What has happened?
The UK Treasury Select Committee has published a report on anti-money laundering (AML) supervision and sanctions implementation, calling for the Government to review this year the effectiveness of the Office of Financial Sanctions Implementation (OFSI), the body responsible for implementing financial sanctions in the UK.
What does it mean?
Entitled “Economic Crime – Anti-Money laundering supervision and sanctions implementation”, the report covers several issues concerning economic crime in the UK, including the effectiveness of OFSI.
In this regard, the report noted that the agency, which was created a year and a half ago, has been criticised for "lacking bite" and not acting as a deterrent to UK-based sanctions violations.
It has also been said that no one really understands what sort of threat OFSI poses as an enforcement agency.
On the other hand, when it comes to sanctions, all financial institutions and exporting companies are aware of the US Office of Foreign Assets Control (OFAC) and know what its powers are.
The report concluded that "public examples of enforcement will be necessary if the organisation is to be recognised as an effective deterrent".
OFSI has several sanctions breaches under investigation, and it recently issued its first-ever fine – for a breach of financial sanctions after a little-known bank handled just £200 of assets frozen in connection with a sanctioned Egyptian individual – which should be a step towards the agency being seen as a deterrent.
The report therefore recommended that the Government should review the effectiveness of OFSI this year, so two years after its creation.
Commenting on the report, Partner Aline Doussin said:
"The UK Treasury Select Committee has recommended a drastic overhaul of the UK's financial crime enforcement system, which will put pressure on both the Financial Conduct Authority and OFSI to pursue greater enforcement action and combat economic crime."
As to the rest of the report, the Select Committee recommended that the Government should review the UK's AML supervision more frequently and called for a more precise estimate of the scale of economic crime in the UK.
Among other things, the report also stated that the UK should not compromise in the fight against economic crime to secure trade deals after Brexit and that it was wrong for the Government to not reform the corporate criminal liability framework for economic crime.
Please contact us if you have any questions on the above or would like to know how we can help your organisation.
Receive free news and analysis – written by Hogan Lovells' world-leading legal teams and tailored to your preferences – by registering on Engage. You can also access our cutting-edge interactive Lawtech tools, designed to help you make better decisions and save time and money.
You can also keep track of all the Engage content by following our LinkedIn page.