March 18, 2019

OFSI Publish Details of First Fine For Financial Sanctions Breach

The UK Office of Financial Sanctions Implementation (OFSI) has recently published details of the first monetary penalty it has imposed for breach of financial sanctions since civil penalties for breaches of financial sanctions were introduced by the Policing and Crime Act 2017.

At this stage, OFSI has elected to provide a brief summary of the breach. It notes that "enquiries remain ongoing into other aspects of this breach which do not concern" the entity that has been fined and that a fuller summary of the background to this monetary penalty could be published following the conclusion of these enquiries.

Raphaels Bank was fined GBP5,000 for transferring GBP200 belonging to a ‘designated person’, in breach of a prohibition of an asset freeze imposed by the European Union on certain persons, entities and bodies in relation to events in Egypt. The notice states that OFSI has imposed the monetary penalty because "it was satisfied, on the balance of probabilities, that Raphaels Bank breached a prohibition that is imposed by or under financial sanctions legislation, and knew, or had reasonable cause to suspect, that they were in breach of the prohibition". The fine was reduced by 50 percent from GBP10,000 due to disclosure by Raphaels Bank to, and its cooperation with, OFSI.

In relation to the monetary penalty imposed, it is worth noting that:

  • The maximum penalty that can be imposed by OFSI is the greater of GBP 1 million and 50 percent of the estimated value of the funds that were the subject of the breach;
  • Though the monetary penalty appears to be relatively modest when compared to fines recently imposed by OFSI's US counterpart, the Office of Foreign Assets Control (see, for example, a USD506,250 fine on ZAG IP, LLC, and a USD5,512,564 fine on AppliChem GmbH), it is 250 times the value of the transaction giving rise to the breach. The penalty would have been 500 times the value of the transaction had it not been for Raphaels Bank's disclosure and co‑operation;
  • Given the relatively low value of the transaction, it will be interesting to understand how OFSI determined that the monetary penalty imposed is reasonable and proportionate in the circumstances.In particular, were there any of the aggravating factors listed in OFSI's Monetary Penalties for Breaches of Financial Sanctions (for example, the direct provision of funds to a designated person)?

A better understanding of OFSI's approach to enforcement and its imposition of monetary penalties would be welcomed, given OFSI's acknowledgement in its most recent Annual Review that the majority of cases are resolved by enforcement activity short of a penalty.

Click here for full details of the OFSI monetary penalty breach.

Authored by Chris Hill, Nigel Brook and Qi Jiang