UK: OFSI: The New OFAC? (Part 2)

Last Updated: 13 April 2017
Article by Henrietta Wells, Chris Hill, Nigel Brook and Mike Roderick

Following the enactment of the Policing and Crime Act 2017 (the Act) on 1 April 2017, the provisions of the Policing and Crime Bill reported in our previous article, OFSI: the new OFAC, have now entered into force.

In this article, we outline the changes to guidance from HM Treasury's Office of Financial Sanctions (OFSI) on the new regime for imposition of monetary penalties, made in light of the previous consultation on the draft of this guidance, and the major changes that have occurred with the Act's entry into force.

  1. OFSI's power to impose monetary penalties

    As outlined in more detail in our previous article, these provisions represent a step change in the penalties that can be imposed on UK entities and individuals for breaches of trade and financial sanctions. These include allowing OFSI to impose civil monetary penalties for breaches of sanctions of up to £1 million, or 50% of the estimated value of the funds or resources the subject of the breach, whichever is the greater.
  2. Publication of formal OFSI's guidance

    OFSI has also published formal guidance on the new regime for impositions of monetary penalties. This guidance was shaped by the response to OFSI's consultation on the draft of this guidance, which ran from November 2016 to January 2017. Changes to the guidance in light of the consultation include:

    • Clarification on the concepts of 'serious' and 'most serious' cases, which OFSI has confirmed are administrative rather than legally defined terms. They have advised that the nature of some cases, such as those involving "very high-value or blatant flouting of the law, or severe or lasting damage to the purposes of sanctions regimes" would result in their being considered 'most serious'. Additionally, OFSI will consider aggravating and mitigating factors when determining whether a case is 'serious' or 'most serious';
    • More context on the interaction of the 'reasonable cause to suspect' and 'balance of probabilities' tests in respect of the burden of proof for the new civil penalties. A revised definition confirms that the test is objective: whether a 'reasonable and honest' person should have inferred knowledge or formed the suspicion that the conduct in question amounted to a breach of sanctions;
    • Additional detail on the concept of a 'UK nexus'. Where an international subsidiary of a UK company is involved in activities targeted by UK sanctions, it is possible that the governance or ownership structure of the subsidiary may result in the parent company becoming subject to UK financial sanctions. Further, the clearing of payments through the UK will be sufficient to create a UK nexus and thus engage UK financial sanctions authority;
    • Further guidance on the 'voluntary disclosure' incentive, which confirms that the reduction in a penalty for such voluntary disclosures applies where there is a genuinely voluntary disclosure. OFSI has also confirmed that they will not seek to penalise somebody for making a genuine and voluntary disclosure within a reasonable amount of time simply because another party has done so sooner;
    • Confirmation that what would be considered 'reasonable compliance procedures' will vary between companies, and will depend on the size, sophistication and complexity of a company;
    • Revisions to the penalty process to remove the automatic 15% reduction for 'serious' cases (as opposed to 'most serious' cases), which was originally allowed regardless of whether voluntary disclosure was made. OFSI removed the reduction as they considered it sent the wrong message to allow a standard reduction where there was no voluntary disclosure; and
    • Clarification that, where OFSI intends to publish details of monetary penalties, representations may be made as to the effect that the publication of the penalty details may have.
  3. Changes to criminal offences and penalties

    Further changes to the sanctions enforcement regime made by the Act include an increase in the maximum prison sentence for a breach of sanctions, from 2 years to 7 years. This brings the custodial penalties that may be imposed under financial sanctions into line with those that exist under current counter-terrorism legislation. Two further legislative changes allow for deferred prosecution agreements to be entered into in respect of financial sanctions and counter-terrorism-related offences, and for the making of serious crime prevention orders. While the UK authorities have not been previously able to enter into deferred prosecution agreements in respect of financial sanctions offences, these are a feature of financial crime enforcement actions in other jurisdictions, such as the United States. These provisions will allow for more flexibility in the imposition of penalties, and may form part of OFSI's "promote, enable, respond and change" approach to ensuring compliance with the sanctions regime.
  4. Implementation of United Nations sanctions

    The Act also includes provisions to help the UK implement its obligations under UN sanctions more quickly than previously. This gives direct effect in the UK to financial sanctions listings made by the UN Sanctions Committee, with the intention of reducing the risk of asset flight and allowing a more effective asset freezing regime. This has been achieved by the publication of The United Nations and European Financial Sanctions (Linking) Regulations 2017 (SI 2017 No. 478). OFSI will in future update its Consolidated List of Asset Freeze Targets to include these new designations within one working day of the individual or entity being listed by the UN. The listings will remain live for 30 days, or until the EU adds the new listing to an existing sanctions regulation.
  5. Comment

    As noted in our previous article, the approach that OFSI will take to enforcement under these new powers remains to be seen. However, the revised OFSI guidance gives some indication that their approach to financial sanctions compliance and enforcement is likely to more closely follow that taken by OFAC.

OFSI: The New OFAC? (Part 2)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions