November 15, 2022

OFSI publishes Annual Review 2021-2022

On November 10, 2022, the UK Office of Financial Sanctions Implementation of HM Treasury published its annual review of the UK sanctions programs.  In light of OFSI’s role in the nation’s response to the war in Ukraine, OFSI included supplemental reporting on data from the start of the war in February 2022 until August 24, 2022, in addition to reporting on the financial year that runs from April 2021 through March 2022.

OFSI reports that as of March 2022, there were 3,121 designated persons (601 entities, 15 vessels, and 2,505 individuals) subject to asset freezes issued pursuant to the Sanctions and Anti-Money Laundering Act 2018 across 30 sanctions regimes.  Nine hundred and eight-seven of the total figure were newly designated in the 2021-2022 financial year. 

Over the course of financial year 2021-2022, OFSI issued two monetary penalties totaling more than £86 million to financial technology firms pursuant to the Ukraine (European Union financial Sanctions)(No.2) Regulations 2014.  OFSI also issued an unspecified number of warning letters.  Beginning this year, OFSI will be able to exercise increased enforcement powers due to the enactment of the Economic Crime (Transparency and Enforcement) Act 2022 (ECTE), which uses a strict civil liability standard to penalize financial sanctions breaches.

OFSI has issued 42 new specific licenses during the relevant period and 107 amendments to existing licenses (most of these for the Libya sanctions regime).  The primary grounds for the issuance of specific licenses were:  basic needs, legal services, and routine holding and maintenance.  During financial year 2021-2022, 17 general licenses were issued (this includes several wind-down licenses for Russian and Belarusian designated banks, and two Belarus-focused general licenses

Much of the review is devoted to the presentation of data concerning the “unprecedented size, scale and complexity” of the sanctions regime implemented in response to Russia’s attack on Ukraine, which the director of OFSI termed “an assault on the principles of freedom, democracy and peace.”  Whereas in September 2021, frozen assets held by UK institutions totaled £12.4 million, by October 20, 2022, £18.38 of Russian assets alone were reported under OFSI’s review of frozen assets.  Since the start of the Russian invasion, 1,271 persons have been added to the consolidated list.  OFSI has issued 33 general licenses in connection with the Russia sanctions regime, allowing for insolvency payments, continued internet and news services in Russia, energy supplies, wind-down of accounts and transactions, and the completion of the Chelsea Football Club’s season following the designation of its owner.   OFSI acknowledged the need for streamlining the licensing system, given the depth and breadth of the sanctions regime.  As first steps, OFSI has increased the number of staff dedicated to assessing license applications, and is looking to introduce focused general licenses in some instances in order to resolve the need for overlapping specific licenses.

As noted, new enforcement tools are available to OFSI through implementation of ECTE.  These include amending the Policing and Crime Act 2017 to introduce greater flexibility in how the Treasury manages the administrative review process for monetary penalties, and the power to publicize details of financial sanctions breaches even in cases where no monetary penalty has been imposed, and increasing OFSI’s ability to share information between government organizations.

Both inside and outside of the context of Russia sanctions, OFSI highlighted the importance of cross-government engagement and cross-border cooperation.

Annual Review