Latest UK sanctions enforcement
30/09/2024
The UK’s Office of Financial Sanctions Implementation (OFSI) has issued its latest report of a penalty for the breach of financial sanctions. It concerns a civil monetary penalty of £15,000 imposed on Integral Concierge Services Limited (ICSL), a small UK registered property management and concierge company providing services primarily to Russian and Ukrainian nationals.
This is the first OFSI enforcement outcome published in over a year. Back in April, the UK government confirmed that it expects to see monetary penalties resulting from the 2022 Russia designations come to fruition in 2024 (and, no doubt, in the coming years). This makes sense given the time it takes to identify and properly investigate potential breaches – and is unlikely to have changed following the change of government in the summer. As such, more should follow from OFSI on enforcement – and the lessons from ICSL (and other enforcement cases) will be relevant going forward.
With that in mind, ICSL’s is a fairly standard tale of a company that breached sanctions regulations by making or receiving payments in connection with a person designated under the Russian sanctions regime. There were 26 such payments, with a cumulative value of £15,487.30. The designated person in question owns a residential property in the UK, and ICSL continued to provide property management services (including collection of rent from tenant and paying for upkeep and maintenance of the property), as well as collecting its own management fees, after the person was designated in early 2022. ICSL also made transfers between accounts that dealt with the designated person’s funds. In addition, ICSL breached the reporting requirements of two general licences.
Three lessons to take away.
- Know your sanctions law/regulation and sanctions risks (or get some guidance). ICSL admitted that it did not believe it was necessary to seek guidance about the sanctions regime, despite the fact that its knowledge of sanctions was, by its own admission, limited. OFSI is, unsurprisingly, keen to state that it is essential for firms (particularly those serving high risk client bases) to understand their exposure to sanctions risk and take action to address it.
- Understand the advantages of self-reporting. OFSI emphasises the importance of voluntarily disclosing breaches of regulations to OFSI in its Financial Sanctions and Monetary Penalties guidance. OFSI considers voluntary disclosure as part of the case factors that will aggravate or mitigate when determining the facts and how seriously OFSI will view a case. If a penalty is imposed, OFSI will (in cases like ICSL’s) make up to a 50% reduction in the final monetary penalty to a person who gives prompt and complete voluntary disclosure. ICSL did not voluntarily self-disclose, and so was not eligible for these advantages despite it subsequently cooperating. It is of course hard to self-disclose if you don’t know you are in breach (as seems to have been the case with ICSL) – so see point 1 again and understand OFSI’s approach to breaches.
- Follow reporting (and other) requirements under general licences. General licences perform an important function in the sanctions world. However, firms and individuals should not assume that just because there is a general licence, that means that actions that fall under the general licence are permitted without any other requirements attached. Here, OFSI says that ICSL breached reporting requirements under two general licences in respect of payments to water and utilities companies. The payments were not breaches, but the failures to report were. OFSI says that it did not impose a monetary penalty in respect of these breaches, but considered them an aggravating factor. The obvious lesson here is, not only to understand what a general licence covers, but also to comply with any obligations that fall upon you as a result of taking advantage of that general licence.
This article is not legal advice, which it may be sensible to obtain before you take any decisions or actions in the areas covered. Please do contact me if you would like an initial discussion of your situation.
