OFSI has published an updated version of its enforcement and monetary penalty guidance, which will come into effect from 15 June 2022.
The guidance reflects measures in the Economic Crime (Transparency and Enforcement) Act 2022, (ECA) which come into force on 15 June 2022. These include:
- A new strict civil liability test for imposing monetary penalties
The ECA removed the requirement for OFSI to demonstrate that a person had knowledge or reasonable cause to suspect they were in breach of a financial sanction to issue a monetary penalty. This amendment applies only to consideration of civil liability and the imposition of a monetary penalty and is not relevant to any assessment of whether a criminal offence has been committed under sanctions regulations. It is still necessary for OFSI to establish a breach to the civil standard of proof.
The strict liability regime has dispensed with the statement made in previous guidance which took into account the level of actual and expected knowledge of financial sanctions held by an individual or a company, considering the kind of work they do and their exposure to financial sanctions risk. Whilst that still might be relevant to mitigation, the tenor of the guidance is less forgiving. Although previous guidance had stated that a breach arising from a genuine mistake would not meet the legal standard for a penalty, the revised guidance expressly states that it would. There are no longer blameless breaches; all breaches are considered serious.
As with previous guidance, OFSI sets a premium on self-reporting, and firms will have to consider submissions of suspected breaches to OFSI - whether inadvertant or not - with great care and forethought.
- The new OFSI ability to publish details of breaches where a monetary penalty has not been imposed
This may become an alternative to the imposition of penalties for low-culpability breaches, but the power carries huge reputational risks for affected businesses. The guidance refers to situations in which there are "valuable compliance lessons for industry", where a summary may be published identifying who performed the breach and giving the summary facts of the case, including:
breach type; sanctions regime; the regulation broken; and whether there was voluntary disclosure
the aggregated GBP value of the transactions which are in breach of the regulations, where this can be identified, and why OFSI decided to publish a case summary
compliance lessons OFSI wishes to highlight in this case, to help others avoid committing a similar breach
OFSI states that it will not publish where it is not in the public interest to do so or where the impact of publishing is considered to be disproportionate. It is for the affected person to make representations about any effect that publication of a report may have.
- Removal of the right of review of monetary penalties by a Minister
Financial sanctions are currently dealt with by the Economic Secretary to the Treasury (EST). Whilst the EST may carry out the review, they may now delegate to another minister or senior official to carry out the review. The Minister is no longer required to conduct the review personally. OFSI's Director, Giles Thompson noted in his blog that this will allow HMT to more effectively manage the resourcing implications of this work.
As the Giles Thompson noted, the policy drivers are to create a regime more in line with the American model. That suggests there will be increased enforcement activity by OFSI through penalties and publication over the coming months.