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Update on Sanctions, Corporate Crime and Investigations

Posted on 01 March 2019 by Jo Walsh and James Watson

Update on Sanctions, Corporate Crime and Investigations

The Office of Financial Sanctions Implementation ("OFSI") recently announced what is understood by criminal defence lawyers to be the first monetary penalty for violating sanctions in which Raphaels Bank has been fined £5,000 for contravention of regulation 3 of the Egypt (Asset-Freezing) Regulations 2011.

Violating financial sanctions law is a criminal offence. However, instead of prosecuting for an offence, OFSI has powers to impose a civil penalty under the Policing and Crime Act 2017. Under this legislation, OFSI has the power to impose monetary penalties of up to £1,000,000 or 50% of the estimated value of the funds or resources (where ascertainable), whichever is the greater. In this instance, Raphaels Bank received a penalty of £5,000 - reduced by 50% from £10,000.

OFSI can impose monetary penalty when it is satisfied, on the balance of probabilities, that:

  • A person has breached a prohibition or failed to comply with an obligation that is imposed by or under financial sanctions legislation, and;
  • The person knew, or had reasonable cause to suspect, that they were in breach of the prohibition.

According to the OFSI notice announcing the monetary penalty, Raphaels Bank dealt with funds belonging to a person designated under the above regime to the value of £200.00. Raphaels Bank made a disclosure to OFSI when it became aware that a breach of financial sanctions had taken place and it cooperated with OFSI which, in accordance with OFSI's guidance, qualified it for a reduction in the baseline penalty.

OFSI has applied a multiplier of 25 times the value (reduced from 50 times the value) of the transaction to determine the baseline penalty, and if this continues to be their approach we may see significant penalties in any future enforcement action.

The OFSI notice announcing the penalty indicated that enquiries are ongoing into other aspects of the breach which do not concern Raphaels Bank and that a fuller summary of this breach may be published following the conclusion of those enquiries.

OFSI has faced criticism for its lack of enforcement action since it was established on 31 March 2016 and this first fine may indicate that it will become more active in the future. International sanctions and the approach likely to be taken by OFSI are complex. Where necessary, specialist advice should be sought.

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