The UK Office of Financial Sanctions Implementation has issued new guidance setting out its powers pursuant to the Sanctions and Anti-Money Laundering Act (2018) (“SAMLA”), explaining its approach to sanctions enforcement, and describing how and when monetary penalties will be assessed. The new guidance applies to potential sanctions breaches that occurred after June 15, 2022.
Financial sanctions most commonly consist in (i) targeted asset freezes, (ii) directions to cease doing business with a named person or group, or in connection with a specific, sector, territory or country, and (iii) restrictions on financial markets and services. Under the March 2022 amendments to the Policing and Crime Act 2017, OFSI may impose a monetary penalty if it is satisfied, on the balance of probabilities, that a person has breached a prohibition or failed to comply with an obligation; OFSI need not demonstrate that the person knew or had reason to know that the conduct constituted a breach. OFSI’s approach is summarized in the guidance as “promote, enable, respond, change,”meaning that OFSI will:
- Promote compliance by publicizing sanctions and engaging with the public;
- Enable compliance by providing guidance and alerts;
- Respond to non-compliance by intervening to distrupt attempted breaches, and;
- Change behavior by through enforcement in order to prevent future non-compliance.
The guidance clarifies the minimum penalties to be imposed, and notes that monetary penalties may be imposed on natural persons and legal persons, and on officers of entities if the sanctions breach took place with the officer’s consent or may be attributable to the officer’s neglect. When responding to a potential sanctions breach, OFSI may issue a warning, refer regulated entities to relevant professional associations or regulators in order to improve compliance, publish information about the breach if doing so is in the public interest, impose a monetary penalty, or refer the case to law enforcement for criminal investigation.
In the guidance, OFSI enumerates the types of mitigating and aggravating factors it will take into consideration when assessing a sanctions breach. These factors include the amount involved; the level of harm to the objectives of the sanctions regime; the quality of due diligence conducted, especially in cases where an incorrect assessment of ownership or control is relevant; evidence of intentional circumvention; cooperation, or failure to cooperate in the investigation; failure to apply for a license, or violation of the terms of an existing license; repeated breaches; voluntary disclosure; good faith, and; the interest of the public.
The guidance describes in detail the three-part process employed by OFSI in its assessment of monetary penalties – the penalty threshold under s.146(1) of the Policing and Crime Act 2017, the baseline monetary penalty matrix, and the ultimate decision. Prior to imposing a penalty, OFSI must inform the person of its intention to do so, and allow the person to make written representations in response to the proposed penalty. The guidance describes the right of review, the process for seeking review of a penalty decision, and the possibility of appeal.
Section 149(2) of the Policing and Crime Act 2017 mandates the publication of reports of monetary penalties, and gives OFSI the option of publishing the details of a case even where no monetary penalty has been imposed, after providing the subject with 28 days to respond.