The UK Government put a package of proposals to Parliament in February to increase both the type and the potential severity of consequences for persons and companies who breach EU financial sanctions. If approved, these changes will be powerful new tools in the hands of the Treasury’s new Office of Financial Sanctions Implementation (OFSI) (see the Dechert update last year on the establishment of OFSI), which can be expected to lead to tougher and more proactive sanctions enforcement in the UK.
The proposed introduction of these new powers, together with the establishment of OFSI as a dedicated financial sanctions office within HM Treasury, signals a clear intent by the Government to take sanctions enforcement more seriously. We take a look at the key elements of the new proposals.
What do firms need to do?
None of these proposed measures would change the substantive sanctions restrictions with which firms are currently required to comply. However they would increase the likelihood of consequences for breach. It remains to be seen whether these proposals will be supported in Parliament, and how extensively the new powers, if approved, will be used. But the indications are that HM Treasury intends for OFSI to have teeth, and that the threat of consequences for breach of sanctions – especially large fines - would become more real.
Firms with robust compliance policies already in place do not need to do anything except to continue to comply with sanctions measures. Firms which do not have a sanctions compliance policy, or who feel that their policy may be inadequate, might take this opportunity to strengthen their compliance procedures before these new powers start to bite. Firms may also want to review their contractual and other arrangements to ensure that they understand, and are comfortable with, the level of sanctions exposure which falls on them through their existing contractual arrangements (as to which see this Dechert update). Firms that have concerns as to past or on-going breaches may want to consider, with their legal advisers, how best to minimise their potential exposure in view of the potentially increased risk of enforcement.