September 28, 2022

OFSI’s £30,000 monetary penalty upheld by Economic Secretary to the Treasury

On September 27, 2022, the UK Office of Financial Sanctions Implementation announced that the Economic Secretary to the Treasury upheld OFSI’s decision to impose a £30,000 penalty against Hong Kong International Wine and Spirits Competition Ltd (HKIWSC), a UK registered company, in connection with 3 payments and 78 wine bottles received from a designated entity, the State Unitary Enterprise of the ‘Republic of Crimea’ Production-Agrarian Union (“Massandra”), for entries into wine competitions between September 2017 and August 2020.  According to the Notice of Imposition of Monetary Penalty, the value of the funds and tangible economic resources received by HKIWSC was estimated to be just under £4,000. However, OFSI considered the publicity that Massandra received from the wine competitions to be an intangible economic resource, since “it would likely be used by Massandra in exchange for funds on the basis that it is for the purpose of increasing sales of their wine”. Whilst it was not possible to ascribe a financial value to publicity, OFSI noted that a value determination was not necessary for the purposes of imposing the monetary penalty under the Policing and Crime Act.  According to the Notice of Imposition of a Monetary Penalty (the “Notice”), a penalty reduction discount was not applied by OFSI because HKIWSC had not voluntarily disclosed the payments and wine entries to OFSI.

In the note on compliance included in the Notice, OFSI reminded UK companies which operate internationally that they should ensure that they comply with UK financial sanctions irrespective of where their activities take place and that when considering their sanctions risk exposure, they should consider the provision of intangible economic resources as well as financial transactions or tangible economic resources. OFSI noted that intangible economic resources may include not just publicity but also certain types of intellectual property. 

OFSI – Notice of Imposition of Monetary Penalty HKIWSC