Advisers may face jail for Govt blacklist negligence

Financial advisers are being warned they may face imprisonment if they do business with any one of the thousands of individuals currently on a Government blacklist, which include some linked to terrorist funding.

A recent report by the Financial Crime and Intelligence Division (FCID) of the FSA found some firms have inadequate systems in place to reduce the risk of providing funds or offering financial services, including advice, to those on the list.

It says doing business with them could lead to "criminal penalties" including imprisonment.

The UK Financial Sanctions Regime (FSR) list names around 1,400 individuals and 500 entities suspected of being involved in terrorist financing.

"A failure to comply with these obligations can carry serious consequences," FCID director Philip Robinson says. "For example, it carries the risk of criminal penalties being sought by the government against the firm."

The report, 'Financial services firms' approach to UK financial sanctions' found companies need to improve their systems and controls and says small businesses in particular must improve their awareness of the UK financial sanctions regime.

It concluded a third of medium-sized financial services firms and half of their smaller counterparts have not carried out a risk assessment of their customer base.

It also revealed some medium-sized firms were screening clients to check whether individuals were on the list retrospectively. Some firms screened clients several weeks after doing business rather than at the time of "take-on".

Many firms believed financial sanctions screening was not necessary as they did not hold client money, did not make payments or dealt in products they assessed as low risk for financial crime, according to the report.

Linksfield Technologies is one firm that provides 'FSR Checker' software for smaller businesses and IFAs. It allows managers to compare their customer lists with updates from the Treasury's list of financial sanctions targets.

A free online trial of the service, including five free searches, is available here.

sarah.griffiths@incisivemedia.com