It is relatively straightforward to find out if an individual is subject to financial sanctions. You can search OFSI’s consolidated list and see if you get a match. Signing up to OFSI’s e-alerts also means you’ll be notified when there are updates to the consolidated list. But in some cases, it can be more difficult to establish if a company is subject to financial sanctions. Usually, you can just perform a simple search like the one described above, but some companies have more complicated ownership structures. They may be owned by a designated person (someone subject to financial sanctions) and checks beyond the scope of OFSI’s consolidated list are required to establish who owns them.
In the example below, Company A may not show up as a sanctioned entity, but it is 51% owned by company B which is a sanctioned entity. This means financial sanctions would bite for company A as well as company B.
Some sanctioned entities deliberately use shell companies to try and obscure their ownership structure. If you are finding it difficult to establish who the owner of a company is, it could be a potential red flag for conducting business with them.
Be aware that ownership structures can also change. A designated person may sell some of the shares they own in a company, which could mean that the company is no longer caught by financial sanctions. They could also increase their shareholding, which would mean the company is now subject to financial sanctions.
Another thing to consider is who controls a company or individual. Control includes having a majority of voting rights or the ability to appoint or remove the majority of members of the administration of a company. An individual could be controlled by a family member or friend who is using the individual to enter into transactions. For further guidance on what constitutes ownership and control, read chapter 4 of OFSI’s general guidance.
Libya case study
The Libya Africa Investment Portfolio (LAIP) is part of a large sovereign wealth fund called the Libyan Investment Authority (LIA). The UN listed both these companies under a partial asset freeze on 16 September 2011. LAIP’s real estate arm, the Libyan Arab African Investment Company (also known as LAAICO or LAICO), is subject to a full asset freeze under the EU Libya regime.
LAICO has a subsidiary called ‘Ledger Hotels’ and they partially own or control several high-end hotels across the African continent. These hotels are listed on popular online travel providers.
Although these hotels are easy to book with and found on various online platforms, they may still be subject to financial sanctions. We cannot make a generalisation about this group of hotels as the ownership structure varies from one to the other. If you or your organisation stays in one of these hotels, uses a conference room there, or makes any funds available in exchange for goods and/or services without an OFSI licence*, you may be in breach of UK financial sanctions. Sometimes, companies only become aware of this when their bank blocks payment to the hotel, leaving them unable to pay their bill.
It is imperative that due diligence is carried out and you satisfy yourself that you are not transacting with a hotel controlled by a sanctioned entity. We would strongly encourage anyone considering transacting with a potentially LAICO-owned entity to take independent legal advice and carry out extensive due diligence measures.
If you believe you may be dealing with an individual/firm subject to sanctions, you must:
freeze their funds and assets immediately
not deal with or make funds or economic resources available to them (unless there is an exemption in the legislation that you can rely on or you have a licence from OFSI)
don’t do anything that would circumvent the asset freeze
If you have any questions or comments about the issues raised in this blog, please contact us on firstname.lastname@example.org.
*you may also require a licence from other competent authorities