New OFSI powers and guidance includes strict liability for sanctions breaches
The United Kingdom’s sanctions regulator, the Office of Financial Sanctions Implementation (‘OFSI’), is to assume greater enforcement powers and has updated its guidance on monetary penalties. The changes reflect a new, seemingly tougher approach to sanctions in the wake of Russia’s invasion of Ukraine.
In a blog post of 8 June, OFSI Director Giles Thomson wrote that, following the invasion, ‘The [UK] government brought forward the Economic Crime (Transparency and Enforcement) Act 2022 which included important changes to OFSI’s powers that will enable us to remain a world leader in sanctions enforcement and continue to respond robustly to breaches of financial sanctions.
‘Firstly, for breaches of financial sanctions that are committed after 15 June 2022, OFSI will be able to impose civil monetary penalties on a strict civil liability basis. This means the previous requirement for OFSI to prove that a person had knowledge or reasonable cause to suspect that they were in breach of financial sanctions will be removed, but we will still bear the burden of proof to establish that there was a breach of financial sanctions prohibitions. This brings this aspect of UK financial sanctions legislation more in line with the legal test used for the import and export of arms, and the model used for US financial sanctions. There is no equivalent change to the financial sanctions criminal legal test or threshold.’
Thomson said the change would ‘strengthen OFSI’s ability to take appropriate enforcement action against persons (including both natural and legal persons) that fail to ensure they are not dealing with sanctioned entities or adhere to their financial sanctions obligations.’
He added that the updated monetary penalty guidance ‘does not represent a change to OFSI’s overall enforcement approach and continues to emphasise the importance of self-disclosure as a potential mitigating factor,’ and that ‘To ensure OFSI’s enforcement is proportionate, OFSI will continue to assess how severe the overall breach is as well as the conduct of the persons involved. This includes consideration of whether the person committing the breach knew or suspected that their conduct amounted to a breach of financial sanctions, as well as expected knowledge of the person and their exposure to financial sanctions risk. Whilst we do not prescribe what due diligence should be undertaken to prevent breaches of financial sanctions, we will continue to take into account efforts to prevent such breaches when deciding on any enforcement action.’
