The obligations placed upon the financially regulated sector are many and various, and most are governed by the risk-based approach, in which the risk of dealing with a particular person, company or transaction must be assessed, and the level of due diligence to be applied decided on the basis of the result of that risk assessment. This is particularly true of the so-called Politically Exposed Persons (PEPs), individuals of power and influence globally, such as politicians and ministers, senior judges, military and security commanders, etc. Identification of a client in that category must prompt the process of Enhanced Due Diligence (EDD) and a decision from management as to whether that client will be taken on, or indeed, whether or not a Suspicious Activity Report (SAR) should be submitted.
There is also, however, a class of individual or entity that cannot be dealt with under any circumstances, and it is essential that every effort is made to identify this class before accounts are approved or transactions are commenced. I refer of course to the subjects of the various global sanctions regimes. Many countries have their own lists of sanctioned individuals, and it is up to firms to establish ways of checking that they are aware of the lists in their countries of operation, but for the most part, the lists of greatest importance are those operated by the United Nations (UN), the EU, the USA and the UK. There are various UN lists in operation, and they can be found via the UN web site.1 The EU provides a comprehensive list that is applicable to all member states, 2 whilst in the USA, the list kept by the Office of Foreign Assets Control (OFAC) covers companies with U.S. operations, and anyone dealing in U.S. dollars.3 Her Majesty's Treasury in the UK provides a comprehensive list that is essential for UK companies, and companies operating in the UK, to be aware of.4
United Nations Security Council (UNSC) resolution 1970 (2011) and 1973 (2011) created such a sanctions regime at the commencement of the popular uprising in Libya in the spring of 2011, amended/extended by resolutions 2009 (2011), 2016 (2011), 2040 (2012) and 2095 (2013). The original resolutions created an arms embargo, a ban on flights, an asset freeze and a travel ban, as well as a No Fly Zone operated by NATO forces. The arms and flight measures covered the whole country and population, but the asset freeze and travel ban were, and still are, aimed at specific individuals and entities of and controlled by the Qadhafi regime. The purpose was to prevent funds being used to further repress and harm the Libyan population, and obliged member states to identify such assets situated in their territory, and ensure that they were frozen and not available to the designated individuals and entities.
The Libya sanctions regime has been an unusual one, in that events unfolded quickly over the summer of 2011, culminating in the fall of the regime, and the death of the leader Colonel Muammar Qadhafi and some of his sons. In the following months, the asset freeze measures were gradually relaxed as far as some of the entities were concerned, primarily to help the transitional administration and eventual government to rebuild the nation. By mid-September 2011, the only entities remaining were and are the Libyan Investment Authority (LIA), including the Libyan African Foreign Investment Company (LAFICO), and Libyan African Investment Portfolio (LAIP). Any of their assets that were, or should have been frozen prior to that date were to remain frozen, but they were free to operate normally from 16 September 2011. The aim of the UN Sanctions Committee is to unfreeze these funds as soon as stable financial governance is achieved within the country. The revenue from Libya's oil industry means that the continued freeze is not affecting the country's liquidity in any way.
As far as individuals are concerned, the asset freeze remains complete, even on the funds of those who are now deceased. This is because it is believed that most of those assets were obtained by regime members from state coffers, and their continued freezing enables the new state to lay proper claim to them through legal process in due course. Indeed, this process is well under way and last year a British court ruled that a mansion in London, ostensibly owned by a company registered in the British Virgin Islands, Capitana Seas Ltd, was beneficially owned by Saadi Qadhafi, one of the ex-leader's sons.5 The court awarded the £8 million property to the Libyan government.
All this means that while investment and trade are genuinely encouraged with the 'new' Libya, financial institutions need to be aware that the possibility exists that they may be dealing with a designated individual or associates, so both their sanctions list and beneficial owner checking systems need to be efficient when contemplating business in the region. As ever and everywhere, go and trade, but make sure that you Know Your Customer!
Simon Dilloway BSc(Hons), MSc, CSyP, FSyI, former Metropolitan Police Officer in London, managing director of KYC Cube Ltd and of Lopham Consultancy Ltd, also a member of the Panel of Experts advising the UN Security Council Libya Sanctions Committee on the financial sanctions, London, England, firstname.lastname@example.org
The opinions expressed in this article are those of the author alone, and not of any of the organizations of which he is a member or by which he is engaged.