The Ukraine crisis has meant a series of sanctions have been put in place on Russia and any associated people and companies. Almost all industries have been affected in one way or another, but it is how they handle the sudden change that will cause the most impact.
As these changes have been implemented under the Sanctions and Anti-Money Laundering Act 2018, law firms in particular have had to keep a close eye on how their policies and guidance may alter.
Firms must ensure they are implementing appropriate policies, controls and procedures relating to sanctions and make sure they don’t fall within the sanctions regime.
What can law firms do to comply with sanction checks?
A lot of the sanctions currently in place involve asset freezing, travel bans and addressing and potentially pausing international client communication. It is common for law firms to have global clients, so having to work around different rules in other countries could be difficult.
To keep on top of these changes, firms can carry out sanction checks to ensure they are meeting the correct obligations. These checks can normally be completed by referring to the UK Sanctions List, however some relating closer to the legal sector include updating firm-wide risk assessments, conducting fund and wealth checks, providing staff support, and keeping updated with Russian clients and countries that are regarded as allied to Russia.
A firm-wide risk assessment is put in place to show that a firm has reviewed matters and made appropriate changes to policies, controls and procedures, regardless of if they deal with international clients or not. As the Sanctions List continues to develop and more companies are likely to be added, it is important that the firm continues to check the list to show regulators that they are doing the right thing.
Recently, it has been seen that a lot of law firms are not keeping on top of their risk assessments. Research from the Solicitors Regulation Authority (SRA) showed that in 2019, after requesting 400 firms’ risk assessments, 83% were not compliant with the regulations and 38% were dated after they were asked, showing they might only be completing them when requested.
As there are ongoing changes to policies and sanctions within individual countries, legal firms need to keep an eye out for how this could affect them and their clients. Not only is this in relation to purely Russia clients, but also allied countries under the EAEU such as Belarus, Armenia and China who may become subject to sanctions as well.
Finally, firms need to look inward and make sure their staff feel reassured and supported – staff will want to know how or if the new sanctions may affect them directly.
How will these checks be beneficial in the long run?
As the invasion has put everyone in very troubling and uncertain times, the legal sector must keep an eye on sanction developments to ensure firms aren’t exposed to new risks.
Introducing training to staff more regularly on sanctions, compliance checks and money laundering matters will allow them to play their part in ensuring obligations are met. Undertaking training courses in governance, compliance, CQS and SRA regulations can guarantee firm-wide knowledge of how to tackle current and any future global situations.
Preparation and already having new processes in place will allow a firm to be ready for any sudden changes, such as the Ukraine crisis. Not everything can be predicted, but if law firms are meeting their obligations and have up to date assessments, they can be ready to act when needed.
Brian Rogers, Regulatory Director at Access Legal
