UK: Breach of financial sanctions now a strict liability offence

Thursday, 16 June 2022
A new strict liability offence for breach of financial sanctions came into force this week, following the Economic Crime (Transparency and Enforcement) Act 2022's rapid passage through the UK parliament in March 2022.
HM Treasury building

HM Treasury's Office of Financial Sanctions Implementation (OFSI) can now impose civil monetary penalties without having to prove that the individual or entity had knowledge or reasonable cause to suspect they were in breach of financial sanctions. The 'knowledge or suspicion' element is required for most corporate crime offences in the UK, and its removal massively expands the potential for sanctions-busting fines in the UK, on a par with those of the US Office of Foreign Assets Control (OFAC). Moreover, OFSI will not be limited to only those breaches that occur within UK borders but also any breach that has a UK nexus. However, it will still need to demonstrate on the balance of probabilities that a breach of sanctions really occurred.

At the same time, the OFSI has issued new guidance clarifying when these powers will be used. It will consider whether the individual or entity committing the breach knew or suspected that their conduct amounted to a breach of financial sanctions when taking into account 'aggravating factors' when deciding whether to set a monetary penalty. Thus, the 'knowledge or suspicion' element is still there, but as a non-binding factor in internal guidance rather than as a necessary element for the offence to be made out. 'Naming and shaming' of sanctions-breakers will only be considered on a case-by-case basis when OFSI considers that the breach in question contains 'valuable compliance lessons' for industry. Professional facilitation of a breach or circumvention will also be regarded as an aggravating factor.

Where the breach or failure relates to particular funds or economic resources whose value can be estimated, the permitted maximum penalty will be the greater of GBP1 million or half the estimated value of the funds or resources. Breach of financial sanctions may also be a criminal offence, punishable with seven years in prison. The failure to provide any information requested by OFSI is also a criminal offence in its own right. 'The UK's financial sanctions framework continues to develop and harden, and we expect it to get yet tougher for businesses in the months and years ahead', noted law firm Macfarlanes. 'The new offence will increase the onus on companies to have substantive policies and procedures in place, particularly in regard to due diligence on clients, customers and counterparties, so as to avoid inadvertent breaches and particularly those caused by ineffective compliance controls.'

  • Only breaches from 15 June 2022 onwards will fall within the scope of the new strict liability offence, and the additional measures will not apply retrospectively.

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