New powers brought in through the Economic Crime Act will beef up the ability of the Office of Financial Sanctions Implementation (OFSI) to enforce penalties against individuals in breach of sanctions rules.
An important change is the removal of the need for the OFSI to prove that individuals had knowledge or reasonable cause to suspect that they are in breach of financial sanctions in order to impose a civil monetary penalty.
From 15 June, the OFSI will be able to impose penalties simply by proving that financial sanctions were breached, increasing the onus on a person to conduct suitable levels of due diligence.
The OFSI says that while this will strengthen its ability to enforce penalties against persons (natural and legal) that do not cease dealing with sanctioned entities or otherwise breach their sanctions obligations, it will not always impose a monetary penalty.
As per current guidance, this change does not change the OFSI’s enforcement approach and self-disclosure of any financial sanctions breaches is important to be considered a mitigating factor.
The UK government brought forward the Economic Crime (Transparency and Enforcement) Act 2022 following the Russian invasion of Ukraine. In addition to changes to the powers of the OFSI in its role of enforcing compliance with financial sanctions, the new Act also grants it the power to publish the details of those judged to have breached financial sanctions, even if a monetary penalty has not been issued.
While the OFSI will notify the persons before publication of these details, this carries reputation risk for the profession, especially in conjunction with the downgrading of the appeals process from ministerial to official level.
Full details of the new measures have been published by OFSI and it has said it will soon publish a list of frequently asked questions. We recommend that these FAQs are consulted to add further context to what the updated Act and OFSI’s additional powers mean for the finance industry.
Additionally, ICAEW has produced several recommendations for practical measures to ensure compliance with the sanctions regime and how this is demonstrable to the OFSI.
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