New guidance on UK penalties for sanction breaches signals tougher approach

New guidance on penalties for breaches of financial sanctions suggests that the Office of Financial Sanctions Implementation (“OFSI”) is moving closer to the US model of pursuing wrongdoing aggressively and levying huge fines. The new penalty rules came into force on 1 April 2021, and companies operating in high risk sectors should pay close attention to the updates.
The Introduction to the new Guidance removes a statement that “OFSI will not normally impose a penalty on any person who has already been prosecuted”. This could be taken to mean that OFSI will seek to impose fines, even where persons have been prosecuted for criminal breaches of financial sanctions.
As a business leader, founder or executive, you are under greater scrutiny and more at risk than ever before.
The Guidance updates the factors that OFSI will take in to account when determining whether to take enforcement actions and what those actions might be.
Several changes have been made to the case assessment chapter, including:
The new Guidance has replaced the requirement for a clear relationship between the value of the proposed penalty, value of the breach and how seriously the breach undermined the sanctions regime with a “relationship between the value of the proposed penalty and a holistic assessment of all the other factors present in the case”. It also goes on to state that this “does not mean that a penalty should necessarily be either a specific percentage or multiple of the breach amount”.
relationship between the value of the proposed penalty and a holistic assessment of all the other factors present in the case
Where voluntary disclosures have been made, OFSI will determine the credit to be given to reflect a reduction in penalties. The Guidance confirms a number of points:
Also of particular interest in the revised Guidance is the removal of the statement that OFSI had a discretion not to impose a penalty in certain circumstances, including where imposing a penalty would have no meaningful effect, be perverse or otherwise not in the public interest.
The revised Guidance has made a number of changes to time limits and ministerial review, including extending time limits from 28 calendar days to 28 business days and allowing requests for ministerial review to be made orally if “there is a good reason” for not making a written request.
The revised Guidance states that OFSI will not normally publish the case summary until after the penalised person has had the opportunity to exercise their right to a Ministerial review. If, after an unfavourable Ministerial review, a subsequent appeal is made to the Upper Tribunal, and the tribunal subsequently amends or quashes the penalty, OFSI will publish amended information setting this out in place of its original report.
While the revised Guidance does not depart greatly from the previous Guidance, it does give a potential insight in to the intended direction of OFSI. It would appear that, by broadening its jurisdictional reach and discretion to impose higher penalties, OFSI is seeking to establish itself as a regulator with teeth which will actively and aggressively pursue wrongdoing to enforce the UK’s sanctions regime.
Whether this will result in greater fines, both in volume and/or amount, only time will tell. What is clear however, is that companies will need to ensure that their sanctions compliance programmes, and any voluntary disclosure of a potential breach, reflect the changes in OFSI’s approach to enforcement.
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