SAMLA (Sanctions and Anti-Money Laundering Act)

Prior to Brexit, sanctions and anti-money laundering enforcement in the UK were governed through the European Union’s legal framework. To establish an independent and comprehensive legal basis for implementing and enforcing its own sanctions regimes, the UK enacted the Sanctions and Anti-Money Laundering Act (SAMLA) in July 2018.

What is SAMLA?

SAMLA is an important UK legislation and is intended to allow the UK to impose sanctions following Brexit. The Act gives powers to ministers to modify AML/CFT compliance regulations, without having to undergo lengthy legislative procedures.

What is the purpose of the SAMLA?

The Sanctions and Anti-money laundering Act 2018 has two main purposes. First, the Act provides the legal basis for the UK’s Autonomous Sanctions Framework. Second, SAMLA provides a legal framework for the establishment and implementation of anti-money laundering regulations based on FATF recommendations.

What Types of Sanctions Does SAMLA Impose?

SAMLA UK affirms the right to impose a wide variety of sanctions in the pursuit of its foreign policy and national security interests:

• Financial Sanctions: This entails freezing assets, limiting access to financial services, and excluding access to capital markets.
• Immigration Sanctions: Prohibiting travel and visa denial to those who endanger the national interest.
• Trade Sanctions: Limiting the importation/exportation of goods, services, or technology to prevent their misuse.
• Aircraft Sanctions: Restricting the landing rights, leasing, servicing, and transferring aircraft or aviation parts belonging to or related to sanctioned individuals or entities.
• Shipping Sanctions: Banning access to UK terminals, and limiting leasing, insurance, and ownership transfer of vessels related to listed individuals or regimes.

How Does SAMLA Support the UK’s UN Sanctions Obligations?

SAMLA gives the UK Government the legal power to apply and enforce sanctions that are required by United Nations Security Council resolutions. By doing so, the UK supports global efforts to prevent terrorism, stop the spread of weapons, and respond to international conflicts.

UN sanctions can include restrictions such as freezing assets, banning travel, or stopping the supply of arms. These measures are legally binding under international law, and SAMLA aims to ensure they can be fully enforced in the UK.

What Is “Designation by Description” Under SAMLA?

Section 12 of SAMLA 2018 permits the UK to sanction individuals or entities by describing them, instead of naming each one individually. This happens when it’s not possible to identify every person or company.

The description must be clear enough so that anyone can understand who is included. For example, all members of a certain group or companies owned by a specific person.

The authorities must also have reasonable grounds to suspect that the listed individuals are involved in a sanctionable activity. This tool provides more rapid enforcement and is not present in EU law.

How SAMLA 2018 Strengthens Anti-Money Laundering in the UK?

SAMLA 2018 responds to evolving typologies of money laundering and terrorist financing by strengthening the UK’s ability to cope with financial crime risk. Rather than introducing entirely new requirements, it empowers the UK Government to make supporting rules. SAMLA regulations require businesses in relevant sectors to take appropriate steps, such as:

• Determining and evaluating the risks of money laundering, terrorism financing, or threats to the global financial system.
• Maintaining internal policies, procedures, and controls to handle these risks.
• Implementing particular measures in respect of customer relationships, including verifying the identity of the customer and the source of funds.

SAMLA 2018 seeks to combat hidden ownership of offshore companies, highlighted by leaks like the Pandora Papers. The Act requires that the Secretary of State regularly report on the progress toward establishing a public register of beneficial owners for overseas entities.

SAMLA UK also gives the government the authority to raise penalties for breaches of its prohibitions or requirements, further enhancing enforcement powers.

Who Oversees and Enforces SAMLA in the UK?

Several authorities have been charged with the implementation of SAMLA in the UK:

• HM Treasury is the ministry responsible for determining the direction of UK sanctions policy and making sanctions rules.
• The Office of Financial Sanctions Implementation (OFSI) is the institution that implements financial sanctions, issues guidance, and levies penalties for failed compliance.
• Financial Conduct Authority (FCA) supervises how regulated financial institutions comply with AML  in their Sanction regime.
• The National Crime Agency (NCA) deals with serious financial crime and sanctions evasion.
• The Office of Trade Sanctions Implementation (OTSI) is responsible for civil enforcement of trade sanctions, including services and goods transactions where items do not cross UK borders.

Additionally, HMRC, Department for Transport, FCDO, and Home Office support various sanctions enforcement activities such as customs violations, transport restrictions, policy formulation, and travel sanctions.

How does SAMLA differ from the UK Money Laundering Regulation?

SAMLA 2018 gives the UK government the legal authority to create and update sanctions and AML rules, while the UK Money Laundering Regulations 2017 (MLRs) set out the specific compliance steps.

For example, SAMLA allows the government to issue new rules mandating enhanced checks for customers from high-risk jurisdictions. The MLRs then provide the exact steps a financial firm must take, such as collecting additional documents, applying a risk-based approach, and documenting the process.

Thus, the SAMLA sets the legal mandate, whereas the MLRs carry out that mandate through comprehensive compliance requirements.

What Role Does SAMLA Play in Preventing Terrorist Financing?

SAMLA 2018 plays a key role in preventing terrorist financing in the UK. It allows the government to impose financial sanctions and restrict access to the financial system for individuals or entities linked to terrorism. This is done through a combination of targeted measures that directly involve financial institutions.

It mandates banks to freeze assets, block payments, and limit access to banking services for the listed individuals.

SAMLA uses a reasonable ground to suspect standard, which allows for prompt action without absolute evidence. Companies are required to carry out enhanced due diligence on high-risk clients, monitor suspicious activity, and report red flags.

Overall, this Act is designed to make sure that financial institutions act promptly and proactively to stop terrorist organizations from exploiting the financial system.

What Are the Implications of SAMLA for Financial Institutions and the International Financial System?

The Sanctions and Anti-Money Laundering Act 2018 (SAMLA) sets clear obligations for financial institutions. They must perform thorough Know Your Customer (KYC) and Customer Due Diligence (CDD). They also need to assess risks related to customers and transactions, report SARs when necessary, and maintain up-to-date compliance records.

SAMLA is a UK legislation, but it also applies to UK overseas territories such as Gibraltar and the Cayman Islands. These territories are encouraged to follow international Anti-Money Laundering and Counter-Terrorist Financing (AML/CFT) standards.

The law favors beneficial ownership transparency and supports FATF recommendations. The Act aims to avoid abuse of offshore vehicles by reinforcing the UK’s role in global financial stability.

While it remains a challenge to keep up with evolving UK sanctions and AML laws, let AML Watcher make compliance easy.