Insolvency practitioners added to UK sanctions reporting regime
Important changes are being made to the UK financial sanctions reporting regime from May 2025 which will impact insolvency practitioners (IPs).
The UK government is increasing the scope of financial sanctions reporting obligations to include IPs starting 14 May 2025. The change is brought about through changes to UK sanctions legislation under the Sanctions (EU Exit) (Miscellaneous Amendments) (No.2) Regulations 2024.
IPs will be added to the list of “relevant firms” under financial sanctions regulations and will therefore require complying with reporting requirements to the Office of Financial Sanctions Implementation (OFSI). The change is being made to enhance transparency and compliance with financial sanctions, improve OFSI's understanding of sanctions implementation, and identify potential breaches and circumvention gaps.
Under the reporting obligations, a relevant firm is required to report to OFSI as soon as practicable if it knows or has reasonable cause to suspect that a person
- is a designated person (i.e. someone who is listed on the consolidated sanctions list); or
- has committed a breach of financial sanctions regulations; or
- is a prohibited person.
Where the designated person is a customer of the relevant firm, the relevant firm must also report to OFSI the nature and amount or quantity of any funds or economic resources held by it for the customer at the time when it first had the knowledge or suspicion. In the context of an insolvency appointment, an IP appointed over a designated person (individual or entity) will always have to report to OFSI the nature and amount or quantity of any funds or economic resources held by the IP in relation to that appointment. Under the CCAB Supplementary Anti-money Laundering Guidance for Insolvency Practitioners section F.3.1, IPs will always have a ‘business relationship’ over a debtor/entity over which they are appointed.
The reporting obligations only apply where the knowledge or reasonable suspicion comes to their attention “in the course of carrying on its business”. Where an insolvency practitioner undertakes business that does not constitute insolvency practitioner business – for example where they act as a LPA receiver or undertakes an independent business review – this is not subject to sanctions reporting obligations as these are not as a result of acting as an insolvency practitioner within the meaning of section 388 of the Insolvency Act 1986 or article 3 of the Insolvency (Northern Ireland) Order 1989.
Detailed reporting procedures are outlined in OFSI's general guidance, but will include providing specific information, including the basis for suspicion, identifying information about the person, and details of funds or resources held.
There will also be additional reporting requirements in relation to “prohibited persons” under the Russian Sanctions regime. OFSI will require to be informed as soon as practicable if the “relevant firm” knows, or has reasonable cause to suspect, that it holds funds or economic resources for a person to whom financial services must not be provided to under regulation 18A(1) of The Russia (Sanctions) (EU Exit) Regulations 2019 (a prohibited person).
A prohibited person means the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, the Ministry of Finance of the Russian Federation, a person owned or controlled directly or indirectly by these entities, or a person acting on behalf of or at the direction of these entities.
Relevant firms that hold funds or economic resources for a prohibited person must complete a reporting form template and submit it to OFSI. This form must be submitted when making the initial report and, thereafter, by no later than 30 November in each calendar year, providing a report to OFSI as to the nature and amount or quantity of those funds or economic resources held by that firm as of 30 September in that calendar year.
Action required
IPs should already be taking steps under their AML procedures to understand whether individuals or businesses over which they are appointed are on the consolidated sanctions list or otherwise connected with sanctioned regimes. In addition, the number of individuals or entities subject to insolvency procedures and which meet the criteria for the new reporting requirements is likely to be relatively small and therefore the new legislation requirements are likely to have limited practical impact on most IPs. However, the consequences of failing to report are significant and therefore all IP firms should ensure that they have robust policies and procedures in place to ensure that where there is a requirement to report that this is identified and actioned.
IP firms should ensure that the new requirements are communicated to staff as part of staff training and CPD and update case and AML checklists as appropriate.
Read the OFSI Financial sanctions guidance for Insolvency Practitioners.
