HM Treasury sanctions enforcement powers to increase

UK Government proposes new power for HM Treasury to impose civil fines for financial sanctions breaches, and increases to maximum prison sentences from two to seven years.

Draft legislation has been put forward for debate in parliament which introduces new powers for HM Treasury (HMT) to impose civil fines for sanctions breaches. The legislation also proposes to increase maximum prison sentences for financial sanctions violations from two to seven years.

The Policing and Crime Bill 2015-16 proposes a number of changes to the financial sanctions regime, including:

  • An increase in the prison sentence for sanctions violations on summary conviction from six to 12 months, and on conviction on indictment from two to seven years (clause 89).
  • A new power for HMT to impose civil fines for financial sanctions breaches of up to the greater of (i) 50% of the value of the funds or resources involved (if quantifiable) or (ii) £1m where it is satisfied on the balance of probabilities that such breach has occurred (clause 91).
  • A recipient will have an opportunity to make representations before a fine is imposed. After a fine is imposed, the recipient will have the right to seek a review of it by a government minister, who has the power to uphold or cancel the penalty, or change its amount (clauses 92 - 94).
  • An amendment to the Crime and Courts Act 2013 to allow for a deferred prosecution agreement (DPA) to be entered into by a corporate that has committed a financial sanctions offence under any UK legislation which implements EU or UN financial sanctions (clause 95).
  • Allowing DPAs to be entered into by a corporate for the following offences, which have also been amended so as to increase the prison sentences associated with those offences (as per above):
    • failing to comply with a freezing order under the Anti-terrorism, Crime and Security Act 2001, or assisting another in doing so
    • failing to provide information or documentation, or knowingly or recklessly providing false information or documentation, required by a freezing order under the Anti-terrorism, Crime and Security Act 2001, or with a view to obtaining a licence under such order
    • failing to comply with, or circumventing, a direction to limit or cease business with a designated person, given by HMT under the Counter-Terrorism Act 2008, and
    • failing to provide information or documentation, or knowingly or recklessly providing false information or documentation, for the purpose of obtaining a licence from HMT under the Counter-Terrorism Act 2008 (clause 95).

Comment

This introduction of a power for HMT to impose civil penalties is particularly interesting because of the parallels that can be drawn with the often high profile and high value civil penalties and enforcement settlements imposed by Office of Foreign Assets Control (OFAC) in the United States. Civil settlements with OFAC often accompany criminal enforcement action for sanctions violations brought by the US Department of Justice (DOJ). It is presently unclear whether HMT intends to mirror the operational relationship between OFAC and the DOJ, or whether civil settlements will be offered by HMT as an alternative to a criminal penalty.

The introduction of a power to impose civil penalties and an increase in the maximum custodial sentences available for breaches of financial sanctions, may be the first steps towards the increased enforcement of sanctions by HMT, which was foreshadowed in the Summer Budget 2015 (the budget). The budget also announced the creation of a new Office of Financial Sanctions Implementation (OFSI) within HMT. We understand that OFSI is expected to be operational by the end of April 2016 and will aim to (i) increase awareness of and compliance with financial sanctions; (ii) ensure that financial sanctions breaches are rapidly detected and effectively addressed; and (iii) provide a professional service to the public and industry.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.