The Sanctions Act imposes legal requirements on (financial) institutions to ensure their integrity and to combat undesirable trade, money laundering and the financing of terrorism. On this Glossary page, we explain what the Sanctions Act is, who it applies to, and how you can comply with the Sanctions Act.
What does the Sanctions Act 1977 entail?
The Sanctions Act 1977 is often mentioned in the same breath as the Wwft. This is because the Sanctions Act imposes requirements related to CDD and integrity. The essence of the Sanctions Act 1977 is that sanction measures promulgated nationally and internationally are applicable to comply with. Sanctions measures are used in response to violations of international law or human rights by regimes that do not respect rule of law and democratic principles.
Sanctions measures may apply against countries, individuals and/or organisations. There are several sanctions lists including those of the US, EU and NL and the UN sanctions list.
The sanctions lists are regularly updated. It is therefore important to keep these lists up to date and apply them to clients at client acceptance and during monitoring and review. It is also recommended to keep changes in the list(s) against the client file.
To whom does the Sanctions Act apply?
The Sanctions Act 1977 must be complied with by banks and other financial enterprises. However, natural persons, legal entities or partnerships acting within the scope of their professional activities can also come into contact with the Sanctions Act 1977.
Thus, the Sanctions Act is not limited solely to supervised (financial) institutions.
Furnishing Sanctions Act compliance
Your institution is expected to prevent doing business with parties on so-called sanctions lists. These can be countries, individuals or organisations.
To comply with sanctions regulations, you must have set up an administrative organisation and internal control measures. The frequency of screening can be determined based on your type of institution and the type of customers. The Sanctions Act and the internal sanctions policy must be translated into appropriate procedures and measures. For example, you should have clear policies regarding all sanctioned countries, which are taken into account in the screening process of potential clients.
Screening sanction lists
During screening against the sanctions lists, all names and other relevant data of natural persons and legal entities in the customer files (including UBO, authorised representative, beneficiary, etc.) are checked against the EU and Dutch sanction lists. In practice, we often see that these lists are supplemented by the US sanctions lists (OFAC) and/or other relevant foreign lists. Screening of relationships occurs during customer onboarding, periodic reviews, event-driven reviews, and/or during interim changes in the customer database and the sanctions lists.
What to do in case of a hit on the sanctions list?
The Sanctions Act 1977 obligates you to report to the regulator if a customer appears on the sanctions lists, and to freeze any assets.
Want to know more?
Would you like to learn more about compliance with the Sanctions Act? Through our training institute The Ministry of Compliance, we offer a Sanctions Act Awareness course.
For more information about our training courses and support on Wwft and Sanctions Act compliance, please feel free to contact our specialists.
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