Sanctions Law in the Bailiwick of Guernsey
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This article originally appeared in Aurigny’s En Voyage, Issue 44.
Todd McGuffin, Head of Disputes and Risk.
The Bailiwick maintains a comprehensive sanctions framework to ensure compliance with international obligations and to protect its reputation as a well-regulated financial centre. Sanctions play a critical role in combating terrorism, money laundering, weapons proliferation, and threats to global peace and security. Guernsey’s regime mirrors that of the United Kingdom, allowing the Islands to implement United Nations (UN) and UK sanctions effectively and consistently.
The cornerstone of Guernsey’s sanctions regime is the Sanctions (Bailiwick of Guernsey) Law 2018, which provides a statutory basis for implementing and enforcing international sanctions within the Islands. Following the UK’s departure from the European Union, the Sanctions (Implementation of UK Regimes) (Bailiwick of Guernsey) (Brexit) Regulations 2020 ensured that UK sanctions measures continued to apply locally.
Complementary legislation includes the Terrorist Asset-Freezing (Bailiwick of Guernsey) Law 2011, which governs the freezing of assets linked to terrorist activities. The Policy & Resources Committee (P&R) is responsible for the administration of sanctions, while the Guernsey Financial Services Commission (GFSC) supervises compliance within the financial sector.
Sanctions apply to individuals, entities, and states designated under UN, UK, or other international regimes. The prohibitions extend to persons owned or controlled by designated individuals and those acting on their behalf. This ensures that Guernsey cannot be used as a conduit to evade sanctions through indirect ownership or complex structures – a key concern for a jurisdiction with a large fiduciary and financial services industry. The Sanctions Law prohibits the following without authorisation:
- Dealing with funds or economic resources belonging to a designated person;
- Making funds or resources available, directly or indirectly, to or for the benefit of a designated person;
- Providing trust or corporate services to designated persons or connected entities, particularly under sanctions imposed by the Russia (Sanctions) (EU Exit) Regulations 2019 (Russia Regulations).
Licences may be issued by P&R to permit certain otherwise prohibited activities, such as the payment of basic expenses, legal fees, or maintenance costs in relation to assets. General licences may also be issued to cover specific categories of transactions.
Non-compliance with the Sanctions Law is a criminal offence and may also attract regulatory sanctions, including fines, licence suspension, or revocation. Further, the GFSC has shown increasing willingness to take enforcement action where sanctions systems and controls are inadequate.
We regularly provide advice to individuals, beneficiaries, local directors and trustees as to the applicability of the sanctions regime with respect to trust and corporate structures particularly as to the scope of Regulations 10-15 (Assets-Freeze), Regulation 18C (prohibition on Trusts Services) and the applicability of the statutory exemptions in Part 7 of the Sanctions Law.
The sanctions regime is integral to maintaining the Bailiwick’s international credibility and financial integrity. By aligning closely with the UK and UN regimes, the Bailiwick ensures that its financial services sector remains compliant, transparent, and trusted. However, financial services business remain obligated to act in the best interests of their clients and beneficiaries to the full extent permitted under the Sanctions Law including seeking appropriate licenses or relying upon applicable statutory exceptions.