What You Need to Know
In this blog post we take a look at applying for humanitarian licencing from the Office for Financial Sanctions Implementation (OFSI) for organisations working within the third sector.
OFSI have been in existence since 2016 with the objective of raising awareness of how UN sanctions may impact on your activities, providing compliance tools and issuing licenses where UK organisations are working overseas with financial links to the UK that would otherwise be in breach of sanctions.
When a country, person or organisation is subject to an asset freeze, any funds or economic resources belonging to them, must be frozen and trading / moving funds to them is prohibited.
OFSI see humanitarian work as important and are willing to grant some relief to a strict imposition of sanctions and therefore will often treat as a priority any application for relief.
Why Financial Sanctions Exist
Financial sanctions can be used to bring pressure on the country, person or organisation to make them change their actions such as persecution, funding terrorism, or reduce the risk they pose to the world community. For example, in Syria or Myanmar sanctions are being used to deprive the current regimes of the ability to persecute large parts of their civilian population.
The types of sanctions that can be applied include asset freezing or the prevention of transmission of funds like money, securities and physical movement of goods or restrictions on access to financial services.
Before applying, consider engaging with any parties to be included on a requested licence including bodies that channel funds to you or that may be required to process a transaction e.g. your bank will have its own rules to avoid itself breaching sanctions.
NGO Risk Profile
OFSI see the NGO high risk profiles as charities working with local NGO’s in opposition held territories and operating offices overseas. Medium risk activities would be utilising cash couriers, transferring funds and providing funds to partners.
Please note where a charity is funding another charity to do the work, the Charity Commission would expect the grant funder to do their own due diligence and ensure the other charity doing the activity has the correct licence in place.
Applying for a Licence – Tips
- Apply well before the licence is actually required. Humanitarian cases are prioritised but this will still take over a month.
- Before applying, read the licensing section in OFSI’s general guidance. Do also look at OFSI’s other specific guidance documents where relevant.
- Don’t be alarmed if OFSI ask follow-up questions following the submission of an application – they often ask for clarifications and further information.
- Do consider whether there is a “reasonableness” test and whether further information will be required.
- Provide as much information and evidence as you can at the start of the application to avoid delays.
- Before applying, consider engaging with any parties to be included on a requested licence (e.g. banks).
You may want to consider seeking independent legal advice before applying. While this is not a requirement, OFSI cannot offer legal advice.
A UK based NGO wishes to put in place a small humanitarian programme in North Korea. There are financial sanctions in place which mean a licence is required from OFSI to transfer more than £13,000 per year into North Korea. Any payments under £13,000 are not licensed. The £13,000 cap includes linked payments, so for example two £5,000 payments and one £3,001 payment.
The charity provided a complete breakdown of the payment chain and clear justification of why the funds where required within their application to OFSI.
In this case study OFSI were satisfied and agreed to grant a one-year licence to allow the charity to send up to £5,000 per month.
Please note where licences are issued with a time frame, no reminders on renewal are sent, so the charity would need to ensure that they renewed it.
For more information it’s worth noting that the Charity Commission provide some guidance for certain locations and risk assessments however this is not specific to each country as they deal with 168,000 registered charities.
Sanctions Impact on Insurance
Should NGO’s require insurance as part of their licensed work then brokers and insurers will also be required to sanction check countries, organisations and persons as part of offering cover. Cover can’t be provided for sanctioned entities or persons.
However, where insurers can offer cover in sanctioned countries they will be an endorsement applied to state that no payments can be made into that country or to any entity there. So, if for example someone required medical treatment under a travel policy, they would have to pay the invoice direct with the medical facility and then claim re-imbursement back from the insurer. An insurer guarantee of payment or direct settlement would not be allowable with the medical facility in the sanctioned country.
Both Banner Financial Services and insurers we use will all conform to sanctions checking which is particularly important in relation to claims. Banks also bring their own layer of checking for money being sent to a sanctioned territory as well as an identified name of an individual firm.
You can be assured that Banner Financial Services has a checking procedure in place as part of our regulatory activity and are required to confirm this annually. We are aware of our duties and part of premium covers this activity. The process we follow means you won’t be inadvertently drawn into a breach of sanctions rules.