The UK sanctions enforcement regime gets tougher today due to changes made by the Economic Crimes (Transparency and Enforcement) Act 2022 coming into force.
Failure to comply with UK financial sanctions legislation can be a criminal offense subject to fines and imprisonment. The Office for Financial Sanctions Implementation (OFSI), the UK’s financial sanctions enforcer, also has the power to impose civil penalties of up to GBP1 million or 50% of the value of the offence, whichever is greater. To date, this has been the OFSI’s preferred method of execution.
Before today, OFSI could not impose a monetary penalty on a company or individual unless it was satisfied, on the balance of probabilities, that the person ‘knew’ or had ‘reasonable grounds to suspect’ that their conduct violated a penalty. or that they had failed to comply with their obligations under the regime. As of today, this knowledge requirement is replaced by strict liability: in other words, a person’s intent or knowledge of the breach is irrelevant to the question of whether OFSI has the power to impose a civil money penalty. OFSI must still show on the balance of probabilities that a violation occurred.
The new test, which is more similar to the US model, increases the risk that a company will be fined because the OFSI will no longer have to prove that this knowledge requirement has been met. While it will still be a defense (to a criminal offense) for a business (or individual) to say that they did not know, and could not have known or suspected, that their conduct violated a sanction, it will not be a response to the imposition of a sanction. civil fine. OFSI has released updated guidance on its new powers and a revised approach to enforcing breaches starting today. The guidance makes it clear that a sanctions violation will be considered more serious (and therefore more likely to receive a sanction) if the person or entity knew, or had reasonable suspicion, that their conduct constituted a violation. . Therefore, the knowledge/suspicion is still relevant, although not strictly necessary for the OFSI to impose a sanction.
Also starting today, there is an increased risk of reputational damage from anyone who violates a financial sanction. OFSI already had the power to publish details of the monetary penalties that had been imposed. But now OFSI has a new power to publicly ‘name and shame’ a company or individual that OFSI believes, in the balance of probabilities, has violated a financial penalty prohibition or failed to meet an obligation, even when the company or individual has not been fined This new power applies to offenses that occur after today.