New guidance on financial sanctions evasion and strict civil liability

illustration showing financial sanctions with the use of money and a gavel.

The past few weeks have seen some significant developments in relation to the enforcement of financial sanctions in the UK. In this article, we explore what these developments are, what it means for your business and what actions you can take.

What are financial sanctions?

According to the Financial Conduct Authority (FCA), financial sanctions prohibit a firm from carrying out transactions with a person or organisation (known as the target). In some cases, the order will prohibit a firm from providing any financial services to the target. 

These measures can vary from the comprehensive – prohibiting the transfer of any funds to a sanctioned country and freezing the assets of a government, the corporate entities and residents of the target country – to targeted asset freezes on individuals/entities.

It is a criminal offence not to comply with a financial sanction unless you have an appropriate licence or authorisation from the Office of Financial Sanctions Implementation (OFSI).

New guidelines by the FCA on sanctions evasions

To ensure that firms have a robust governance system in place and do not default on sanctions compliance, the FCA has added to their reporting protocols, actively encouraging employees to report their concerns on a ‘confidential and anonymous basis’.

The FCA has stated that anyone can confidentially report concerns about their current or previous employer to their whistleblowing team. These concerns can be about any sanctions evasion issues or weaknesses in sanctions controls where they relate to any firm or person listed on the FCA’s registers or to a UK listed security.

This can include information about:

  • Any suggestion that firms have poor sanctions controls
  • Suspected breaches of the sanctions regime
  • Actual breaches on the sanctions regime
  • Any method that the whistleblower believes is used by firms or individuals to breach the sanctions regime

Financial crime specialists David Hamilton and Stacy Keen in their opinion piece for Scottish Legal News have made a crucial statement which sums up this update perfectly –

“It seems certain that sanctions compliance will become an increasingly prevalent ground for regulatory enforcement, particularly in cases where firms have failed to make appropriate notifications and the FCA has received intelligence from whistleblowers.”

Enforcing financial sanctions in the UK

In addition to the new processes introduced by the FCA, the provisions of the Economic Crime Act, 2022 which deal with creating a strict civil liability for violating sanctions and imposing monetary penalties have come into force from 15 June 2022. 

To recap, the Economic Crime Act enacted on 15 March 2022 in response to Russia’s invasion of Ukraine aims to:  

  • Make it easier to prosecute anyone involved in violating sanctions
  • Strengthen unexplained wealth orders (UWOs)
  • Introduce a beneficial ownership register for overseas entities holding real estate in the UK

In light of these provisions coming into effect, OFSI has published updated guidance on its new powers and approach to enforcement, which highlights that going forward the OFSI will:

  • Impose civil monetary penalties on a strict liability basis which means that a person/business will be held liable even where they have no knowledge or reasonable cause to suspect that they are in breach of sanctions. This means if a breach of financial sanctions regulations is caused by mistake, even without the knowledge that the action would be a breach or provide any reasonable cause to suspect this, the matter would still meet the legal standard for HM Treasury to impose a monetary penalty. The imposition of strict liability is a conscious attempt by OFSI to enable the UK to follow a stricter approach.
  • Publish information pertaining to a breach, even where no monetary penalty is imposed, including a summary of the case and the identities of the persons that committed the breach. Doing so deters future non-compliance from the penalised individual and enables others to learn from the case.

What measures should companies take to ensure compliance?

With all these actions being taken, it is imperative for companies to ensure they have comprehensive systems and controls in place to identify and mitigate financial sanctions risk. 

Here are a few things that companies can do to make sure they do not breach the UK’s financial sanctions regulations:

  • Ensure that senior management understands your organisation’s sanctions obligations
  • Reviewing and reinforcing sanctions related policies and procedures
  • Make sure that your organisation’s politically exposed persons (PEPs) and sanctions screening provides comprehensive coverage to match the nature, size and risk of the business
  • Provide regular training to make sure everyone within the organisation fully understands the requirements and procedures
  • Ensure that everyone knows who to escalate red flags and high risk results to, within the organisation as and when required

How can Amiqus help?

By using our watchlist check, you can instantly screen and continuously monitor global data on politically exposed persons (PEPs) and sanctions lists, as well as adverse media data. It allows you to perform PEPs/sanctions monitoring and adverse media not just on individuals but on businesses and assets too.

Due to the fast-paced and increasingly complex sanctions landscape, we make sure that our PEPs/sanctions check and monitoring is updated in real time so our clients do not violate the UK law by not including the latest additions in their searches.

In addition, Amiqus is also integrated with Companies House and OpenCorporates, covering 120 million entities in the UK and worldwide. Our companies lookup feature uses this integration to help our clients identify true owners, directors and people with significant control (PSC) of organisations – an important feature to help with sanctions compliance.

If you have any questions or need assistance to turn on the PEPs/sanctions check in your Amiqus account, kindly get in touch with us on [email protected].

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