The UK recently took significant steps to strengthen penalties for breaches of financial sanctions. Financial sanctions take many guises and may apply to individuals, companies or other entities. They include, for example, targeted asset freezes, orders to cease business or activities of a specified type and restrictions on financial markets and services. Following the enactment of the Policing and Crime Act 2017 on 31 January 2017, the Office of Financial Sanctions Implementation (OFSI) has been given the power to impose monetary penalties of up to 50% of the value of the offending transaction or £1million, whichever is higher. OFSI will only need to be satisfied on a balance of probabilities that there was a breach.
Any company with a UK connection may be sanctioned under the Act and companies that do business abroad or with foreign nationals will be most at risk. OFSI has published draft Guidance setting out the processes it proposes to use to decide:
- whether a monetary penalty is suitable;
- the level of any penalty;
- the process of imposing the penalty – including timescales and the rights of the penalised person/entity; and
- the circumstances in which OFSI will publish details of the monetary penalties it imposes.
This article examines how the Guidance informs the compliance and enforcement approach that OFSI looks set to adopt and how companies should consider reacting. The Guidance comes into force in April 2017.