Sanctions & Anti-Money Laundering Act 2018
June 4, 2018
The long-awaited Sanctions & Anti-Money Laundering (SAML) Act 2018 received Royal Assent on 23 May, after being approved by both Houses of Parliament the previous day. The bill’s seven-month journey through Parliament secures the Government’s objective to continue complying with its international sanction obligations after the UK withdraws from the European Union on 29 March 2019. The new act will become effective from this date.
The Purpose of SAML
The UK’s current legal obligations and powers to comply with the United Nation’s (UN) international sanctions regime (under Chapter VII of the UN Charter) are enshrined in the European Communities Act (ECA) 1972. However, the UK’s powers to impose and amend sanctions will become invalid after Brexit as of the introduction of the European Union (Withdrawal) Bill, which will repeal the ECA 1972. Such an eventuality would leave the UK in breach of its international obligations and, therefore, of international law. As the Government’s impact assessment of SAML described the position: “Failure to implement these sanctions will undermine the UK’s reputation as a credible and reliable partner for international allies”.
The introduction of SAML allows the UK to continue meeting its obligations under the UN sanctions regimes and enables the Government to continue using sanctions as a tool to deliver national security and foreign policy objectives. SAML also guarantees the UK Government’s power to introduce and enforce its own Anti-Money Laundering and Counter-Terrorist Financing (AML/CTF) regulation to ensure that the UK’s national financial crime framework continues to align with international standards.
What does SAML cover?
SAML invests the Government with new powers to implement and impose a range of sanctions on individuals, companies and states in accordance with the UN’s sanctions regime. The Act also empowers the Government to implement sanctions in response to gross violations of human rights and can be implemented to promote compliance with international humanitarian laws.
Through the powers granted in SAML, the Government will be permitted, for the first time, to designate financial sanction targets via “a prescribed description of persons connected with a prescribed country”. This gives the Government powers to compel financial institutions to deny services to individuals or entities that meet a specified description in circumstances where ministers are unable to identify the names of all individuals matching the bespoke description. These new provisions are likely to place even more pressure on financial service providers to comply with the UK’s sanctions regime.
The Government will also be granted powers to introduce any new legislation aimed at the prevention, detection, and investigation of money laundering and terrorist financing. This provision enables the UK to continue implementing international AML standards published by the Financial Action Task Force, which would otherwise have been transposed into UK law through European Union Directives.
Finally, SAML enhances the UK’s national financial crime framework by obliging British Overseas Territories, including the British Virgin Islands and the Cayman Islands, to create transparent public registers of beneficial owners of incorporated entities within their respective jurisdictions. If these public registers come to fruition, they will challenge the reputation of British Overseas Territories as attractive tax havens for criminals who wish to protect and obscure their wealth.
What does SAML’s Introduction mean?
The introduction of SAML underpins how seriously the UK Government takes its responsibilities under the international sanctions regime. The new legislation ensures that the Government’s sanction powers will be an integral factor in the UK’s national AML/CTF framework, and, as such, in the country’s anticipated strong record of continued compliance with international financial crime standards after Brexit.
SAML will present new challenges for regulated financial institutions as they endeavour to make any necessary changes to their controls and procedures to comply with the new sanctions regime.
How can Thistle help you?
Thistle will continue to review any updates to industry guidance in response to this new legislation. If firms need assistance in reviewing their AML/CTF controls in order to comply with the new sanctions regime, please contact Thistle or visit our payment services page for more information.