The House of Commons Treasury Committee took oral evidence as part of its Economic Crime Inquiry from OFSI Director Rena Lalgie, Simon York (HMRC Fraud Investigation Service Director), and Alison Barker (FCA Director). The main sanctions points (transcript here) are:
- In 2017 OFSI received 133 reports of suspected sanctions breaches, estimated value £1.4 billion (see February 2018 blog).
- OFSI’s new civil monetary penalty powers may be used in cases where sanctions breaches occurred after 1 April 2017. OFSI guidance says it “will use [those powers] for the most serious breaches of financial sanctions. Those cases are starting to come through. Where we see them coming through, we will not hesitate to use [those powers].”
- In response to the suggestion of “inadequate” enforcement of sanctions breaches (103 of the 133 reported breaches had been reported to OFSI since it gained its powers to impose civil monetary penalties), OFSI Director Rena Lalgie said that did “not mean those breaches occurred within that particular year, and we have not assessed all of those as being actual breaches”. And “at a glance, it is easy to infer that, because we have not issued one of those [civil monetary] penalties yet, we are not enforcing the system. I do not think that is right. We are taking some form of action in every case of non‑compliance that we see, but it has to be proportionate to the facts of the case.”
- OFSI has powers to “share information with anybody as long as it is to further compliance with the regulation. That means [it does] share information with other regulators: the FCA, the [SRA] and others.”
- OFSI works “very closely with colleagues in the Foreign Office and with colleagues across the EU who are thinking about the sanctions regime. There is a richness to the information that we see through our implementation, which can really support and help to inform future policy. We have seen examples where the experience of the trickiness around implementing financial sanctions has therefore informed the way in which sanctions regimes have been revised and updated.”
The UK has passed the Chemical Weapons (Asset-Freezing) and Miscellaneous Amendments Regulations 2018, SI 2018/1090, which comes into force on 7 November 2018.
The Regulations make provision for UK enforcement, licensing, penalties etc in respect of Council Regulation (EU) 2018/1542, the EU’s new chemical weapons sanctions regime (see previous blog).
Yesterday, OFAC designated 5 Colombian nationals as Specially Designated Narcotics Traffickers, pursuant to the US Kingpin Act (US asset freezes), over “narcotics trafficking activities”.
The 5 individuals: Jonathan Alvarez Escobar; Jose Efer Higuita Peralta; Alonso Zuleta Noscue; Pedro Luis Zuleta Noscue; and Jose Oscar Zuleta Trochez. See OFAC Notice and US Treasury press release.
OFAC has designated 20 entities as Specially Designated Global Terrorists, pursuant to Executive Order 13224 (US asset freezes), for “providing financial support to the Basij Resistance Force (Basij), a paramilitary force subordinate to Iran’s Islamic Revolutionary Guard Corps (IRGC)”.
According to the US Treasury press release, “the IRGC’s Basij militia recruits, trains, and deploys child soldiers to fight in IRGC-fueled conflicts across the region. This Iran-based network is known as Bonyad Taavon Basij, which is translated as Basij Cooperative Foundation, and is comprised of [(at least) the 20 entities designated today]”, of which are “deeply entrenched in major Iranian industries, such as automotive, mines and metals, tractor manufacturing, and banking.”
The 20 entities: Andisheh Mehvaran Investment Company; Bahman Group; Bandar Abbas Zinc Production Company; Bank Mellat; Bonyad Taavon Basij; Calcimin; Esfahan’s Mobarakeh Steel Company; Iran Tractor Manufacturing Company; Iran Zinc Mines Development Company; Mehr Eqtesad Bank; Mehr Eqtesad Financial Group; Negin Sahel Royal Investment Company; Parsian Bank; Parsian Catalyst Chemical Company; Qeshm Zinc Smelting And Reduction Company; Sina Bank; Tadbirgaran Atiyeh Iranian Investment Company; Taktar Investment Company; Technotar Engineering Company; and Zanjan Acid Production Company. See OFAC Notice.
Yesterday, the UN Security Council announced that it has added British national Anjem Choudary to its ISIL (Da’esh) & Al-Qaida sanctions list for “recruiting for” and “otherwise supporting acts or activities of” ISIL (asset freeze, travel ban, and arms embargo imposed). The UN Narrative Summary of Reasons for Listing notes that Mr Choudary was sentenced in the UK (September 2016) for inviting support for ISIL, and that since his conviction and imprisonment, he has not made any statements denouncing his allegiance to and support for ISIL.
On 18 October 2018, the EU implemented this UN listing, see Commission Implementing Regulation (EU) 2018/1562.
The UK Commercial Court has given judgment in Mamancochet Mining Ltd v Aegis Managing Agency Ltd & Others  EWHC 2643 (Comm) holding that:
– Defendants are liable to pay insurance claim under a marine insurance contract (covering the theft of shipments of steel billets).
– This is because payment would not “expose” the underwriters to EU or US sanctions on Iran if paid out before 4 November 2018 (the end of the wind down period for reimposed US Iran sanctions) therefore the sanctions clause (“no… insurer shall be liable to pay any claim… to the extent that… payment of such claim… would expose that… insurer to any sanction, prohibition or restriction under [UN] resolutions or the trade or economic sanctions, laws, or regulations of the [EU], [UK] or the [USA]”) does not apply.
– The Court said that “exposure” to sanctions meant that the payment had to breach sanctions as opposed to exposing insurers to a real risk of breach.
– The risk was insufficient here because US sanctions waivers were in place until 4 November 2018 (the wind down period following the US decision to withdraw participation in the JCPOA).
– The Court did not reach a concluded view on the Claimant’s argument that reliance on the sanctions clause would breach the EU Blocking Regulation, but saw force in the argument that the Blocking Regulation was not engaged where the insurer’s liability to pay a claim is suspended under a sanctions clause because the insurer is not “complying” with a third country’s prohibition but is simply relying upon the terms of the policy to resist payment.
The Government has published a notice explaining how the UK will implement sanctions if the UK leaves the EU in March 2019 with no agreement as to the UK/EU future relationship. The notice says:
- The UK will continue to implement UN sanctions in UK law.
- The government will “look to carry over all EU sanctions at the time of our departure”.
- The UK will implement sanctions by regulations made under the Sanctions & AML Act 2018. “Much of” the required legislation will be put before Parliament before March 2019 and any other EU regimes not covered by that legislation will continue as “retained EU law under the EU (Withdrawal) Act 2018”.
- The new regulations will include the purpose of sanctions, listing criteria and people & entities listed, details of the prohibitions, exemptions and enforcement, and information sharing.
- After the UK leaves the EU, it will “work with the EU and other international partners on sanctions where this is in our mutual interest”.
Max Hill QC, the UK Independent Reviewer of Terrorism Legislation, has published his final annual report (10 October) on the operation of the Terrorism Acts in 2017. It covers proscribed organisations (5 organisations were proscribed in 2017) and the replacement of the current Terrorist Asset Freezing Act 2010 with the Sanctions and Anti-Money Laundering Act 2018 for terrorist asset freezing in the UK. The report also makes a number of recommendations on TPIMs and port and border controls.