Updated guidance regarding the enforcement of financial sanctions from the UK’s Office of Financial Sanctions Implementation (OFSI) was published on 16 March 2023. The guidance, which sits alongside OFSI’s general guidance on financial sanctions, provides that where OFSI determines that a breach of UK financial sanctions has occurred, and an incorrect assessment of the ownership and control of an entity is relevant to that breach, it will consider the degree and quality of due diligence conducted on the ownership and control of that entity when assessing enforcement options.

Under UK sanctions, asset freeze restrictions attach not only to expressly designated persons or entities but also to entities that the designated person “owns” or “controls”. When OFSI determines that a breach has occurred (eg when funds are made available to an entity owned/controlled by a targeted person), OFSI has stated that it will consider the degree and quality of research and due diligence conducted by the offending person on the ownership and control of the sanctioned entity

The updated guidance is important in clarifying what due diligence is expected under the UK’s new strict liability civil enforcement regime, and underlines the importance of performing thorough sanctions screening exercises, especially as the burden of proof for demonstrating that reasonable and appropriate due diligence was undertaken lies with the person against whom OFSI is taking an enforcement action.

Read more here on the expected standard of due diligence and mitigating factors that will be taken into account in any enforcement action.

Navigating conflicting laws driven by national security and geopolitics is one of ten key challenges identified for in-house counsel in 2023 in our Cross-border White Collar Crime Review.