UK Sanctions - New guidance on monetary penalties and new corruption sanctions regime

OFSI Monetary Penalty Guidance

Key updates include:

• a suggestion that OFSI may no longer engage in correspondence requiring details of how a party will improve compliance practices as a first level of enforcement: in the first instance OFSI may issue a warning;
• an indication that confusion over obligations under other international sanctions regimes will be treated with less leniency where there is a failure to comply with UK sanctions regulations;
• the removal of a distinction between direct and indirect provision of funds to sanctions targets: any provision of funds may now be treated equally;
• a potential willingness to impose financial penalties even if the case has been prosecuted through the criminal process;
• that OFSI will objectively assess the level of knowledge about the sanctions regime an individual or company ought to have when considering what enforcement action to take – the prior guidance suggested a more lenient approach to knowledge of the sanctions regime;
• removing prior guidance that acting swiftly to remedy the cause of a breach was an important factor in avoidance of a penalty, suggesting that quickly remedying a problem may be given less credit in the future; and
• in regards to calculation of any penalty: although the revised guidance essentially adopts the same approach as the former guidance, especially regarding the importance of voluntary disclosure, in considering the proportionality of a penalty, OFSI has indicated that it will look at a holistic assessment of all the other factors present in the case.

While drawing lessons from the updated guidance is somewhat of an uncertain business and requires the parsing of OFSI’s intent behind the deletion of certain statements from the prior guidance, the overall impression does seem to be a noticeable shift in OFSI’s approach and suggests that we may see more active sanctions enforcement in the UK and a more aggressive pursuit of financial penalties.

New global corruption sanctions regime

On 26 April 2021, the Government introduced a new global corruption sanctions regime.  Under this regime, a Minister has the ability to designate individuals and companies who are suspected of involvement in corruption, and in fact there have already been sanctions made against 22 individuals involved in corruption cases in Russia, South Africa, South Sudan and Latin America. These new sanctions may impact companies operating across riskier jurisdictions, for example those with a presence in jurisdictions scoring poorly in Transparency International’s corruption index.

Impact of changes

The form of the UK’s approach to international sanctions was uncertain immediately following its departure from the EU. By signalling OFSI’s potentially tougher stance on sanctions enforcement and developing a new global corruption sanctions regime, the UK Government may be setting a more ambitious agenda, with OFSI potentially poised to act more aggressively.

Given the potentially severe consequences for businesses and individuals in the event of breach of sanctions, developments in this area should continue to be followed closely – particularly if OFSI does begin to engage in enforcement that is more frequent, more aggressive, or both.