Regulations and guidelines 4/2023 on customer due diligence related to compliance with sanctions regulation and national freezing orders enter into force on 1 March 2024
The FIN-FSA has issued regulations and guidelines 4/2023 on customer due diligence related to compliance with sanctions regulation and national freezing orders.
The authority to supervise procedures concerning sanctions compliance is a new one for the FIN-FSA, and there is no previously published set of regulations and guidelines on the subject.
Contents
The purpose of the regulations and guidelines is to provide binding regulations as well as interpretations and recommendations to entities supervised by the FIN-FSA on customer due diligence related to compliance with sanctions regulation and national freezing orders. Regulations and guidelines are provided on the organisation of the supervised entity’s activities, assessment of risks related to sanctions, customer due diligence, sanctions screening, asset freezing, third-country sanctions and reporting. Particularly noteworthy items in the regulations and guidelines include the clarification of roles and responsibilities in ensuring compliance with sanctions (chapter 4), the requirement to prepare a risk assessment on sanctions (chapter 5), the identification of customers and their beneficial owners (chapter 6), requirements concerning sanctions screening and asset freezing (chapter 7 and 8) and requirements concerning third-party sanctions (chapter 10). The objective is to ensure that supervised entities have effective policies, procedures and internal controls in place to ensure compliance with sanctions regulation and national freezing orders.
In contrast to the draft previously out for public consultation, the chapter on background checks of employees to ensure compliance with sanctions regulation and freezing orders has been removed from the regulations and guidelines.
The FIN-FSA has also added a new interpretation to chapter 5, paragraph 5, which highlights the proportionality of effective policies, procedures and internal controls with the risks identified in the risk assessment. Accordingly, supervised entities may apply a risk-based approach in determining how to allocate resources to ensuring compliance with sanctions regulation and national freezing orders. However, risk-based discretion may not be applied to compliance with sanctions regulation and national freezing orders.
In addition, the FIN-FSA has added a recommendation to the regulations and guidelines that supervised entities should seek a balance in having effective procedures for the management of sanctions risks whilst not unduly preventing its customers’ access to services (chapter 4.3, paragraph 26).
Finally, some clarifications have been made, and, among other things, application examples as requested in the consultation feedback have been added to several parts of the regulations and guidelines.
Entry into force
The regulations and guidelines will enter into force on 1 March 2024
For further information, please contact
Anssi Leisio, Senior Specialist, anssi.leisio(at)finanssivalvonta.fi or telephone +358 9 183 5524