Sanctions Act 1977: Compliance Essentials for Financial Institutions

Decoding the Sanctions Act 1977: A Compliance Guide for Financial Entities

The Sanctions Act 1977 is a pivotal legal framework that mandates (financial) institutions to ensure integrity in operations to combat undesirable trade, money laundering, and terrorism. This act is often linked with the Anti-Money Laundering and Counter-Terrorist Financing Act (Wwft) due to its shared emphasis on compliance and integrity.

Key Provisions of the Sanctions Act 1977

The Sanctions Act 1977 enforces the application of national and international sanction measures. These measures are often in response to violations of international law or human rights, targeting regimes not adhering to the rule of law and democratic principles.

Sanction Measures: Diverse and Dynamic

Sanctions can target countries, individuals, or organizations and vary from asset freezes to restrictions on financial services. Sanctions lists, including those from the US, EU, NL, and the UN, are regularly updated, necessitating continuous monitoring and application in client relationships.

Applicability of the Sanctions Act

The Sanctions Act 1977 applies not only to banks and financial companies but also to natural persons, legal entities, or companies engaging in professional activities. Its scope extends beyond supervised financial institutions.

Ensuring Compliance with the Sanctions Act

Compliance involves avoiding business with parties on sanctions lists and setting up an administrative organization with internal control measures. Institutions must integrate the Sanctions Act and internal sanctions policy into appropriate procedures and screening processes, considering all sanctioned countries.

Screening Against Sanctions Lists

Screening involves checking client files against EU and Dutch sanctions lists, often supplemented by US lists (OFAC) and other relevant foreign lists. This screening is conducted at client acceptance, periodic review, and event-driven review.

Reporting and Freezing Assets

If a client appears on the sanctions lists, institutions must notify the regulator and freeze any assets as required by the Sanctions Act 1977.

1. What is the Sanctions Act 1977?

The Sanctions Act 1977 is a Dutch law that enforces compliance with national and international sanctions to prevent undesirable trade, money laundering, and terrorism financing.

2. Who must comply with the Sanctions Act 1977?

It applies to banks, financial companies, and any professional entities that could potentially engage in transactions subject to sanctions.

3. What are sanction measures under this act?

Sanction measures range from freezing assets to prohibiting the provision of certain financial services to listed countries, individuals, or organizations.

4. How do financial institutions ensure compliance with the Sanctions Act?

Compliance is ensured through screening client files against relevant sanctions lists, avoiding business with listed parties, and implementing effective internal controls and procedures.

5. What should institutions do if they find a client on the sanctions list? Institutions must report the match to the regulator and take necessary actions, such as freezing assets, as mandated by the Sanctions Act.

Sanctions Act