Financial sanctions
Financial sanctions are restrictions introduced to achieve specific foreign policy or national security objectives such as restricting access to certain financial services and to financial markets, funds and economic resources.
Legal framework
The United Nations (‘UN’) imposes financial sanctions and requires member states to implement them through Resolutions passed by the UN Security Council.
The UK imposes financial sanctions through a combination of statutory instruments and primary legislation, including the Sanctions and Anti-Money Laundering Act 2018, the Counter Terrorism Act 2008 and the Anti-Terrorism, Crime and Security Act 2001 (ATCSA 2001).
To whom do UK financial sanctions apply?
UK financial sanctions apply to all persons within the territory and territorial sea of the UK and to all UK persons, wherever they are in the world. In practical terms, UK financial sanctions apply to all individuals and legal entities within or who undertake activities within the UK’s territory and all UK nationals and legal entities established under UK law, including their branches, regardless of where their activities take place.
Implementation
The Office of Financial Sanctions Implementation (‘OFSI’), is the authority responsible for implementing the UK’s financial sanctions on behalf of HM Treasury. OFSI is responsible for monitoring compliance with financial sanctions and for assessing suspected breaches. It can impose monetary penalties for breaches of financial sanctions and refer cases to law enforcement agencies for investigation and potential prosecution.
The Foreign, Commonwealth and Development Office (‘FCDO’) is responsible for the UK’s international sanctions policy, including all international sanctions regimes and designations. The FCDO publishes the UK Sanctions List.
Sanctions lists
OFSI maintains two lists of those subject to financial sanctions, which lists are published to assist compliance by individuals and organisations. First, the consolidated list of asset freeze targets which details all asset freeze targets. These individuals, entities and ships are known as ‘designated persons’. Second, the list of persons named in relation to financial and investment restrictions, some of whom might also be listed on the consolidated list. OFSI works closely with the FCDO to ensure their lists are aligned.
Reporting obligations
Reporting obligations require relevant firms to inform OFSI as soon as practicable if they know or reasonably suspect a person is a designated person or has committed offences under the UK regulations, where that information is received while carrying on their business. This requirement applies to relevant firms in the UK or under UK jurisdiction including individuals working for them.
The obligation to report to OFSI is in addition to any other reporting obligations. These might include reporting required by a professional Regulator or submitting Suspicious Activity Reports (SARs) to the NCA under the Proceeds of Crime Act 2002.
Exceptions and licensing
Specific exceptions and licensing powers are contained in sanctions regulations and can enable otherwise prohibited transactions and prohibited activity to take place, in certain circumstances. Exceptions to a prohibition apply automatically in certain defined circumstances and do not require a licence from OFSI.
Challenging designations
It is possible for those subject to financial sanctions to request a reassessment of their listing. The sanctions will remain in place while the reassessment is taking place.
Punishment
The maximum punishment for a person who is guilty of breaching financial sanctions is a term of imprisonment of 7 years. OFSI has the power to impose monetary penalties for breaches of financial sanctions, including for reporting and information offences ranging from 50% of the total breach up to £1m, whichever is greater.
Deferred Prosecution Agreements (DPAs) and Serious Crime Prevention Orders (‘SCPOs’) are available in relation to breaches of financial sanctions.
Sanctions compliance and investigations
The key to sanctions compliance and investigations is early and ongoing expert intervention. In practical terms, this involves deploying a multi-disciplinary team of litigators, compliance specialists, specialist barristers, forensic accountants and industry experts.
How can we help?
We can deploy a multi-disciplinary team of expert litigators to devise and execute bespoke strategies to expedite outcomes, minimise reputational damage and protect business continuity.
We benefit from a wealth of in-house expertise in several disciplines including compliance, regulatory, criminal defence, and dispute resolution. We also enjoy enduring relationships with leading consultants, including compliance experts, specialist barristers and industry experts.
We also provide regulatory and compliance advice to individual and business clients in relation to sanctions, including advice in relation to reporting obligations, exceptions and licensing and challenging designations.
Free Initial Discussion
If you have been notified of an impending investigation or prosecution into breaches of financial sanctions or you require compliance advise in relation to financial sanctions it is critical that you contact us as soon as possible.
Contact our lawyers by calling us on 0203 987 0222 or complete our enquiry form and one of our team will call you back.
