OFSI evidence to Treasury Committee Economic Crime Inquiry

Parliament4The 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 noncompliance 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.”

UK provides for new EU chemical weapons sanctions

Parliament1The 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).

What will UK sanctions look like if there is no Brexit deal by March 2019?

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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”.

Independent Reviewer report on Terrorism Acts

Max Hill QCMax 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.

OFSI renews 2 TAFA designations

HMTreasury.jpgYesterday, OFSI renewed the terrorist listings of two entities – Ejército de Liberación Nacional (ELN) and Sendero Luminoso (SL) – under the Terrorist Asset-Freezing etc Act 2010 (TAFA).

The OFSI Notice explains that a renewed designation may be appealed to the High Court (or, in Scotland, to the Court of Session) under section 26 of TAFA.

OFSI publishes first Annual Review for 2017-2018

OFSI1Today, OFSI has published its first Annual Review covering the financial year 2017-2018. It includes sections on: UN and EU financial sanctions regimes; UK counter-terrorism asset freezes; review of frozen assets; compliance and enforcement; reporting to OFSI; licensing; raising awareness; and EU exit.

Commons paper on the future of sanctions

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The House of Commons Library has published an interesting Briefing Paper on The Future of Sanctions post Brexit (26 September 2018). A few of the points it makes:

  • The terms of agreement on the UK’s post Brexit involvement in EU foreign policy, including sanctions, is still unclear. The UK has said it wants an independent sanctions policy, the EU has said it wants “decision making autonomy”.
  • Transatlantic cooperation is likely to become more difficult, sanctions could become “entangled with increasingly competitive and nationalist trade policies”, and without the UK, EU sanctions may become more damaging to UK interests. Less coordinated sanctions could undermine their beneficial effects and exacerbate their unwelcome consequences (“freezing the Western assets of oligarchs close to the Kremlin, for example, may result in rich Russians re-patriating their wealth – something that the Kremlin would welcome”.
  • The UK will have to take over the “technical work” previously done in Brussels to ensure good sanctions design, but the UK “supplied a disproportionate amount of this expertise” to the EU in any event.
  • The UK courts are likely to be “crucial in shaping policy” and there is likely to be a “big increase in litigation” which will require “extra capacity in the UK court system”.
  • A problem with the Government’s position that there should be no remedy in a UK court for an unfounded UN designation is that there is only a UN Ombudsperson for one sanctions list (the UN Ombudsperson for the ISIL (Da’esh) and Al-Qaida Sanctions Committee) not the 13 other sanctions regimes.
  • One disadvantage of Magnitsky legislation is that it could be applied selectively and could lead to more litigation.

UK asks UN and EU for further Russian sanctions

Theresa MayThe UK, US, France, Germany and Canada issued a joint statement today saying that they had full confidence in the UK’s assessment that the Salisbury chemical weapons attack was carried out by Russian military intelligence and approved at a senior government level. The statement was issued just before a UN Security Council meeting at which the UK is expected to put the case for further sanctions against Russia. Theresa May has also said she will “push for new EU sanctions regimes against those responsible for cyber attacks and gross human rights violations”. Russia has denied involvement in the attack.