Further to the Office of Financial Sanctions Implementation’s (“OFSI”) consultation on the introduction of civil monetary penalties for breaches of financial sanctions (our e-briefing on which can be found here), Part 8 of the Policing and Crime Act 2017 (the “Act”) came into force on 1 April 2017 bringing with it a range of changes to the current sanctions enforcement regime in the UK. The changes to the regime mean that compliance with UN, EU and UK sanctions will be strengthened.
The Act amends:
(i) the procedure for UN-mandated sanctions;
(ii) Enables the imposition of civil monetary penalties for breaches; and
(iii) the framework of criminal offences;
The Act defines “financial sanctions” as a wide range of asset freezing and investment-related measures, but does not include trade sanctions.
In response to perceived delays by the EU in implementing UN-mandated asset freezes, from 1 April 2017, all new UN financial sanctions will have immediate direct effect in the UK.
OFSI will add any such listings to the consolidated list of targets within one working day of them being announced by the UN. These listings will be kept live for 30 days, or until the EU adds the new UN listing to existing sanctions regulations (whichever is sooner).
Civil monetary penalties
The Act gives OFSI new civil powers to impose monetary penalties for breaches of financial sanctions.
In order to do so, OFSI must be satisfied, on the balance of probabilities, that (a) a person (including a legal entity) breached a prohibition, or failed to comply with an obligation, imposed by a financial sanction, and that (b) that person knew or had reasonable cause to believe that they were committing a breach. These parameters mean that separate penalties could be imposed on a legal entity, and on the officers who run the entity in question.
OFSI will be entitled to impose fines representing the greater of £1,000,000 or 50% of the estimated value of the breach, to be quantified and/or levied at its discretion.
To support this change, OFSI has published:
Within these guidance documents, OFSI has re-emphasised the importance of early voluntary disclosure of suspected breaches of financial sanctions.
Section 144 of the Act increases the maximum criminal penalty, for breach of financial sanctions, from two to seven years imprisonment. In addition, the Act adds breach of financial sanctions to the list of offences in respect of which deferred prosecution agreements may be entered into, and serious crime prevention orders made, further broadening the enforcement options available in the UK.
These changes indicate that the UK authorities are continuing to progress towards US-style enforcement for breaches of sanctions, and for policing of financial crime more generally, with an increasing focus on who companies are doing business with, or who is doing business on their behalf. All companies should be aware of OFSI’s increased focus on sanctions compliance, and should take steps to combat any potential risks by ensuring that internal policies and procedures are in place, and that they work effectively within the scope of the new regime.