UK Seeing Uptick in Sanctions Enforcement, Adding More Resources

The U.K.’s lead sanctions agency plans to add more employees and resources over the next year, saying that should lead to speedier decisions on license applications and more sanctions-related investigations. It also said it will soon issue penalties for Russia-related violations and wants to expand its mandatory sanctions reporting requirements.

In its annual report released this month, which covers the 2022-2023 financial year, the Office of Financial Sanctions Implementation said it ended 2022 with around 100 full-time employees but wants to soon expand that number to 135. Over the past year, the agency said it “increased resource[s]” for its enforcement team by 175%, in its licensing team by 160% and in its guidance and engagement team by 120%, “significantly expanding OFSI capability and capacity.” This has allowed it to be “more responsive” when issuing general licenses and given it “greater capacity to work on the large volume of licensing applications” and investigate violations.

Excluding violations of the oil price cap and counterterrorism breaches, the agency said it recorded 473 suspected sanctions violations during the past year, which was a “significant increase” from the 147 cases during 2021-2022.

OFSI said the rise in enforcement was mostly due to sanctions activity against Russia, although it didn’t impose a Russia-related sanctions penalty stemming from the country’s 2022 invasion of Ukraine. But it said it’s currently investigating “a large number of complex investigations” involving Russia-related sanctions violations and expects that work to “lead to public enforcement action in subsequent Annual Reviews.”

During 2022-2023, OFSI said it issued seven warning letters and two monetary penalties, and closed 51 cases with no action, 44 of which involved Russia. The agency recognizes the “importance of proportionality in its enforcement efforts,” OFSI said. “Striking the right balance ensures that OFSI’s actions remain fair and just, preventing undue harm to individuals or entities inadvertently caught in the crossfire.”

The agency also touted its licensing work, calling it a “landmark year” for its licensing unit, which managed a “substantially larger licensing caseload than in previous years.” The unit adjudicated 503 licensing cases -- up from 170 the year before -- while approving 283 licenses and rejecting nine. The other licenses were either withdrawn, needed no action from OFSI or were sent back for insufficient information.

OFSI also said it plans to push for new legislation in the next year that would place new mandatory reporting requirements on people and assets designated under the country’s Russia and Belarus regimes. More reporting of those assets “will take us further than current reporting obligations” and will “further tighten the net around those seeking to hide assets in the UK.”

Along with improving its ability to trace sanctioned assets, OFSI also said its recently redesigned “intelligence function” will allow it to better gather information about sanctions breaches and share information with allies. In the report’s introduction, OFSI Director Giles Thomson specifically pointed to the agency’s new partnership with the U.S. Office of Foreign Assets Control (see 2311170038). That effort is allowing OFSI and OFAC to “pool our expertise,” Thomson said.

He said OFSI wants to continue expanding its cooperation with allies “to make the crisis-induced improvements to our sanctions system permanent and sustainable.” The U.K. “cannot be complacent about the threats we face and the need to continue to improve the role of sanctions in our response to them.”