The new UK Office of Financial Sanctions Implementation (OFSI), ^[1] part of HM Treasury (HMT) opened on 31 March 2016.  This may signal a shift towards more aggressive enforcement of the financial sanctions regime in the UK. 

OFSI is responsible for the implementation and administration of international financial sanctions in effect in the UK, for domestic designations under the Terrorist Asset-Freezing Act 2010, licensing exemptions to financial sanctions, and directions given under Schedule 7 to the Counter-Terrorism Act 2008,^[2] and under Council Regulation (EU) No 833/2014,^[3] concerning Russia's actions in Ukraine. OFSI will "work closely with law enforcement to help ensure that financial sanctions are properly understood, implemented and enforced".^[4]

Also, in February 2016, the UK's Home Secretary presented the Policing and Crime Bill to Parliament. The Bill includes proposals to increase criminal penalties for financial sanctions breaches, enhance the ability of HMT to enforce the new regime, and provides for the swifter implementation of UN financial sanctions. As an alternative to a criminal prosecution for breach of financial sanctions, the Bill provides for HMT to impose monetary penalties for financial sanctions non-compliance. HMT will have powers to impose monetary penalties of up to GBP 1 million or 50% of the estimated value of the funds assessed to be in violation of the relevant financial sanctions. The new Bill will also allow HMT to pursue criminal prosecutions and enter into deferred prosecution agreements.  

These developments bring the UK closer to the approach in the U.S. The U.S. sanctions enforcement regime, implemented by the Office of Foreign Assets Control (OFAC), has a significant enforcement record and has levied some large fines in recent years. Historically there has been little enforcement in the UK, although the Financial Conduct Agency (FCA) has fined banks for having inadequate systems and controls.

For UK businesses, the creation of OFSI with significant enforcement powers will increase the risk of falling foul of financial sanctions. It is important for businesses to keep up to date with UK sanctions. The new OFSI website contains a consolidated list of targets and an email updating service. ^[2]

Further Information 

This case summary is part of the Allen & Overy Litigation and Dispute Resolution Review, a monthly publication.  For more information please contact Sarah Garvey sarah.garvey@allenovery.com, or tel +44 20 3088 3710.

Footnotes: 

[1]    https://www.gov.uk/government/organisations/office-of-financial-sanctions-implementation.

[2]    http://www.legislation.gov.uk/ukpga/2008/28/schedule/7.

[3]    http://eur-lex.europa.eu/legal-content/EN/TXT/;ELX_SESSIONID=Dj2cTbFhLGxyP62DYN0W9JlS1hyLtqPbHdnzXYLGzTcxCkGJsz1s!2004986111?uri=OJ:JOL_2014_229_R_0001.

[4]    https://www.gov.uk/government/news/new-body-to-support-financial-sanctions-implementation-launched.  

[5]    https://www.gov.uk/government/organisations/office-of-financial-sanctions-implementation.