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Financial sanctions enforcement powers extended to estate agents

Thursday 10 August 2017

NAEA Propertymark members need to be aware that from 8 August 2017 the UK Government’s enforcement powers have been broadened to include estate agents in relation to financial sanctions regulations.

This means that estate agents will now have committed a criminal offence if they do not report the information they should already be reporting to HM Treasury’s Office of Financial Sanctions Implementation (OFSI).

Previously, enforcement action could only be taken against firms or people in the regulated financial services sector who failed to report. The extended powers are set out in the new European Union Financial Sanctions (Amendment of Information Provisions) Regulations 2017. Despite the EU referendum result, the UK Government has said that until exit negotiations are concluded, the UK remains a full member of the European Union and all the rights and obligations of EU membership remain in force.

Why is it important?

All businesses, organisations and individuals have an obligation under the financial sanctions regulations to report information to the UK Government if they know or have reasonable cause to suspect that a person has committed an offence under the regulations or they are a designated person meaning that they are currently subject to financial sanctions.

Financial sanctions are restrictions put in place by the UK or EU to achieve a specific national or security objective. The aim is to limit the provision of certain financial services or restrict access to financial markets, funds and economic resources, for instance to those believed to be involved in terrorist activity.

The Government believe that terrorists may use residential properties as a base for their activities, such as to rent in specific locations. Reporting of information helps OFSI to detect breaches and identify those who evade sanctions by using aliases.

Consolidated list of targets

To help, the UK Government has produced a list of financial sanctions targets which consists of the names of both foreign and UK individuals and entities. Politically Exposed Persons (PEPs) are not necessarily financial sanctions targets and most listed individuals and entities are aware that they are on the list, which is publicly available. Therefore the issue of ‘tipping off’ should not generally arise. The UK Government also has the power to grant licences exempting certain transactions from financial sanctions.

The UK Government also holds consolidated lists for Terrorism and Terrorist Financing, and UK Freezing Orders, which have been decided under domestic law.

What you need to do

If you know or have reasonable cause to suspect that you are in possession or control of, or are otherwise dealing with funds or economic resources of a designated person you must freeze them, not deal with them or make them available to, or for the benefit of, the designated person, unless there is an exemption in the legislation that you can rely on, you have a licence from OFSI and report them to OFSI.

When reporting you should gather information on which the knowledge or suspicion is based and any info you hold about the individual as to how they can be identified. Reporting then falls into two categories:

If you are reporting information regarding a designated person or reports of frozen funds and economic resources or notifications of credits to frozen accounts you should email ofsi@hmtreasury.gsi.gov.uk

Reports regarding suspected breaches of financial sanctions should be submitted to OFSI using this form.

If you are unsure of your reporting obligations, you should seek independent legal advice.

Further information can be found in the OFSI’s updated guidance to help individuals and businesses understand what they should report and when.

The updated guidance also clarifies OFSI’s existing positions on organisations owned or controlled by those subject to sanctions, as well as the process for obtaining a licence. This is where specific exemptions and licensing powers are generally contained in financial sanctions legislation and can allow other prohibited transactions to take place in some circumstances.

OFSI considers that the key criterion to assessing whether a legal person or entity is owned by another legal person or entity is the possession of more than 50% of the proprietary rights of an entity or having a majority interest in it. If this criterion is met, and the owner is also a designated person, then financial sanctions will also apply to the entity that is owned by the designated person.

What you should do next

All NAEA Propertymark members are encouraged to review their responsibilities as non-compliance could lead to a monetary penalty or criminal prosecution. To stay up-to-date on financial sanctions, subscribe to OFSI’s email alert.

Alternatively, you can contact OFSI directly by email on OFSI@hmtreasury.gsi.gov.uk or phone on 0207 270 5454.