The UK HM Treasury (“HMT”) is changing its policy in relation to funds received in the UK that have come either directly or indirectly from an individual or entity outside of the EU that is subject to EU Sanctions (a “designated party” or a “designated person”).
HMT has previously taken the view that when funds are received by a non-designated person in the UK, from a designated person outside the EU, the funds did not need to be frozen and a licence was not required for their release. However, from midnight on 31 July 2014, any funds arriving in the UK, or in a UK bank anywhere in the world, which have come from, or via, a designated person based outside the EU, will be required to be frozen in a suspense account, or other separate account, on arrival in the UK bank. In order to release those funds to the intended recipient, a licence will be required from HMT.
Even if funds are not coming directly from a designated entity or individual, but did go through a designated entity (including a designated bank) earlier in the payment route, they will need to be frozen and a licence will be required to release the funds.
If HMT refuses to issue a licence the funds would need to remain frozen.
This policy change brings the UK in line with the policies of other EU Member States.
What does this mean for you?
UK financial institutions should already be running adequate screening programmes to identify whether counterparties are designated under EU Sanctions. From midnight on 31 July 2014, all funds received from such a designated entity or individual will be required to be frozen (e.g. in a suspense account) unless a licence from HMT authorises the release.
UK businesses may therefore encounter delays in receiving payments due by their counterparties which are designated under EU Sanctions and should take this into consideration when planning and forecasting their cash flows. Ultimately, if HMT refuses a licence application, funds may also remain frozen until the time when the relevant EU Sanctions are lifted.
If you are an exporter and have an export licence from the UK Export Control Organisation authorising you to export goods to a designated entity outside the EU, you will still need a further licence from HM Treasury to receive payment for the goods from the designated entity.
If you are receiving funds directly or indirectly from a designated Iranian person, body or entity and are issued a licence by HMT, you will not need to make a separate notification/authorisation to HM Treasury pursuant to the requirements of the EU Sanctions against Iran.
Finally, the change of policy only applies to funds arriving in the UK from a designated party outside the EU. Funds held, owned or controlled by designated persons, entities and bodies within the EU are frozen and therefore would already require a licence to be transferred or dealt with.