U.K. sanctions body signals tougher enforcement with new guidance

The revisions will take effect April 1, at which time OFSI will use the guidance to assess any potential financial sanctions breaches after that date. While the guidance does not contain any material changes, the subtle updates “suggest an intention to make use of monetary penalties in concert with other enforcement tools and the possibility of a broader interpretation of OFSI’s jurisdiction to impose penalties,” wrote Alexandra Melia, a partner with Steptoe Johnson, in a client alert.

In the guidance’s current form, for example, there is language that states, “OFSI will not normally impose a penalty on any person who already has been prosecuted.” Such language was removed from the new version. “This may signal an intention to make use of monetary penalties in cases that also involve a criminal prosecution for breaches of financial sanctions,” Melia wrote.

Language also has been removed that stated OFSI will “not artificially bring something within U.K. authority that does not naturally come under it.” Removal of this language “may indicate a more expansive interpretation of OFSI’s jurisdiction to impose penalties, perhaps including in cases involving payment flows through U.K. banks,” Melia wrote.

OFSI also clarified its expectations as it concerns sanctions compliance. “When we consider what action to take, we take into account the level of actual and expected knowledge of financial sanctions held by an individual or company, considering the kind of work they and their exposure to financial sanctions risk,” the guidance states. “Regulated professionals should meet regulatory and professional standards. We may consider the failure to do so an aggravating factor.” This language replaces that of the current version, which requires an individual or company to “make their own assessment of what is reasonable and necessary for their particular circumstances.”

Additionally, the bar for misconduct has been lowered, as the new guidance refers to the “most serious” cases as those that concern “particularly poor, negligent or intentional conduct” instead of those that are a “blatant flouting of the law.”

Regarding penalties, the new guidance clarified OFSI will consider the financial value of the transactions or resources involved in a breach of financial sanctions regulations in the overall assessment of the case. “While a high-value breach is generally more likely to result in enforcement action, there are circumstances involving lower-value breaches where it will be considered appropriate to take enforcement action,” the guidance states. Moreover, the section on “discretion not to impose a penalty” has been removed from the current version.