The Economic Crime (Transparency and Enforcement) Act 2022 came into force on 15 March 2022 having been fast-tracked.
In our previous update, we explained the key provisions in the Bill in relation to the creation of a register of overseas entities to be held at Companies House. Those provisions are enacted via Part 1 of the 2022 Act.
In this update, we explain some key changes to the UK sanctions regime introduced via the 2022 Act.
A key change introduced via the 2022 Act is to make it easier for the Office of Financial Sanctions Implementation (OFSI) to impose a penalty for a breach of financial sanctions legislation.
Prior to the 2022 Act coming into force, OFSI required to demonstrate that an individual or organisation had breached sanctions legislation and knew (or had reasonable cause to suspect) they had committed a breach, before it could impose a penalty. Section 54 of the 2022 Act removes the requirement to demonstrate knowledge or reasonable cause for suspicion.
This means that a penalty can be imposed for a breach of sanctions legislation even if an individual or organisation doesn't know or suspect they committed a breach. The current maximum penalty is £1 million or 50% of the estimated value of the breach, whichever is higher.
It is important to note that this change does not impact the test for criminal prosecutions following a suspected breach of sanctions regulations. It relates only to the OFSI procedure for imposing penalties which can be done without a criminal prosecution. In order for a criminal prosecution to succeed in relation to, for example, the Russia (Sanctions) (EU Exit) Regulations 2019, the UK prosecuting authorities would require to prove that the accused knew or suspected that the conduct which is the subject of the proceedings involved a breach of sanctions regulations.
The other key change implemented to the existing sanctions regime by the 2022 Act is a new expedited procedure for designating persons as subject to financial sanctions. This means that we can expect more designations of individuals and organisations. We can also expect designations to be made on a more regular basis.