It is also worth remembering that there are other types of sanctions in addition to financial measures (eg trade and immigration). Montserrat is required to implement all sanctions.

For guidance on all sanctions, please refer to the following link:

https://www.gov.uk/government/publications/the-uk-sanctions-list

It outlines your obligations under financial sanctions as well as the approach to licensing, enforcement, and designation issues. It takes into account relevant case law and guidance at the date of publication.

This guidance is general in nature but has tailored content to specific sectors. Please note that each case will be considered on the facts and the specific legal requirements that apply.

Please also note that the competent authorities cannot issue definitive guidance on how the courts in this jurisdiction would interpret these laws.

Finally, this guidance does not represent legal advice. If you are unsure about your obligations in a given case, you should consider taking independent legal advice.

Overview of the roles and responsibilities of Competent Authorities involved in the implementation of Targeted International Financial Sanctions in Montserrat.

What are financial sanctions?

Financial sanctions are generally imposed to:

Coerce a regime, or individuals within a regime, into changing their behaviour (or aspects of it), by increasing the cost on them to such an extent that they decide to cease the offending behaviour;

Constrain a target by denying them access to key resources needed to continue their offending behaviour, including the financing of terrorism or nuclear proliferation;

Signal disapproval, stigmatising and potentially isolating a regime or individual, or as a way of sending broader political messages nationally or internationally; and/or

Protect the value of assets that have been misappropriated from a country, until they can be repatriated.

How are sanctions imposed?

The United Nations (UN) imposes financial sanctions and requires member states to implement them through Resolutions passed by the UN Security Council (UNSC).

The UK implements all financial sanctions imposed by the UN. It does this through UK statutory instruments (UK regulations). In addition, the UK has its own autonomous sanctions regimes to impose financial sanctions and restrictions.

Montserrat can also impose its own financial sanctions.

What financial sanctions are in force in Montserrat

The financial sanctions in force in Montserrat are essentially the same as those that are in force in the UK. There are currently 38 regimes that are subject to financial sanctions in the UK which can be found on the HM Treasury Office of Financial Sanctions Implementation (OFSI) website.

Financial sanctions targets by regime – GOV.UK (www.gov.uk)

https://www.gov.uk/government/collections/uk-sanctions-regimes-under-the-sanctions-act

Types of financial sanctions?

Financial sanctions come in many forms as they are developed in response to a given situation. The most common types of financial sanctions are:

• Targeted asset freezes – apply to named individuals, entities and bodies, restricting access to funds and economic resources. An individual or entity subject to an asset freeze will be listed on OFSI’s consolidated list:

Financial sanctions targets: list of all asset freeze targets – GOV.UK (www.gov.uk)

• Restrictions on a wide variety of financial markets and services – can apply to named individuals, entities and bodies, specified groups or entire sectors. Such restrictions have taken the form of:
• investment bans;
• restrictions on access to capital markets;
• directions to cease banking relationships and activities;
• requirements to notify or seek authorisation before certain payments are made or received; and
• restrictions on provision of financial, insurance, brokering, advisory services or other financial assistance.
• directives to cease all business – of a specified type, with a specific person, group, sector territory or country.

Who needs to comply with financial sanctions?

Financial sanctions apply more broadly than to the persons subject to them. UK financial sanctions apply within the territory of the UK and to all UK persons, wherever they are in the world.

In Montserrat, UN and UK financial sanctions apply to all individuals and legal entities who are within or undertake activities within Montserrat.

The Order in Councils provide that financial sanctions apply to:

any person in Montserrat,

any person elsewhere who is—

a British citizen, a British Overseas Territories citizen, a British Overseas citizen, a British subject, a British National (Overseas) or a British protected person and is ordinarily resident in the Territory (Montserrat), or

a body incorporated or constituted under the law of any part of Montserrat, and

any person on board a ship or aircraft that is registered in Montserrat.

Asset Freeze definitions and obligations

Ownership and Control

An entity is owned or controlled directly or indirectly by another person in any of the following circumstances:

• The person holds (directly or indirectly) more than 50% of the shares or voting rights in an entity;
• The person has the right (directly or indirectly) to appoint or remove a majority of the board of directors of the entity; or
• It is reasonable to expect that the person would be able to ensure the affairs of the entity are conducted in accordance with the person’s wishes. This could, for example, include:

o Appointing, solely by exercising one’s voting rights, a majority of the members of the administrative, management or supervisory bodies of an entity, who have held office during the present and previous financial year;

o Controlling alone, pursuant to an agreement with other shareholders in or members of an entity, a majority of shareholders’ or members’ voting rights in that entity;

o Having the right to exercise a dominant influence over an entity, pursuant to an agreement entered into with that entity, or to a provision in its Memorandum or Articles of Association, where the law governing that entity permits its being subject to such agreement or provision;

o Having the right to exercise a dominant influence referred to in the point above, without being the holder of that right (including by means of a front company);

o Having the ability to direct another entity in accordance with one’s wishes. This can be through any means, directly or indirectly. For example, it is possible that a designated person may have control or use of another person’s bank accounts or economic resources and may be using them to circumvent financial sanctions.

If any of the above criteria are met, and the person who owns or controls the entity is also a designated person, then financial sanctions will also apply to that entity in its entirety (meaning these assets should also be frozen). The prohibitions on making funds or economic resources available directly or indirectly to a designated person, also prohibit making them available to an entity who is owned or controlled, directly or indirectly, by the designated person. The UK Government will look to designate owned or controlled entities/individuals in their own right where possible.

Funds generally means financial assets and benefits of every kind, including (but not limited to):

• cash, cheques, claims on money, drafts, money orders and other payment instruments
• deposits with financial institutions or other entities, balances on accounts, debts and debt obligations
• publicly- and privately-traded securities and debt instruments, including stocks and shares, certificates representing securities, bonds, notes, warrants, debentures and derivatives contracts
• interest, dividends or other income on or value accruing from or generated by assets
• credit, right of set-off, guarantees, performance bonds or other financial commitments letters of credit, bills of lading, bills of sale
• documents showing evidence of an interest in funds or financial resources
• any other instrument of export financing.

Economic resources means assets of every kind, whether tangible or intangible, movable or immovable, which are not funds, but may be used to obtain funds, goods or services.

Goods include items, materials and equipment.

Cryptoassets – Definitions of “funds” and “economic resources” are wide, as referenced above. Cryptoassets are considered to be covered by these definitions and are therefore caught by the financial sanctions restrictions.

Dealing with funds includes to move, transfer, alter, use, access, or to deal with in any way which would result in any change in the funds’ volume, amount, location, ownership, possession, character, destination or any other change that would enable use, including portfolio management i.e. the management of securities (shares, bonds, etc.) and other assets.

Dealing with economic resources means using the economic resources to obtain funds, goods, or services in any way, including, but not limited to, by selling, hiring or the mortgaging resources. It is not prohibited for a designated person to use their own economic resources for personal consumption (e.g. using their car to do the shopping). However, a designated person could not sell or use the resource to generate funds (e.g. by selling the car or using it for a taxi or courier business) without a licence.

Making available funds or economic resources, directly or indirectly, to a designated person – if a person makes funds available (directly or indirectly) to a designated person, or economic resources are made available (directly or indirectly) that would likely be exchanged, or used in exchange, for funds, goods or services by the designated person, this is a criminal offence

Making available funds or economic resources for the benefit of a designated person – if funds or economic resource are made available for the benefit of a designated person and they obtain, or are able to obtain, a “significant financial benefit” from the funds or economic resources, this is an offence. In this instance financial benefit includes the discharge of a financial obligation for which the designated person is wholly or partly responsible.

Other financial restrictions

Financial sanctions regimes may include other restrictions in addition to asset freezes. Where these exist, they will be listed on the individual regime pages on GOV.UK:

Financial sanctions targets by regime – GOV.UK (www.gov.uk)

Licensing overview 

The Governor may grant licences to permit that which would otherwise be prohibited by sanctions legislation. If a licence is being granted under an Order in Council, the Governor must obtain the consent of the UK Secretary of State.  It is important to note that the Governor can only issue licences where there are specific and relevant licensing grounds to do so, and where the specific conditions in the grounds have been met. The available grounds can be found in the legislation underpinning each particular financial sanctions regime: Financial sanctions targets by regime – GOV.UK (www.gov.uk)

To licence as proportionately as possible whilst also mitigating risks, which may include terrorist financing risks, the Governor may also attach conditions to a licence.

The licence will also contain strict reporting conditions, requiring you to provide the Governor with proof of purchase and payment etc., A failure to comply with these reporting requirements may result in a criminal prosecution.

A licence will not be issued retrospectively and the granting of a licence will be considered on a case by case basis. You should not assume that a licence will be granted or engage in any activities prohibited by financial sanctions until you have received an appropriate licence.

If you are dealing with funds that should be frozen or making economic resources available to a designated person, or for their benefit (directly or indirectly) without an appropriate licence or valid exception, this will be considered as a breach of financial sanctions.

 “It is also an offence for you to knowingly or recklessly provide false or misleading information in any licence application. Any such licence granted is void from the time it was granted”. Doing so may result in a criminal prosecution.

Exceptions and Licensing

The following sections provide a general overview of the standard exceptions and licensing grounds found in financial sanctions legislation. The grounds may vary from regime to regime so it is important that you check the relevant, up-to-date legislation.

Specific exemptions and licensing powers are generally contained in financial sanctions legislations and can allow otherwise prohibited transactions to take place in some circumstances.

A licence is a written authorisation from the Governor with the consent of the UK Secretary of State, permitting an otherwise prohibited act.

An exception to a prohibition applies automatically in certain defined circumstances and does not require you to obtain a licence from Governor.

Exceptions and licensing

Specific exceptions and licensing powers are contained in the sanctions regulations made under the Sanctions Act and can allow otherwise prohibited transactions and prohibited activity to take place in some circumstances. A licence is a written permission from the Governor allowing an act that would otherwise breach prohibitions imposed by financial sanctions. An exception to a prohibition applies automatically in certain defined circumstances as set out in the regulations and does not require you to obtain a licence from the Governor.

The following sections provide a general overview of the standard exceptions and licensing grounds found in financial sanctions legislation.

The grounds may vary from regime to regime, so it is important that you check the relevant, up-to-date legislation.

Crediting frozen accounts 

Asset freezing legislation permits without a licence:

• a relevant institution to credit a frozen account with interest or other earnings due on the frozen account, so long as those funds are frozen immediately.
• a person to transfer funds to a relevant institution for crediting a frozen account where those funds are transferred in discharge (or partial discharge) of obligations that were concluded or arose before the date the person became a designated person.
• a relevant institution to credit a frozen account with payments from a third party, provided that the incoming funds are also frozen and that it informs OFSI of the transaction without delay (see Chapter 5 of this guide).

Independent person holding legal or equitable interest in frozen funds or economic resources 

The legislation creates an exception to allow independent persons to transfer their legal or equitable interests in frozen funds or economic resources to another person, where immediately before the transfer all the provisions in 1-4 below are present: 1. The independent person is not a designated person; 2. The independent person holds the interest in the funds or economic resources; 3. The independent person doesn’t hold the interest jointly with a designated person; and 4. The independent person isn’t owned or controlled, directly or indirectly by a designated person (see Chapter 4 for meaning of owned or controlled).

Ring-fencing

From 1 January 2019, each large bank must separate core retail banking from the rest of its business, known as ring-fencing, to comply with the Financial Services (Banking Reform) Act 2013. UK sanctions regimes contain an exception permitting banks subject to the ring-fencing legislation to transfer funds from account A in a non-ring fenced body to account B in a ring fenced body (as defined in the legislation) where accounts A and B are held or controlled (directly or indirectly) by a designated person.

Targeted Financial Sanctions – Designated or Listed Persons

The application of targeted financial sanctions are part of the obligations imposed under the laws that make up Montserrat’s sanctions regime. These sanctions would be against the funds or assets of designated or listed persons.

The international sanctions in force in Montserrat are essentially the same as those in the UK and the UK HM Treasury (Treasury) maintains a Consolidated List of individuals and entities subject to financial sanctions.  See following link:

https://www.gov.uk/government/publications/the-uk-sanctions-list

Therefore, in order to comply with these international measures, you should check the Consolidated List, which can be found on the UK HM Treasury website.

Persons and entities operating in Montserrat’s regulated financial sectors are obliged to implement such sanctions by:

1. Checking whether they maintain any accounts or otherwise hold any funds or economic resources for designated or listed persons;
2. Freezing such accounts or other funds and, unless the Minister has granted a licence, refraining from dealing with or making available such funds or economic resources to the designated or listed persons or any third party; and
3. Notifying the Governor of the above.

As sanctions measures are subject to change, it is essential that ongoing screening is carried out.

Additionally, you should note that the targets included in the Consolidated List may at times be broader than the requirements of Montserrat’s Sanctions Regime. When the Consolidated List is updated as a result of new legislation or of changes to existing legislation, equivalent provisions in Montserrat may not yet have been implemented, although it is normally to be expected that such changes will be implemented in Montserrat shortly thereafter.

Furthermore, if the UK identifies targets in addition to those identified by the United Nations (UN), the Consolidated Lists for specific regimes may contain targets that are not included in the definition of designated persons or listed persons under the applicable UK legislation that is extended to Montserrat.

The Consolidated List

In relation to the required screening for designated or listed persons, it is necessary to first make reference to the Consolidated List. If a target match is identified against the Consolidated List, it is then strongly recommended that cross-reference should be made to the relevant legislation in force in Montserrat and to the Annexes to the relevant UN measures referred to in the definition of designated persons or listed persons in the Order. This will verify whether in fact the target match is also subject to the prohibitions under the Montserrat Sanctions Regime.

The Consolidated List includes all the names of financial sanctions targets under United Nations Security Council Resolutions and UK legislation. The Consolidated List normally indicates whether the target is designated by the UN or the UK. The Consolidated List is divided by country, with separate sections for terrorist financing and Al-Qaida as well. The Treasury also provide individual Consolidated Lists for each of the individual regimes (e.g. Afghanistan, Syria etc.).

The following links provide access to the Treasury Guidance in relation to sanctions and to the consolidated list of persons constituting the target of financial sanctions in respect of each applicable Order, listed in Schedule 1 to the 2013 Regulations:

• Consolidated List of all Financial Sanctions Targets – Persons must ensure that they have read and understood the above GUIDANCE ON THE CONSOLIDATED LISTS
• Consolidated Lists by Regime – Persons must ensure that they have read and understood the above GUIDANCE ON THE CONSOLIDATED LISTS
• Treasury Guidance in relation to Consolidated Lists

Where relevant, reference can also be made to the Treasury guidance provided in relation to the sanctions regimes. Visit this site and select the link for the relevant individual regime, and then select the link for the relevant release provided at the bottom of the page.

United States sanctions?

https://ofac.treasury.gov

The Attorney General in Montserrat does not provide guidance on compliance with foreign sanctions; however, some foreign sanctions like those of the Office of Foreign Assets Control (OFAC) of the US Department of Treasury, have far-reaching extra-territorial effect, and may still be applicable. Therefore, you should be mindful of OFAC sanctions if:

• The ownership of your business is by a United States corporation
• goods originate from that country (if importing goods)
• you are dealing in their currency
• have United States offices, subsidiaries, branches or agencies or a relationship with a United States institution

Failure to comply with OFAC sanctions could expose you to criminal or civil liability in the United States.

If you plan to transact in US dollars or work with US persons or companies, check that you comply with OFAC/US sanctions.

• Remember to consider “owned and controlled by” scenarios.
• Consider filing a SAR to the FSC, if applicable
• You may need a licence from OFAC.
• Seek legal advice

ENDS