The Guernsey Financial Services Commission has described the scale of the sanctions imposed on Russian individuals and legal entities as ‘unprecedented’ – by the end of the year nearly 1,500 individuals and 162 legal entities had been targeted, with secondary sanctions extended to third parties too.
Some local firms were struggling to keep up using manual screening as further sanctions were being imposed day by day.
The commission said its monitoring of local exposure – through direct customers, beneficial owners of customers, or through assets held in local structures – suggested ‘a moderate exposure to sanctions evasion risk which for the most part is being cautiously and conservatively managed by firms’.
But its monitoring of sanctions exposure identified two firms where there were sufficient concerns to warrant on-site inspections. Both resulted in referrals to its enforcement division for investigation into potentially significant and systemic failings in anti-money laundering and terrorist financing controls.
More than 80% of local firms had already invested in automated screening systems to identify designated persons before the war started, said Fiona Crocker, director of the commission’s financial crime division, and that rose to 90% by the end of the year.
‘Compliance with sanctions is an absolute,’ she said in the GFSC's annual report.
‘Sanctions risk, including evasion, should be on all firms’ agendas to ensure this risk is being effectively managed. An effective risk-based approach for managing financial crime risk must include the ability to react quickly to reallocate resources to effectively tackle heightened risk situations.’
Mrs Crocker said that the Ukraine invasion had been a significant test to the commission’s resources.
Its financial crime division diverted on-site resources to a few firms who were not managing sanctions risk optimally.