First OFSI penalty for breach of financial sanctions

Calum Burnett

Details of the first monetary penalty imposed for breach of financial sanctions by the UK Office of Financial Sanctions Implementation (OFSI) was published yesterday. Raphaels Bank has been fined GBP5000 for transferring GBP200 belonging to a ‘designated person’ in breach of an asset freeze in EU financial sanctions on designated persons and entities relating to Egypt. OFSI imposed the monetary penalty because it was satisfied, on the balance of probabilities, that Raphaels Bank breached a financial sanction and knew, or had reasonable cause to suspect, that they were in breach of the prohibition. The fine was reduced by 50% due to disclosure and cooperation.

OFSI was created in 2016 and given new enforcement powers, including to impose monetary penalties, under the Policing & Crime Act 2017. This is the first time it has exercised the power to impose a financial penalty. In its 2017/2018 Annual Review, OFSI stated that 122 suspected breaches of financial sanctions had been reported. OFSI stated that it was likely to impose monetary penalties in 2018-19, although “the majority of cases will continue to be resolved by enforcement activity short of a penalty”. The “permitted maximum” penalty that OFSI can impose is GBP 1,000,000 or 50% of the estimated value of the funds or economic resources, whichever is greater. This is an interesting first use of OFSI’s powers, given its decision to impose a sanction in respect of a very low value sanctions breach, despite the fact that the conduct was self-reported. OFSI’s announcement does not contain much information to provide context to the decision to impose a penalty in this case.

Depending on what happens with Brexit, we may see a new UK sanctions regime come into force. On a hard Brexit at the end of March, those advising on sanctions compliance will need to be able to navigate around UN sanctions, EU sanctions laws onshored under the European Union (Withdrawal) Act 2018 and, perhaps, amended and new UK sanctions under the Sanctions & Anti-Money Laundering Act 2018. We are already seeing a plethora of draft Brexit related SIs relating to financial sanctions, which will come into force on a hard Brexit. Both the UK Foreign Office and OFSI have provided guidance on a post-Brexit UK sanctions regime:

https://www.gov.uk/government/publications/sanctions-policy-if-theres-no-brexit-deal/sanctions-policy-if-theres-no-brexit-deal

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/775675/Post_EU_Exit-_Financial_Sanctions_-_General_Guidance.pdf

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