Law Firm Provides Guidance on UK's Stricter Sanctions Liability Practices
Liability under the U.K.'s Russia sanctions regime may be determined even when an offending party wasn't aware of or had no reasonable suspicion of the breach, so companies should review their internal sanctions compliance to ensure they have "comprehensive processes and procedures in place" to avoid sanctions risk, global law firm Sidley Austin said in a guidance.
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The U.K.'s Office of Financial Sanctions Implementation and its Treasury, now following the U.S.'s stricter approach of imposing liability, can publicize the details of financial sanctions breaches even where a penalty has not been imposed, Sidley said. OFSI has further focused more on reporting, emphasizing the importance of self-disclosure, and has continued to take into account efforts to prevent breaches when deciding on enforcement action, the guidance said.
The U.K.'s Economic Crime (Transparency and Enforcement) Act 2022 removed the requirement that OFSI could sanction only individuals or entities that knew or suspected they were acting in violation of sanctions; intent is now irrelevant, the guidance said. The act permits the Treasury to publish notices in cases where the Treasury believes a person has breached sanctions but a fine has not been issued. The act dropped the requirement that the Treasury inform individuals of their right to have a fine reviewed directly by a minister. Individuals still must be informed of their right to review, but officials can undertake the reviews on behalf of the ministers. The act allows ministers to authorize information sharing by relevant departments with the Treasury.
Sidley outlined how these changes may alter the U.K.'s approach to sanctions enforcement. The firm said the approach might be split into two groups: "those that focus on strengthening reporting and notification obligations (a compliance-based approach) and those that focus on action against companies and supply chains directly (an enforcement-based approach)." These new powers also allow the Treasury to take an enforcement-based approach as seen in the U.S., Sidley said, but this move will depend on various factors including the Treasury's resources and "mindset."
In response to the new measures, the mission for companies hasn't changed, Sidley said: They still should seek to build and maintain proper sanctions compliance programs. "What has changed is what may happen when companies’ processes and procedures fail," the guidance said. "As such, companies would be well advised to familiarize themselves with OFSI’s approach to voluntary disclosures and the mitigations offered in response to such self-reporting. It seems that such an approach may cause strict liability breaches to be viewed in a more favorable light."