Changes to the UK’s financial sanctions regime, introduced by the Economic Crime (Transparency and Enforcement) Act 2022 (the “Act“), came into force today (15 June 2022) and, with them, the power for the Office of Financial Sanctions Implementation (“OFSI“) to impose civil monetary penalties in respect of financial sanctions breaches on a strict liability basis (i.e. irrespective of any knowledge or suspicion). This new standard of liability will apply to any potential breach taking place on or after 00:00 this morning.
As a reminder, it is now possible for OFSI to levy civil fines of up to £1m or 50% of the value of a relevant breach without being required to show that a person had relevant knowledge or reasonable cause to suspect that a transaction to which they were party was in breach of sanctions (e.g. knowledge or reasonable grounds to suspect that they were dealing with a designated person). As a result, companies may now face civil liability for inadvertent breaches of financial sanctions, including where due diligence has been carried out and there was no “reasonable” cause to suspect a breach. We have previously discussed the key provisions of the Act in our briefing available here. The test for criminal liability for sanctions breaches remains the same (i.e. OFSI must show that the relevant person had the relevant knowledge, suspicion or reasonable cause to suspect).
In addition, OFSI can now publicly name companies which have not been subject to a fine but which OFSI considers have, on the balance of probabilities, breached financial sanctions from today. This potentially increases the risk of reputational damage even in instances where no fines are imposed.
OFSI has published revised guidance on its approach to enforcement and monetary penalties, and we will publish a more detailed briefing in respect of this guidance in due course.