Targeted Financial Sanctions FAQs

Overview of Targeted Financial Sanctions

The United Nations Security Council (UNSC) is one of the six principal organs of the United Nations (UN) and has primary responsibility for the maintenance of international peace and security. It has 15 Members, and each member has one vote. Under the Charter of the United Nations, all Member States of the UN are obligated to comply with the Security Council’s decisions. 

The UNSC holds the capacity to take action seeking to maintain or restore international peace and security under Article 41 of Chapter VII of the Charter of the United Nations by imposing sanctioning measures. 

The Security Council sanctions regimes focus on supporting the settlement of political conflicts, nuclear non-proliferation, and counterterrorism. 

These regimes include measures ranging from comprehensive economic and trade sanctions to more targeted measures such as arms embargoes, travel bans, and restrictions on dealing with certain financial or commodity transactions. 

In addition, there are recommendations of the FATF (Financial Action Task Force). This is an inter-governmental body responsible for setting international standards on anti-money laundering (AML) and countering the financing of terrorism (CFT) and proliferation (CPF). Recommendation 6 and 7 (R6/R7) require the implementation of targeted financial sanctions (TFS) to comply with the UN Security Council Resolutions (UNSCRs) relating to the prevention and suppression of terrorism, terrorism and terrorist financing, and proliferation financing.

What are Targeted Financial Sanctions (TFS)?

The term targeted sanctions means that such sanctions are imposed against specific individuals, entities, or groups. The term includes both asset freezing and prohibitions to prevent funds or other assets from being made available, directly or indirectly, for the benefit of individuals, entities, groups, or organizations who are designated according to the UNSCRs and Local Terrorist List.

Why are individuals, entities, or groups designated in the Sanction Lists?

The Sanction Lists include names of individuals, entities, or groups that the UAE or the UN believe are detrimental to national and/or global peace and security. These individuals, entities, or groups are mostly involved in acts of terrorism, terrorism financing, proliferation financing, and violation of international law.

What is the purpose of Targeted Financial Sanctions?

The purpose of TFS (Targeted Financial Sanctions) is to deny certain individuals, entities, or groups the means to violate international peace and security, support terrorism or finance the proliferation of weapons of mass destruction. To achieve this, it seeks to ensure that no funds or other assets or services of any kind are made available to designated persons for so long as they remain subject to the targeted financial sanctions measures.

Key Challenges

Staying up-to date in terms of TFS is a key challenge for many companies.

Where to find the updated Sanctions Lists?

The UNSC has a UN Consolidated List of all the sanctioned individuals, entities, or groups designated by the United Nations Sanctions Committees or directly by the UNSC.

In addition to that are mostly country specific lists like the SECO List (Switzerland), the HMRC Treasury List (UK) and The UAE Local Terrorist List (UAE) of all the sanctioned individuals, entities, or groups designated by the UAE Cabinet.

Ongoing Monitoring and Enhanced Transaction Monitoring

All FIs, DNFBPs, and VASPs must undertake regular and ongoing screening and UN Consolidated List. Screening must be undertaken in the following cases:

1. Upon any updates to the Local Terrorist List or UN Consolidated List. In such cases, screening must be conducted immediately and without delay to ensure compliance with implementing freezing measures without delay (within 24 hours).
2. Prior to onboarding new customers.
3. Upon KYC reviews or changes to a customer’s information.
4. Before processing any transaction.

The following databases must be included in the screening process:

• Existing customer databases. All systems containing customer data and transactions need to be mapped to the screening system to ensure full compliance.
• Potential customers before conducting any transactions or entering a business relationship with any Person.
• Names of parties to any transactions (e.g., buyer, seller, agent, freight forwarder, etc.)
• Ultimate beneficial owners, both natural and legal.
• Names of individuals, entities, or groups with direct or indirect relationships with them.
• Directors and/or agents acting on behalf of customers (including individuals with power of attorney).

FIs, DNFBPs, and VASPs are also required to identify, assess, monitor, manage and mitigate terrorist and proliferation financing risks, particularly sanctions-related risks. The internal screening process must take into account such a risk assessment. Where there are higher risks, FIs, DNFBPs, and VASPs should take commensurate measures to manage and mitigate the risks, including applying enhanced screening measures. Correspondingly, where the risks are lower, they should ensure that the screening measures are commensurate with the lower level of risk. 

FIs, DNFBPs, and VASPs must ensure full implementation of targeted financial sanctions in any risk scenario.

Who is the target of these measures?

The freezing measures, including the prohibition of making funds or other assets or services available, apply to:

1. Any individual, entity, or group designated in the Local Terrorist List issued by the Federal Cabinet or designated by the UNSC in the UN Consolidated List.
2. Any entity, directly or indirectly owned or controlled by an individual, entity, or group designated under 1.
3. Any individual or entity acting on behalf of or at the direction of any individual, entity, or group designated under 1 & 2.

In cases where an asset is owned or controlled in part or in full by a designated individual, entity, or group and such asset continues to produce benefit (e.g. in the form of dividends or interest) the relevant portion of such benefit is also subject to freezing measures.

Removal from the UN List

Any individual, entity, or group designated by the UNSC can submit a request for removal from the UN Consolidated List to the applicable UNSC Sanctions Committee, following the procedures for submitting de-listing requests according to each UNSC Sanctions Committee.

How DX Compliance can help?

With CheckAML by DX Compliance, you can perform instant AML Checks and screen your customers against a global database.