What are targeted financial sanctions?
Financial sanctions are restrictions put in place to achieve a specific foreign policy or national security objective. They can:
- Limit the provision of certain financial services;
- Restrict access to financial markets, funds and economic resources;
Why are they important to an AML/CFT/CPF framework?
Financial sanctions are generally imposed to:
- Coerce a regime, or individuals within a regime, into changing their behaviour (or aspects of it) by increasing the cost on them to such an extent that they decide to cease the offending behaviour;
- Constrain a target by denying them access to key resources needed to continue their offending behaviour, including the financing of terrorism or nuclear proliferation;
- Signal disapproval, stigmatising and potentially isolating a regime or individual, or as a way of sending broader political messages nationally or internationally; and
- Protect the value of assets that have been misappropriated from a country until these assets can be repatriated.
What does the Isle of Man do?
The Isle of Man implements all United Nations and UK sanctions regimes. All UN and UK designations are effective in the Isle of Man, and changes made to them are effective immediately. The Isle of Man implements financial sanctions under the following primary legislation–
Sanctions Act 2024
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Provides the power to give effect to the United Kingdom (UK) sanctions provisions and the UK blocking provisions;
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Contains powers to impose civil penalties.
Terrorism and Other Crime (Financial Restrictions) Act 2014
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Implements United Nations targeted financial sanctions concerned with terrorism and proliferation financing;
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Ensures that when a person or entity is listed/de-listed under UN sanctions related to terrorism (i.e., Al-Qaida, ISIL, the Taliban) or proliferation financing, this has an automatic effect in the Island.
TF/PF Sanctions
The Financial Action Task Force (FATF)'s Recommendations set out a comprehensive and consistent framework of measures which countries should implement in order to combat money laundering and terrorist financing, as well as the financing of proliferation of weapons of mass destruction.
Countries should identify, assess, and understand the money laundering and terrorist financing risks for the country, and should take action, including designating an authority or mechanism to coordinate risk assessments and allocate resources, aimed at ensuring the risks are mitigated effectively.
FATF Recommendation 5
Countries should criminalise terrorist financing on the basis of the Terrorist Financing Convention, and should criminalise not only the financing of terrorist acts but also the financing of terrorist organisations and individual terrorists, even in the absence of a link to a specific terrorist act or acts. Countries should ensure that such offences are designated as money laundering predicate offences.
FATF Recommendation 6
Countries should implement targeted financial sanctions regimes to comply with United Nations Security Council resolutions relating to the prevention and suppression of terrorism and terrorist financing. The resolutions require countries to freeze without delay the funds or other assets of, and to ensure that no funds or other assets are made available, directly or indirectly, to or for the benefit of, any person or entity, either
- (i) designated by, or under the authority of, the United Nations Security Council under Chapter VII of the Charter of the United Nations, including in accordance with resolution 1267 (1999) and its successor resolutions; or
- (ii) designated by that country pursuant to resolution 1373 (2001).
FATF Recommendation 7
Countries should implement targeted financial sanctions to comply with United Nations Security Council resolutions relating to the prevention, suppression and disruption of proliferation of weapons of mass destruction and its financing. These resolutions require countries to freeze without delay the funds or other assets of, and to ensure that no funds and other assets are made available, directly or indirectly, to or for the benefit of, any person or entity designated by, or under the authority of, the United Nations Security Council under Chapter VII of the Charter of the United Nations.
Operator obligations
The Isle of Man Treasury expects all businesses that engage in activities where financial sanctions apply to stay up-to-date with the sanctions regimes in force, to:
- Consider the likely exposure of their business to sanctions.
- Take appropriate steps to mitigate those risks, taking into account the specific nature of their activities.
With regards to Sanctions alerts, operators are reminded to make updates without delay:
- Consider 3rd parties you interact with directly or indirectly;
- Consider the customer's jurisdiction;
- Note, sanctions can escalate cyberattacks, so remain vigilant of updates from the Cyber Security Centre for the Isle of Man (CSC) as well.
Isle of Man Customs and Immigration Division
Customs is the competent authority for the implementation of sanctions and has comprehensive guidance on its sanctions webpage, Isle of Man Government - Sanctions and Export Control. However, reports which are required to be made in respect of financial sanctions must be made to the Financial Intelligence Unit
