On 31 March 2016, HM Treasury announced that the Office of Financial Sanctions Implementation (“OFSI”) had officially been established. In their announcement, HM Treasury said: “OFSI will provide a high-quality service to the private sector, working closely with law enforcement to help ensure that financial sanctions are properly understood, implemented and enforced.”
Chancellor George Osborne said: “OFSI will be a centre of excellence for financial sanctions, raising awareness and providing clear guidance to promote compliance with financial sanctions, providing a professional service to the public and industry, and working closely with other parts of government to ensure that sanctions breaches are rapidly detected and effectively addressed.”
Whilst it is clear from these statements that OFSI’s role will involve providing guidance to assist and promote compliance with financial sanctions - something which will no doubt be welcomed by businesses - it is also clear that OFSI will be responsible for what is likely to be an increasingly aggressive enforcement regime.
Indeed, in the same announcement, HM Treasury foreshadowed their proposed Policing and Crime Bill, which is currently at committee stage. The Bill is intended to harmonise criminal penalties for breach of financial sanctions, and also expands the range of methods for alternative disposal of offences.
As an alternative to criminal prosecution for breach of financial sanctions, the Bill provides for a new civil regime, to be used when it is not in the public interest to pursue a criminal prosecution (or deferred prosecution agreement), and where the level of breach is such that a warning letter is unlikely to bring about a sufficient change in behaviour. The civil penalties include a maximum fine of £1 million, or 50% of the value of the breach, whichever is the greater. The details of any penalties will be published.
It will be interesting to see the approach OFSI takes both in promoting compliance with financial sanctions, and in enforcing breaches. We understand that OFSI has liaised closely with the US Office of Foreign Assets Control to obtain guidance in this regard.
For further discussion on the difficulties that the OFSI will face in providing guidance on EU sanctions, please see this video blog entitled "Should UK banks be preparing themselves for US-style fines?".