Individual officers of companies and entities personally face civil penalties of £1 million if they are involved in failing to comply with sanctions requirements under new UK legislation. A consultation document issued by OFSI (Office of Financial Sanctions Implementation in the UK) outlines the proposed operation of new powers under the UK Policing and Crime Act.
Under the proposals, the power to issue civil penalties would apply not only to UK companies and entities but also their officers as individuals if the breach or failure either (a) took place with the consent or connivance of the officer or (b) was attributable to any neglect on the part of the officer. The OFSI would be able to issue civil penalties of up to 1 million or (if greater) in the case of a breach relating to specific funds or economic resources, 50% of the estimated value of those funds or resources.
It is intended that the legislation will have wide reaching extra territorial effect, similar to OFAC sanctions in the US. The intention is that the OFSI will be able to impose a civil penalty where a sanctions breach involves not just a UK based company or person but where there is simply a ‘UK Nexus’. This means that additional vigilance around sanctions compliance is needed because breaches may gain the attention and enforcement powers of the OFSI in the UK, even if they take place elsewhere in the world. The full scope of what ‘UK Nexus’ might entail is yet to be determined but examples given of when penalties might be imposed are:
- foreign nationals dealing with UK persons
- UK companies working overseas
- international transactions clearing or transiting through the UK
- actions of a subsidiary (wherever based) of a UK parent company
- financial products/ insurance brought on the UK market but held or used overseas
The OFSI consultation paper also makes specific reference to individuals who act on behalf of or provide advice to others (professional facilitation). There is a clear direction in the consultation paper that such individuals should ensure that they act within the law while representing their clients and that breaches involving professional facilitation will be taken more seriously by the OFSI.
The OFSI press release notes that there were 100 suspected breaches of sanctions in the UK last year. In 2016 the largest monetary breach had an estimated value of £15 million and under the new proposals would have resulted in a fine of £7.5 million.
The OFSI consultation closes for comments on 26 January 2017 and can be read in full here: