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Sanctions & financial crime

Information on legislation and regulation regarding financial crime, including sanctions, and guidance on financial crime risk.

Regulatory Information

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Lloyd’s Financial Crime (Advisory) team exists to protect Lloyd’s licences, trading rights and brand from the risks arising from sanctions, money laundering and terrorist financing, bribery and corruption, fraud, market abuse / insider dealing, and facilitation of UK and foreign tax evasion. The Advisory team supports the market by providing information, guidance and training relating to financial crime risk and relevant legislation and regulation.

Lloyd’s Financial Crime Monitoring and Assurance team reviews and oversees the market’s management of financial crime related risk. The team conducts thematic and targeted reviews across the above six pillars of financial crime and provides insights and recommendations to support best practice.

Financial Crime pillars 

Sanctions are used by national governments and supranational organisations (e.g. EU and UN) to address threats to international peace and security and influence behaviour. Sanctions can include asset freezes, arms embargoes, travel bans, export/import bans, and prohibitions on providing certain specified services. Additionally, non-comprehensive and list-based sanctions restrict certain activities and target specific persons and entities.

Export Control Obligations

The UK’s 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, and imposes restrictions for certain prohibited goods going to any 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 (i.e. insurers and brokers) anywhere in the world or to persons operating in the UK.

Money laundering and terrorist financing involves any act to conceal or disguise the identity of criminal proceeds, the acquisition, use or possession of criminal property, or the use of funds for the purpose of financing terrorist acts. 

The term “terrorist financing” refers to the use of funds or other assets by any means (legally or illegally obtained) with the unlawful intention of terrorism.  

The UK Bribery Act 2010 defines four bribery and corruption offences: bribing a person; being bribed; bribing a foreign public official; and corporate liability for failing to prevent bribery by associated persons. An ‘associated person’ is defined broadly as any person or entity which performs services for the organisation, which may include employees, subsidiaries and agents.

A bribe refers to any inducement, reward, or object of value (e.g. money, gifts, hospitality, loans, services, discount, or award of a contract) offered to an individual to gain commercial, contractual, regulatory, or personal advantage. 

The term “fraud” refers to the use of deception to deprive, disadvantage or cause loss to another person or party. This can include theft, the misuse of funds or other resources, or more complex crimes such as false accounting and/or the supply of false information.  

As a globally recognised and trusted brand, the Lloyd’s name is sometimes used in a fraudulent manner. Lloyd’s works closely with competent authorities and law enforcement agencies around the world to try to prevent this from occurring. Despite this, we are aware of a number of scams in operation which fraudulently use the Lloyd’s name and logo. See Consumer Alerts for details.

Market abuse is the concept of unlawful behaviour in the financial markets and consists of insider dealing, unlawful disclosure of inside information, and market manipulation. 

Inside information is information of a precise nature which: 

Is not generally available; 
Relates directly or indirectly to Lloyd’s; 
Relates directly or indirectly to Market Participants’ material non-public information; 
Would likely have a significant effect (either positive or negative) on the price of the subordinated debt that Lloyd’s has issued, where relevant (the “Securities”); and / or
Would likely have a significant effect (either positive or negative) on the price of shares relating to those Market Participants. 

Tax evasion is the deliberate and fraudulent misrepresentation of information so as to not pay tax. Tax evasion is illegal and differs from tax avoidance, which is the legal structuring of tax affairs to minimise tax due.

Tax evasion generally includes the deliberate concealment or misrepresentation of beneficial ownership of assets, income and gains, or otherwise fraudulent conduct, designed to divert money from the public revenue. Failure to prevent the facilitation of tax evasion is a corporate criminal offence under the Criminal Finances Act 2017. 

Reporting obligations

Managing agents have certain regulatory responsibilities to report incidents to relevant UK competent authorities or international authorities as applicable. This could include the UK National Crime Agency (NCA), the UK Financial Conduct Authority (FCA) and/ or HM Treasury’s Office of Financial Sanctions Implementation (OFSI). 

Managing agents may also have responsibility to report to Lloyd’s for financial crime related incidents including, but are not limited to;

 A target match with an individual or entity on the UK Consolidated List or UK Sanctions List; 

 Any suspected, potential or actual violations and incidents of financial crime (including Suspicious Activity Reports (SARs) made to any regulator) which may impact the operational effectiveness or reputation of Lloyd’s or the Lloyd’s market.

Lloyd’s Minimum Standard - MS10

The Minimum Standards contain Requirements which represent the minimum level of performance required of managing agents within the Lloyd’s market to meet the Minimum Standards.

Minimum Standard 10: Regulatory contains requirements and guidance related to Lloyd’s expectations on managing agents to ensure compliance with applicable financial crime legislation, including that related to anti-money laundering, anti-bribery and corruption, and international sanctions.

Country specific information

For country and territory specific financial crime and sanctions information, please visit Crystal. 

Please note: Requirements and prohibitions of trade and financial sanctions vary among targeted countries and can be complex. Penalties for non-compliance with 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 Financial Crime Advisory team 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.

For more information contact: FinancialCrime@lloyds.com 

Contact

For more information contact: