The Office of Financial Sanctions Implementation (OFSI) has updated its guidance on its approach to enforcement. This is partially to reflect changes in legislation brought in under the Economic Crime (Transparency and Enforcement) Act 2022.
These changes include:
- A new strict civil liability test for imposing monetary penalties
- Changes to the review of monetary penalties
- The new OFSI ability to publish details of breaches where a monetary penalty has not been imposed
OFSI has published further information on this matter.
Writing in a letter prior to the commencement of OFSI’s new enforcement powers on 15th June, Giles Thomson, Director of OFSI, said of the new strict liability offence: “This means the previous requirement for OFSI to prove that a person had knowledge or reasonable cause to suspect that they were in breach of financial sanctions will be removed.” OFSI will, however, “still bear the burden of proof to establish that there was a breach of financial sanctions prohibitions”. There is no equivalent change to the financial sanctions criminal legal test or threshold. Thomson added:
“This change will strengthen OFSI’s ability to take appropriate enforcement action against persons (including both natural and legal persons) that fail to ensure they are not dealing with sanctioned entities or adhere to their financial sanctions obligations. It does not mean that OFSI will impose a monetary penalty in every case we find there to be a breach of financial sanctions. OFSI imposes monetary penalties where it is appropriate, proportionate and in the public interest to do so, and this will continue to be the case from 15th June 2022.
Solicitor firms’ obligations
All firms authorised by the Solicitors Regulation Authority (SRA) need to make sure they are upholding their duties under the UK’s sanctions regime including reporting to OFSI:
- where they encounter a designated person (ie a person or entity on the consolidated sanctions list)
- where they have reasonable cause to suspect that funds they encounter belong to a designated person
- where they have reasonable cause to suspect a breach of the sanctions regime has occurred
Firms must also make sure they are not providing paid for services to designated persons, particularly where those services might allow them to circumvent the sanctions regime. Screening current and prospective clients and counterparties against the sanctions list on an ongoing basis is the most direct way of achieving this, but managing exposure to sanctions risk requires a more systemic approach to addressing sanctions risk.
Firms have a duty to uphold these regulations under the SRA’s Rules 3.1 and 3.2 of the Code of Conduct for Firms.
