Sanctions & financial crime
Find information on active and pending legislation regarding financial crime, international sanctions and regulatory risk.
As an internationally recognised brand, the Lloyd’s name is sometimes used in a fraudulent manner. International Regulatory Risk (IRR) in the International Regulatory Affairs department works closely with policyholders, regulators and law enforcement agencies around the world to prevent this from occurring and, where possible, prosecute the perpetrators.
Money laundering is the process used by criminals to disguise the origin and ownership of the proceeds of their criminal activity in order to avoid prosecution, conviction and confiscation. General insurance is considered to face a lower risk of money laundering than other sectors.
UK legislation imposes obligations to report any suspicious transactions to the National Crime Agency (NCA). This requires Lloyd’s market participants to have training and awareness in place for their employees.
IRR offers training and guidance to managing agents to support their anti-money laundering efforts and can assist in reporting suspicious transactions to NCA on behalf of managing agents.
The UK Bribery Act came into force 1 July 2011. It simplifies previous legislation to enable more effective enforcement and prosecution, as well as introducing greater corporate responsibility.
The Act provides for four offences: bribing a person; being bribed; bribing a foreign public official and corporate liability for failing to prevent bribery by associated persons. ‘Associated person’ is defined broadly as any person or entity which performs services for the corporation.
The offence of corporate liability for failing to mitigate the risk of bribery is a strict liability offence and the only defence for a commercial organisation is to demonstrate that it has adequate systems in place to prevent associated persons from engaging in bribery.
These offences can be triggered by illegal contact anywhere in the world. Lloyd’s has produced guidance for managing agents on the impact of the Bribery Act and the implementation of adequate systems and controls.
City of London Police
The City of London Police has commissioned this short crime prevention video to demonstrate the impact that a corruption investigation could have on companies and individuals who ignore the Bribery Act and break the law.
Sanctions include a range of financial or trading restrictions, such as freezes on the assets of and travel restrictions on nominated individuals, bans on financing of state-owned enterprises, prohibitions on the supply of technical, financial and other assistance and outright prohibitions on trade.
Economic, trade or financial sanctions are imposed by governments or the United Nations to exert pressure on individuals or political regimes and for the advancement of foreign policy objectives. In the UK, a person or firm who breaches the terms of a sanction is guilty of a criminal offence.
The most important sanctions for Lloyd’s are those imposed by the US government and the EU. EU sanctions are typically imposed through Council Regulations, which have immediate legal effect in member states (including the UK). In the US and the EU, sanctions often implement measures contained in Resolutions of the United Nations Security Council.
Sanctions can be applied unilaterally or collectively and different rules will apply to each sanctions regime. Some of these sanctions affect designated individuals only in the targeted country. There are also sanctions in place against named individuals or entities who are:
- related or belong to the Taliban and the Al-Qa’ida network
- suspected terrorists
The HM Treasury publishes a consolidated list of financial sanctions targets listed by the United Nations, the European Union and the UK. This list includes all individuals and entities noted on all current sanctions lists.
There is no specific statutory or regulatory obligation on general insurers to check their customer lists against the HM Treasury sanctions lists; however, in order to avoid committing an offence of non-disclosure, it would be prudent for firms to do so.
There are a number of statutory instruments relating to financial sanctions and terrorist financing. These measures apply to all firms regulated under the FSMA (rather than just to banks, on whom additional obligations are placed) and create a number of offences including that of failing to disclose knowledge or suspicion that any person on the relevant HM Treasury sanctions list is, or has been, a customer of the firm.
In addition, the Department of Business, Innovation and Skills (BIS) has guidance on the www.gov.uk website about trade sanctions including arms embargoes specific to certain countries.
The US Government, via its Office of Foreign Assets Control (OFAC), also publishes guidance about the sanctions regimes it imposes. In addition, OFAC has published a consolidated list of those entities and individuals designated as subject to sanctions and has a tool called “Sanctions Search List” to facilitate searching through the consolidated list.
Lloyd's produces detailed due diligence process guidance to assist managing agents in understanding the impact of UK and US sanctions legislation.
The Export Control Order 2008, in part, imposes requirements on UK entities with regard to the movement of controlled military goods from an overseas country to an embargoed destination.
The provision of insurance and reinsurance involved in moving these goods is subject to a licence being obtained from the UK Government, without which criminal penalties may ensue. This impacts on UK individuals and companies anywhere in the world or to persons operating in the UK.
IRR, alongside the Lloyd’s Market Association (LMA) and London International Insurance Brokers Association (LIIBA), has produced guidance and recommendations for practical solutions in complying with this legislation and has also negotiated the release of an Open general Trade Control Licence (Insurance and Reinsurance) related to UN mandated/authorised missions.
Country specific sanctions
Visit Crystal or contact:
Lloyd's International Trading Advice (LITA)
Ground Floor, Underwriting Room
Lloyd's of London,
1 Lime Street,
EC3M 7HA, UK
e-Learning Training Modules
This training module has been developed in conjunction with the market and Its purpose is to ensure Lloyd’s market participants, no matter where they are located, understand; the basis of the UK Bribery Act 2010 (Bribery Act), particularly commercial bribery; their obligations in respect of the prevention of money laundering and reporting of suspicious transactions when conducting business on behalf of Lloyd's syndicates; and their obligations regarding compliance with international sanctions.
Note that this training is not mandatory, but the module should be considered a useful tool in ensuring that Market participants understand Financial Crime Prevention.
Please provide the relevant link below to those coverholders and TPAs that you wish to undertake this training, considering whether it is more appropriate for this communication to be sent via the broker or direct to the coverholder.
Note that where individuals have already registered for the Complaint handling or Conduct risk training, they will not need to sign up again as these modules will automatically be available within their profile.
Please note: Requirements and prohibitions of trade sanctions vary among targeted countries and can be complex. Penalties for non-compliance with economic sanctions include regulatory action, monetary fines and/or custodial sentences.
Although Lloyd’s can provide general guidance on this subject, anyone handling business potentially subject to sanctions should consider seeking independent legal advice.
The International Regulatory Risk team (IRR) has an extensive network of global contacts in regulatory and law enforcement organisations and welcomes any information from the underwriting and compliance community regarding any issues affecting Lloyd’s.