Reporting Requirement for Insolvency Practitioners in the sanctions report regime from 14 May 2025

IPA Insolvency Practitioner newsletter, January 2025

The existing UK sanctions Regulations have been amended via the Sanctions (EU Exit) (Miscellaneous Amendments) (No. 2) Regulations 2024. The majority of the amendments came into force on 5th December 2024 and the remainder, listed in Regulation 1(2), will come into force on 14th May 2025.

From 14th May 2025 the amendments will add Insolvency Practitioners (IPs) to the list of “relevant firms” which have obligations to report to the Office of Financial Sanctions Implementation (OFSI).  The regulations will widen the reporting requirements on IPs.

The amendments also clarify that the prohibitions on “making funds available to any person for the benefit of a designated person” includes making funds available for the benefit of a person owned or controlled (directly or indirectly) by the designated person.

What is required?

From 14th May 2025 IPs will be are obliged to report to OFSI – as soon as reasonably practicable – if the IP knows or has reasonable cause to suspect (from information which came to the IP in the course of carrying on the IP’s business) that:

  • a person is a designated person (this is someone who is listed on the OFSI consolidated sanctions list), or
  • a person has breached a prohibition or failed to comply with an obligation under financial sanction regulations (or Treasury licencing requirements), or
  • the IP holds funds or economic resources for a prohibited person or designated person (the Russian sanctions regulations require reporting in relation to “prohibited persons” and “designated persons”, but regulations for other countries may refer only to “designated persons”).

From 14th May 2025 if an IP makes a report to OFSI about a “customer” of the IP, then the IP must also report to OFSI the nature and quantity of any funds or economic resources held by the IP for that customer at the time the IP first had knowledge of suspicion.  If an insolvency appointment is over a designated person or prohibited person (which may be an individual or other legal entity), as an IP you will have to report to OFSI the nature and amount or quantity or economic resources held by you in relation to that appointment.

If an IP informs the OFSI that that a customer is a designated person, or that the IP holds (or suspects they hold) funds or economic resources for a prohibited person (or which are controlled by a designated person) and the IP continues to hold them then the IP must, by 30th November in each year, report to OFSI the nature and quantity of the funds or economic resources held by the IP as at 30th September in that calendar year.

What does this mean for insolvency appointments?

The obligations to report apply where the knowledge or reasonable suspicion arises in the course of carrying on its business. A list of relevant appointments is outlined in the CCAB Supplementary Guidance for IPs at para F.3.3:

  • Agreeing to act as liquidator or provisional liquidator of a solvent or insolvent company or LLP;
  • Agreeing to act as nominee in a company voluntary arrangement not preceded by another insolvency procedure;
  • Agreeing to accept an appointment as administrator or special administrator;
  • Agreeing to accept appointment as an administrative receiver (in Scotland, receiver);
  • Agreeing to act as nominee or supervisor in an individual voluntary arrangement;
  • Agreeing to act as a trustee (including interim trustee) in a bankruptcy, a sequestration or under a trust deed;
  • Accepting instructions to prepare, or assist in preparing, a proposal for a company or individual voluntary arrangement where appointment as nominee will be sought;
  • Agreeing to act as liquidator, provisional liquidator or administrator of an insolvent partnership;

• Agreeing to act as trustee of a partnership under Article 11 of the Insolvent Partnerships Order 1994;  

• Agreeing to act as nominee or supervisor in relation to a partnership voluntary arrangement.

Does this cover all IPs’ work?

The obligation to report applies where the knowledge or reasonable suspicion arises in the course of carrying on its business.

It is considered that appointments as an LPA Receiver or to undertake an independent business review would not be ‘IP business’ and you would therefore not be acting as an IP as per S388 of the Insolvency Act 1986 or Article 3 of the Insolvency (Northern Ireland) Order 1989 and reporting obligations would not apply.

What must I report and how?

OFSI have provided guidance on reporting procedures – Financial sanctions guidance for Insolvency Practitioners – GOV.UK.

The detail required includes specific information on the designated person, basis for suspicion and details and nature and amount or quantity or economic resources held.

Russian Sanctions

There will be additional requirements to report regarding “prohibited persons” under Russian Sanctions. OFSI require you to report as soon as practicable if you know, or have reasonable cause to suspect that you hold funds or economic resources for a person to whom financial services must not be provided under Reg 18A(1) of The Russia Sanctions (EU Exit) Regulations 2019.

‘Prohibited Persons’ are – Central Bank of the Russian Federation, National Wealth Fund of the Russian Federation, Ministry of Finance of the Russian Federation, a person owned or controlled directly by one of these entities or person acting on behalf of, or at the direction or, one of these entities.

If – as a relevant firm – you are holding funds or economic resources, you must complete a reporting form template and submit to OFSI. The form must be submitted when making an initial report and thereafter no later than 30 November in each calendar year. The report must advise OFSI of the nature and amount or quantity of the funds or economic resources held by the IP/firm as at 30 September in that calendar year.

What should you do?

Firstly, you must make sure that your Nominated Officer (also known as the MLRO) is made aware of this reporting requirement prior to 14 May 2025 so that they can ensure they are aware of what is required and can circulate details around teams.

The IPA has issued a number of articles and details on IPs taking steps to understand whether any entity over which an appointment is to be made includes any entity on the Consolidated Sanctions list. This should be made a check as per of due diligence work to ensure that you know what your reporting duties are.

It is believed that the number of appointments that meet the reporting criteria will be small and, other than due diligence, there should be a limited impact on most of an IP’s work. There is a risk that the small number of impacted cases results in reporting responsibilities being missed, however failure to comply with the reporting requirements is an offence. There are severe consequences for failing to report and you must ensure that you have a robust and effective due diligence policy that all staff understand and adhere to, and clear reporting lines if the need to make a report to OFSI arises.