This Red Alert is published by the UK government and issued by the National Economic Crime Centre (NECC), a multi-agency unit in the National Crime Agency (NCA), HM Treasury’s Office of Financial Sanctions Implementation (OFSI) and the Foreign, Commonwealth & Development Office (FCDO).
Who is this alert for?
✅Banks
✅Credit card operators
✅Foreign exchange dealers
✅Non-bank payment service providers
✅Customs brokers
✅Freight forwarders
✅Transportation and logistics providers
What is this alert?
Since the Russian invasion of Ukraine in February 2022, all new investment into Russia has been prohibited, and over 1,900 entities and individuals with a combined net worth of over £140 billion have been sanctioned.
This representantes a significant impact on bilateral Russia-UK trade, with over £20 billion of that now under the Russia sanctions regime.
This means Russian oligarchs are doing more to circumvent the law and are increasingly desperate to use their assets, often to support the Russian war effort. Russia is also exerting significant pressure to procure sanctioned goods from other countries, including such goods from the UK. Some of these items have been used in the battlefield in Ukraine, potentially used for war crimes, and some have originated in the UK.
What actions have been taken against other companies?
Two Turkish businesses, TURKIK UNION and AZU INTERNATIONAL, have been sanctioned for their role in exporting microelectronics to Russia. AEROMOTUS UNMANNED AERIAL VEHICLES TRADING LLC, a Dubai-based company, was sanctioned for supplying drone and components of drones to Russia. OOO TK FLY BRIDGE, a Russian company involved in procuring dual-use goods, was sanctioned, alongside individuals and businesses in Belarus, China, Serbia, Turkey, the UAE and Uzbekistan, all involved in supplying the Russian war machine.
What does the financial sector have to do?
Financial services, and in particular the regulated sector, have a key role to play in detecting activity designed to breach international sanctions and fund ongoing war crimes in Ukraine. All companies are required to uphold international sanctions, but financial services play a significant role in stopping the illegal flow of sanctioned goods.
Key elements of sanctions screening include:
✅Utilising data sources
✅Screening of clients, customers and third parties
✅Ongoing monitoring
✅Review transaction activity
✅Understand customer profiles
✅Monitor usage of items on the Common High Priority List
What is the Common High Priority List?
The Common High Priority List has been developed by the UK, US, EU and Japan which includes many items found on the battlefield in Ukraine. All these items are under sanction.
The list is divided into four Tiers, with tiers one and two containing particularly sensitive items – integrated circuits of the highest concern for Russian weapons systems, and additional electronic components.
- Tier 1: Integrated circuits (also referred to as microelectronics)
- Tier 2: Electronics components including communications modules and passive electronic components
- Tier 3A: Further electronic components used in Russian weapons systems, with a broader range of suppliers
- Tier 3B: Mechanical and other components utilised in Russian weapons systems
- Tier 4: Manufacturing, production and quality testing equipment of electric components, circuit boards and modules
The full list includes dozens of individual items such as diodes, television cameras and video recorders, ball bearings, lasers, and parts of aeroplanes. All of these items are under sanction.
They should be treated like handling stolen goods. Transporting, selling, buying, shipping or otherwise being connected to the supply of these goods to sanctioned entities is a criminal offence.
What are key red flags to be aware of?
There are a number of red flags to be aware of when dealing with sanctioned items, and where there is a risk of a sanctions breach. A single red flag is not necessarily indicative of illicit or suspicious activity. The surrounding facts and circumstances should be considered before determining next steps, like submitting a suspicious activity report to the NCA.
1. Transactions related to payments for goods on the Common High Priority list, from a company incorporated after 24 February 2022 and based in known diversionary destinations.
2. A customer who lacks or refuses to provide details on banks, shippers, or third parties, including about end users, intended end-use, or company ownership.
3. Transactions involving smaller value payments, all from the same end user’s foreign bank account, to multiple, similar suppliers of Common High Priority list items.
4. A customer that significantly overpays for a Common High Priority list item, compared to known market prices.
5. Purchases under a letter of credit that are consigned to the issuing bank, not to the actual end user. In addition, supporting documents, such as a commercial invoice, do not list the actual end-user.
6. Transactions involving entities with little to no web presence, such as a website or a domain based email account.
7. Transactions involving customers with phone numbers with country codes that do not match the destination country.
8. The item or service (commodity, software, service or technology) does not fit the purchaser’s line of business.
9. The customer’s name or its address is similar to one of the parties on the OFSI consolidated list.
10. Transactions involve a purported civil end-user, but research indicates customers with counterparties with connections with the military, such as an address that is a military facility or is co-located with military facilities in a country of concern.
11. Transactions involving companies that are physically co-located, or have shared ownership, with an entity on the OFSI consolidated list.
12. Transactions that use open accounts/open lines of credit when the payment services are conducted in conjunction with known diversionary destinations.
13. Transactions involving a last-minute change in payment routing that was previously scheduled from a country of concern, but now routed through a different country or company.
14. Transactions involving payments being made from entities located at known transhipment points or involve atypical shipping routes to reach a destination.
VinciWorks’ sanctions compliance solutions
The field of economic sanctions has been growing increasingly complicated in recent years. As events in Russia, Iran, China and other countries grab global headlines, businesses are struggling to stay on top of changes. Our resources include a library of free guides, policy templates, on-demand webinars and blogs to help your organisation get to grips with the latest sanctions.
Online training
All businesses are required to screen for sanctions compliance when conducting due diligence, but in particular, regulated entities should make sure everyone is up to speed on the new sanctions rules. Our courses will teach users to understand global sanctions regimes for different jurisdictions and how they affect your business. Users will learn how to apply processes for customer screening, to identify red flags and report them, and how to make sense of recent sanctions changes.
