Out-Law / Your Daily Need-To-Know

Out-Law News 2 min. read

UK proposes tougher penalties for financial sanction violations


Proposed new criminal and civil penalties for those who breach financial sanctions would "raise the stakes" for those found to be dealing with designated persons, an expert has said.

Stacy Keen of Pinsent Masons, the law firm behind Out-Law.com, was commenting on draft legislation published by the UK government as part of the new Policing and Crime Bill. If passed in its current form, the bill would increase the maximum prison sentences for breaches, as well as introduce new civil penalties in cases where it is not in the public interest to prosecute.

"Financial sanctions are an important foreign policy and national security tool," the government said in an explanatory note published alongside the draft legislation (6-page / 128KB PDF). "New legislation is required in order to bring consistency to penalties across all the financial sanctions regimes, ensure that penalties for breached of financial sanctions have a sufficient deterrent effect, and provide the enforcement community with a broader and more flexible array of powers."

Measures set out in the bill would "harmonise" the existing criminal penalties available in sanctions cases, so that the same penalties would be available to the courts for breaches of EU regulations as are currently available for breaches of the 2010 Terrorist Asset Freezing etc. Act. Once in force, the bill would increase the maximum sentence from two years to seven years imprisonment on conviction on indictment, or six months imprisonment on summary conviction.

The bill would also give the new Office of Financial Sanctions Implementation (OFSI), which is due to be established within the UK Treasury, the power to administer new civil penalties where prosecution is not in the public interest. Cases would be referred to the OFSI following initial law enforcement enquiries, and the individual or organisation suspected of breaching financial sanctions would be able to argue their case.

Civil penalties would only be imposed if OFSI was satisfied that a breach had been committed and the individual or organisation involved "knew, or had reasonable cause to suspect" that their actions were in breach of sanctions, according to the government's note. Those subject to penalties would have the right to request a review of the decision by a government minister in the first instance, and then by the courts through judicial review.

Details of any penalties imposed would be published, and the maximum penalty set by the legislation at £1 million or 50% of the total value of the breach, whichever is greater. The Treasury will consult later this year on its planned process for imposing penalties and approach to publication, as well as the levels of penalty it intends to impose in a given situation, according to the note.

Once in force, the bill would also give the UK Treasury the power to implement new international financial sanctions imposed by the UN on a temporary basis, pending the adoption of the necessary legislation by the EU. Currently, UN sanctions only take effect in the UK once implemented through a directly-applicable EU regulation; a process that usually takes an average of four weeks, according to the government's note.

"This delay means there is the possibility of asset flight (whereby assets are removed from the UK before the sanctions are imposed) which could put the UK in breach of its international obligations," the government said in its note.

UN sanctions implemented by the Treasury on a temporary basis would last for 30 days, which may be extended to 60 days if required, according to the note. The temporary arrangements would lapse and be replaced by the EU legislation as soon as it is made.

We are processing your request. \n Thank you for your patience. An error occurred. This could be due to inactivity on the page - please try again.