The Office of Financial Sanctions Enforcement (OFSI) has published its 2019/2020 annual review, covering the period April 2019 to March 2020.
Our five key takeaways are as follows:
(1) OFSI takes stock of its first four years
OFSI has used the annual review as an opportunity to set out a holistic overview of milestones delivered since its inception in 2016. OFSI has clearly achieved a lot in a short space of time and has established itself as a regulator with teeth. Importantly, OFSI views itself as integral to the Government’s strategy of combatting economic crime and considers the implementation and enforcement of financial sanctions to be a critical part of wider efforts to tackle the abuse of the UK’s financial system.
(2) Compliance and Enforcement
OFSI received 140 reports of potential financial sanctions breaches in the 2019-20 period, a 40% increase from the previous year. The total value of potential breaches reported was £982.34 million, representing an almost four-fold increase from the period year. Given OFSI has the power to impose penalties of up to 50% of the estimated value of the funds or resources relating to a breach, it is likely that we will continue to see significant fines going forward.
The report highlights the uptick in OFSI’s enforcement activity, revisiting the Telia Carrier UK Ltd penalty issued on 9 September 2019 and the fine imposed on Standard Chartered Bank (which you can read about here).
Unsurprisingly, a significant proportion of OFSI’s time over the past year has been used preparing for the end of the transition period.
OFSI has one eye “looking ahead” and has set out its stall to “champion financial sanctions compliance both at home and abroad, and to ensure that the UK’s autonomous financial sanctions regimes are understood and enforced.” This reflects the Government’s decision in July this year to impose unilateral sanctions for the first time under the Sanctions and Anti-Money Laundering Act 2018 (SAMLA) in the form of The Global Human Rights Regulations 2020 (which you can read about here).
The annual review serves as a timely reminder that the end of the transition period is 31 December 2020 when EU sanctions will cease to apply pending further agreement between the UK and the EU.
(4) OFSI expands international engagement
Cross-border cooperation between authorities has been one of the key trends across economic crime enforcement in recent years. It is therefore noteworthy that OFSI has nearly doubled the number of jurisdictions it has engaged with over the past financial year, undertaking engagements in 83 countries across 6 continents. The focus of OFSI’s multilateral and international engagements was on “sanctions related to counter-terrorism and counter-proliferation”, underlining the connection between the UK’s autonomous financial sanctions measures and UK foreign policy.
OFSI has taken steps to consolidate the licencing process and ensure that licences can be issued to applicants as fast as possible. At the end of the transition period, there will be a new application for licences requested under SAMLA. Critically, SAMLA will provide OFSI with greater flexibility including the ability to issue “general licences”, permitting specific types of behaviour whilst removing the need for an application process. These general licences will be issued by OFSI to fulfil a policy aim and will include applicable requirements, such as the obligation to notify OFSI before use.
As the UK’s financial sanctions landscape continues to evolve and OFSI grows in stature and influence, it is important that this area remains a priority item on compliance agendas. We will continue to track global developments: you can read our latest updates here.