Ukrainian-Russian Conflict Escalates: How Developing Sanctions Affect U.S. Asset Managers
The rising geopolitical tensions between Russia and Ukraine boiled over on February 24, 2022, as Russia mobilized forces across the Ukrainian border and launched a series of airstrikes.
Emerging U.S. sanction developments
Although U.S. AML regulatory framework does not currently require registered investment advisers (RIAs) or private funds to maintain anti-money laundering (AML) policies or procedures, all U.S. persons and entities are required to abide by the mandates of the Treasury’s Office of Foreign Assets Control (OFAC), which administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals against targeted foreign countries, entities, and individuals. Due to the current conflict in Ukraine, OFAC and European sanctions are rapidly changing.
Because of this lack of AML regulations applicable to asset managers, many institutions have not implemented adequate Know Your Customer (KYC) or customer diligence procedures to address OFAC requirements, which in light of current developments, increases their regulatory, reputational, operational, and legal risk. Firms should review their KYC, sanctions, and due diligence efforts in light of the changing OFAC mandates and consider whether additional steps need to be taken to comply with current U.S. sanctions.
Additional considerations for your cybersecurity program
The recent geopolitical tensions with Russia and Ukraine have resulted in heightened cybersecurity concerns. As a result, the U.S. Cybersecurity & Infrastructure Security Agency (CISA) released guidance with action steps firms can take to bolster and protect their cyber programs. Lean more about these concerns and recommended action steps to mitigate risk to your firm here.
Reach out to ACA or other trusted third-party advisors for assistance in reviewing your risk and connections to Ukraine. Stay well-informed of new developments in the conflict as it relates to emerging sanctions and cyber risks/attacks.
How we help
ACA’s ComplianceAlpha AML KYC Solution can assist firms with their sanctions, KYC, and due diligence efforts. Our regulatory technology combined with our managed services help firms meet their customers’ data screening, ongoing monitoring, remediation, look back reviews, and reporting needs.
Our partnership with ComplyAdvantage allows us to help our clients stay up-to-date with rapid changes to sanctions by providing comprehensive coverage of OFAC’s Specially Designated National (SDN) and other government measures or sanctioned persons within a few minutes. Our data sources take into account not only formal SDN list changes in real time, but also measures announced publicly when written evidence from official sources are deemed reliable.
If you have any questions about this alert, or for more information about how ACA can assist your firm in mitigating the risks posed by the Ukrainian/Russian tensions, please reach out to your ACA consultant or contact us below.