Wiki

Sanctions Act

Everything you need to know about the Sanctions Act

The Sanctions Act (officially: 1977 Sanctions Act) imposes legal requirements on financial and other institutions to ensure their integrity, combating undesirable trade, money laundering and terrorism. With this Act, the Netherlands enforces international sanction regimes on a national level, including United Nations and European Union sanctions. Organisations that fall under the Act must identify their relations and implement suitable measures if these relations are on a sanction list and are therefore suspect. Due to the complex nature of this legislation and the communication of requirements, this Wiki sets out the key issues you should know about the Sanctions Act.

Who is subject to the Sanctions Act?

The Sanctions Act is applicable to banks, insurers, exchange institutions, pension funds, trust administrators, lease companies and casinos, etc. A complete and up-to-date list is available here.

Who monitors compliance?

The Dutch Central Bank (DNB) and the Netherlands Authority for the Financial Markets (AFM) supervise compliance with the Sanctions Act. This is based on the 1977 Sanctions Act Supervision Regulation, which stipulates that financial and other institutions must check whether their relations are on the sanction lists of EU regulations, decrees of their Foreign Ministry or resolutions of the United Nations Security Council. DNB mainly assesses whether or not the measures taken are adequate.

Which sanctions are possible?

If a relation turns out to be suspect, various financial sanctions may apply. The European Union regulations provides the following sanctions:

  • Freezing bank balances and assets
  • A prohibition to make financial resources available
  • A prohibition or restrictions on provision of financial services

What happens in the event of non-compliance?

A fine or administrative penalty may be imposed on an organisation in non-compliance with the Sanctions Act. Criminal proceedings are another option. In June 2014, the French bank BNP Paribas was fined 6.5 billion Euros for infringing American trading sanctions against Iran, Sudan, Cuba and Myanmar.

How can organisations comply with the Sanctions Act?

Organisations must be able to check whether their relations are on sanction lists and inform the DNB accordingly. Performing this check is mandatory, but each organisation may decide on a manual or electronic process, and on the frequency. The following starting points apply:

  • Periodical screening is mandatory according to the Sanctions Act.
  • This is why a policy should be in force, which focuses on screening frequency for example.
  • When checking the customer’s identity, the organisation must check the identity of the ‘ultimate beneficial owner’ of a transaction.
  • Subsequently a check must be carried out for any sanctions against this beneficiary or if the beneficiary was the subject of negative publicity.
  • Besides a blacklist, a whitelist may be maintained listing acceptable persons and companies. This list prevents banks and insurers being notified every time a customer’s name happens to be similar to that of a blacklisted entity. Please note: the Personal Data Protection Act applies to such lists. For more information, please consult the Blacklist file issued by the Dutch Data Protection Authority (CBP).
  • If a party is already known to an institution and if it checks the relations database upon acceptance and also frequently after acceptance, a sanction list check is not required for payments from such parties.
  • This also applies if sufficient guarantees are issued for compliance with the sanction regulations of the institutions involved in a transaction.
  • For new or amended sanction rules, it is important to check whether relations are within the scope of the new rules.
  • This check must also ensure that no financial relations of customers are on a sanction list.
  • The sanction regulations are set out on the websites of the United Nations, the European Union and the National Government.

What happens if the check produces a hit?

If a relation is found on a sanction list, the institution must act immediately. The action required depends on the provisions of the sanction regulation and the nature of the services. This might include freezing an insurance policy, terminating a loan or freezing a bank account. The ‘hit’ must be forwarded to DNB using a specific notification form. DNB will then assess the notification. If it does prove to be a hit, DNB sends the notification to the Ministry of Finance. The data that must be forwarded in the notification are:

  • Name, place of residence, place and date of birth of the relevant person
  • The nature and amount of the frozen assets or balances
  • The action implemented by the institution
  • The number of the applicable sanction regulation

The future of the Sanctions Act

The Sanctions Act is frequently updated and amended. The latest amendments became effective as per 1 January 2015 and parliamentary papers for new amendments have been submitted. The relevant amendments implemented and the relevant dates are listed here.

Automated solutions

Compliance with the Sanctions Act is a labour intensive process for most companies. However, there are several options which can lessen the load. For example, Graydon offers customer due diligence as an automated solution. This software can be installed for you and if necessary it can even be integrated into your in-house credit-risk process. This ensures:

  • You automatically have the correct and up-to-date company information available
  • You can view the ultimate beneficial owner by pressing a single button
  • You can automatically screen the ultimate beneficial owner for checklists, PEP lists, sanction lists, fraud lists, negative media exposure etc.
  • All data are automatically saved for future use

Prior to automating your due diligence policy, Graydon enriches, analyses and screens your full portfolio to create a ‘clean slate’.

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