Asset freezes are a temporary blocking of financial resources belonging to an individual or an entity that is designated under a sanctions regime, including the proliferation regimes for Iran and the DPRK. Assets will eventually be released to the legitimate beneficial owner once the security threat is overcome and sanctions are no longer required.
Banks and financial service providers employ commercially available databanks that list Politically Exposed Persons (PEP). These automated compliance tools help in the monitoring of financial transactions to flag individuals, companies or entities that are designated under UN or other sanctions. They also indicate concerns arising from many other integrity risks that are unrelated to sanctions.
|The Financial Action Task Force defines a
Politically Exposed Person (PEP) as:
an individual who is or has been entrusted with prominent public functions by a foreign country, for example a head of state or head of government, senior politician, senior government, judicial or military official, senior executive of a state owned corporation, important political party official.
– a person who is or has been entrusted with a prominent function by an international organization, for example a member of senior management, i.e. a director, deputy director or a member of the board or equivalent function.
Over time, commercial PEP lists expanded to include individuals listed under any sanctions regime, and the most sophisticated databank products also offer a predictive option that analyzes professional and social networks to identify additional high-risk individuals.
Importantly, PEP designations do not imply culpability but are merely a risk qualifier that necessitates heightened attention.
Often, government agencies called National Financial Intelligence Units (FIU) share responsibility in the implementation of sanctions and other enforcement actions. Together with private sector compliance service providers, they rely on the methodologies and principles developed by the Financial Action Task Force (FATF). Of the total of forty FATF Recommendations one addresses directly nonproliferation financing issues, whereas others have relevance to broader sanctions compliance concerns.
FATF guidance interlinking with international and national anti-money laundering instruments, are also integrated into the international coordination of FIUs under the Egmont Group, who in turn are expected to closely collaborate with leading global banking conglomerates. They are organized with the Wolfsberg Group.
The centerpiece of these public-private structures for maintaining the integrity of financial flows is the introduction of important due diligence and reporting obligations. In all cases where integrity standards appear to be compromised, banks and financial institutions are required to file Suspicious Transaction Reports with their oversight authorities. These measures, however, do not directly affect the implementation of financial sanctions adopted under Chapter VII of the UN Charter. Independent from any other legal obligations, the enforcement of UN asset freezes is obligatory on their own merits on all states.