24th May 2017

Raising the bar on sanctions

Written by Navigant

In the last few years, sanctions have rarely been out of the news headlines, from the fight against terrorist financing, the war in Syria and Russia’s actions in Crimea and the Ukraine. These have taken the form of travel bans on individuals, additions to the list of asset freeze targets and we more financial sanctions against named persons and entities.

However, criminal prosecutions against UK financial institutions relating to financial sanctions violations have historically been rare, requiring proof “beyond a reasonable doubt” that the financial institution is guilty of a sanctions breach.

Under the Policing & Crime Act 2017 legislation due to come into force in April 2017, there will be additional powers for the UK Treasury relating to financial sanction enforcement. Financial institutions operating domestically and internationally could now be more likely to face monetary penalties for any sanctions violations as there  is a new civil penalty, requiring a lower burden of proof and making it easier to fine  financial institutions. The Treasury will have authority to take into account any mitigating or aggravating factors in deciding the level of the penalty.

There is also an increase in the maximum criminal penalty for a financial sanctions violation to seven years imprisonment. In addition, financial sanction breaches are now included in the list of offenses where a Serious Crime Prevention Orders (SCPO) and Deferred Prosecution Agreements (DPA) may be imposed.

In response, financial institutions will need to prove they have implemented robust sanctions compliance controls to protect against civil and criminal penalties.

While it remains to be seen whether the UK government approach will result in the size of the fines levied in the US, it seems likely that the low level of enforcement for sanctions violations in the UK will be a thing of the past.

Navigant’s regulatory update looks at the new powers granted to the UK Treasury’s Office of Financial Sanctions Implementation by the Policing and Crime Act 2017 in more depth. We also examine the penalties for noncompliance, including the aggravating and mitigating factors, and who will be affected by the new proposals.

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