3 minute read | March.22.2023
On 16 March 2023, the Office of Financial Sanctions Implementation (“OFSI”) published updated guidance on enforcement and monetary penalties for breaches of financial sanctions (the “Guidance”). The Guidance now specifies that OFSI will consider ownership and control due diligence as an aggravating or mitigating factor when assessing breaches of financial sanctions.
Ownership and Control
In summary, financial sanctions apply not only to “designated persons” (i.e., the targets of asset freezes and other financial sanctions) but also to entities that are owned or controlled, directly or indirectly, by designated persons. Appropriate checks must therefore be performed to determine whether a company is subject to ownership or control by a designated person.
Key points to note from the Guidance are as follows:
How Will This Affect Companies?
Since the implementation of the Economic Crime (Transparency and Enforcement) Act 2022, companies have faced a strict civil liability test for breaches of the UK financial sanctions regime, including circumstances where a company has incorrectly assessed whether an entity is owned or controlled by a designated person. The Guidance makes it clear that reaching that determination in good faith, and on a reasonable basis, may act as a mitigating factor. However, the onus will be on a company to establish that an incorrect assessment was reached in these circumstances. This makes it especially important for companies to ensure that their decision-making process regarding ownership and control is proportionate to the sanctions risk which they face, well-documented, and kept under review (where appropriate).