Category: Sanctions

New UK Sanctions On Russia: What You Need to Know

On 13 June 2024, in coordination with other G7 countries, the UK announced a round of new sanctions on Russia, strengthening the economic measures already in place to degrade Vladmir Putin’s war machine in Ukraine. Announced during the G7 Leaders Summit in Italy, these latest sanctions will have far-reaching global effects, which means businesses in the UK and beyond must understand how to achieve compliance, or face costly penalties.

UK Russia Sanctions in 2024

The UK issued a previous round of sanctions against Russia in February 2024, targeting supplies of munitions and military end-use tools, and persons involved in the financing of Putin’s war effort. At the time, the UK also announced that it would be increasing its focus on Russia’s attempts to avoid sanctions, not least by cracking down on corporate compliance, and by addressing the illicit trading of oil via a ‘shadow fleet’ of ships.

The UK’s position on Russia sanctions reflects that of its international partners, and in particular members of the G7 who have also signalled an increased focus on Russia’s attempts to circumvent the economic measures against it.  

New Sanctions Targets

The UK has issued 50 new sanctions designations against Russia. Notable amongst the new targets is the ‘shadow fleet’ of ships which the Russian government uses to trade oil in violation of existing sanctions. The oil trade is critical to financing the Ukraine invasion and generated 31% of Russia’s total federal revenues in 2023. 

The new UK sanctions also target munitions, machine tools, microelectronics suppliers, and companies providing logistics to the Russian military. That group of targets includes foreign companies based in China, Turkey, Kyrgyzstan, and Israel, and ships supplying military end-use goods to Russia from North Korea.

In conjunction with new US sanctions, the UK sanctions have also increased pressure on Russia’s financial system and, in particular, the Moscow Stock Exchange, with new restrictions for individuals and entities involved in Russian stock trading. 

UK Prime Minister Rishi Sunak stressed that the renewed economic pressure would “bear down on Russia’s ability to fund its war machine” and cut off Putin’s ability to prolong the Ukraine conflict. Echoing that sentiment, Foreign Secretary David Cameron said that the UK would continue to work with its International partners to increase that pressure, and would “stand by Ukraine in this fight.”

The UK Government has listed the targets of its new Russia sanctions, which include:

• 4 ships in Russia’s ‘shadow fleet’
• 2 ships found to have transported weapons to Russia
• 1 ship manager
• 6 entities in the Russian liquefied natural gas (LNG) sector 
• 1 Russian insurance company
• 2 entities with connections to Russia’s civil nuclear sector
• 4 entities and 1 individual with connections to the Russian financial system
• 21 suppliers of goods for Russian military end-use
• 6 individuals or entities with connections to the Russian state that have benefited from the invasion
• 2 designation from the UK’s Central African Republic sanctions lists with connections to the Wagner Group

The Future of UK Sanctions on Russia

To date, the UK Government has sanctioned over 2,000 individuals and entities, with restrictions applied to over 90% of the Russian banking sector, and over 130 close associates of Vladmir Putin – with a combined net worth of around £147 billion. 

The UK’s latest sanctions, along with those issued by the G7, suggest that the pressure on Russia will continue for the foreseeable future, with a more complex focus on the Russian government’s attempts to circumvent the measures against it, and on efforts to fund its campaign in Ukraine. To that end, the UK recently published the UK Sanctions Strategy, which set out the UK Government’s sanctions position on Russia, and detailed wider diplomatic efforts to address Vladmir Putin’s evasion strategies. 

As the UK’s sanctions against Russia evolve and expand, it’s vital that UK firms put adequate sanctions screening measures in place to meet their compliance obligations. Ripjar’s Labyrinth Screening platform is designed to help compliance teams keep pace with new sanctions by providing continuous monitoring and real-time name search capabilities of international sanctions lists, and of thousands of adverse media sources from across the world. Labyrinth Screening includes the cutting-edge AI Risk Profiles and AI Summaries features, which enable compliance teams to identify and extract only the most relevant risk information from vast amounts of unstructured data, and then use advanced generative AI to create a concise summary of that risk, and significantly reduce assessment times.

New US Sanctions Law 2024: Extended Investigation Time for Compliance Officers

On 24 April 2024, President Biden signed bill H.R. 815 into law, a legislative package that also includes the 21st Century Peace Through Strength Act. Although H.R. 815 is largely recognised as a  $95.3 billion foreign aid package, with financial assistance for Ukraine, Israel, and Taiwan, the Peace Through Strength Act contains significant sanctions provisions, including measures for combatting the US’ fentanyl epidemic, and an extension to the legal statute of limitations for sanctions violations, which will significantly affect sanctions compliance. 

The new sanctions regulations add to an already-complex risk landscape, and mean that firms in the US and beyond should review their screening approach. Let’s take a closer look at the contents of H.R. 815 and explore its implications for US sanctions compliance. 

What Are The New Sanctions Regulations?

A product of a bipartisan legislative effort, H.R. 815 contains new sanctions laws aimed at a range of foreign threats. Its key sanctions measures include: 

• Strengthened sanctions against China for transactions involving the purchase of Iranian oil. 
• New sanctions against Iran targeting the country’s petroleum industry, and missile and drone development capabilities. 
• New sanctions targeting financial support for terror groups Hamas and Hezbollah. 
• A mandate for the US Treasury to introduce new sanctions against Mexican cartel members involved in the production and trafficking of fentanyl. 
• An extension of the US’ statute of limitations, doubling potential investigation time from 5 to 10 years. 

10 Year Statute of Limitations 

While obligated entities should carefully consider each of the new sanctions measures, the extension of the statute of limitations is likely to have the greatest impact on regulatory compliance. 

The regulatory change comes at a time when US firms face a high sanctions compliance burden. The US government has expanded its Russia sanctions programme dramatically since the invasion of Ukraine in 2022, along with the introduction of new sanctions against China and Iran. At the same time, the Office of Foreign Assets Control (OFAC) has increased its focus on enforcement, imposing significant penalties for compliance failures as a way to ensure the effectiveness of new sanctions. That shift has delivered results: in 2023 OFAC issued a record $1.5 billion in sanctions fines. 

Coming as a surprise to many industry observers, the new 10 year statute of limitations represents a considerable statutory change for US firms and their compliance teams. Under the previous regime, firms that discovered a sanctions violation on their books often conducted a 5 year retrospective review to uncover further violations and identify potential systemic problems. The new law doubles that burden while, at the same time, reducing pressure on regulators and increasing the opportunity to discover additional violations and impose larger fines. 

US Sanctions Law Changes: Key Considerations

The change in the statute of limitations means that US firms and obligated entities should review their sanctions compliance programmes, focusing on a number of key considerations:

• Risk adjustment: All firms now have an added 5 years of risk to factor into their approach to sanctions compliance. The change may require firms to adjust internal sanctions policy by, for example, maintaining records for at least 10 years. 
• Retroactive risk: As of June 2024, it was unclear whether OFAC and the US Department of Justice would retroactively apply the 10 years statute of limitations to violations that remain within the previous 5 year limit. 
• Russia focus: Given that the new statute of limitations was introduced to support the US’ Russia sanctions programme, it is likely that the US government will maintain a strong focus on the application and enforcement of Russia-related sanctions for the foreseeable future. Obviously this focus should not undermine firms’ treatment of other types of global sanctions risk. 
• Due diligence: Firms that have not been retaining sanctions compliance data for longer than 5 years should adjust their approach to customer due diligence (CDD) to account for the extended risk period. Business data from the past 5 years should be reviewed as a priority. 
• Global adjustment: The US’ position as a global sanctions leader suggests that other Western governments may now make similar changes to their own statute of limitations regulations. 

Overcoming Sanctions Challenges

The US Justice Department recently hired 25 new prosecutors to support its investigations into Russia sanctions violations. The government’s emphasis on enforcement underlines the need for firms to tighten their sanctions compliance performance by putting the right customer due diligence and sanctions screening solutions in place. 

Ripjar’s Labyrinth Screening platform helps firms meet the challenges of a constantly evolving risk landscape. Labyrinth gives compliance teams the ability to screen against thousands of risk data sources including global sanctions lists, in real time, across multiple languages. Now featuring the cutting-edge AI Risk Profiles and AI Summaries tools, Labyrinth Screening supercharges the screening process, harnessing the power of AI to extract only the most relevant customer data and build clear, concise summaries of each customer’s risk.

China Sanctions Update: What You Need to Know

China’s economic and political ambitions often prompt concerns that Western governments will impose sanctions in response to violations of international law. That possibility is particularly worrying for Western businesses because of the significant market disruption they would cause. China is a major trading partner to the West: the UK, US and EU operate at a trade deficit with China, with the UK importing £63.6 billion of Chinese goods in 2021, the US importing $450.4 billion, and the EU €472 billion. With so many Chinese-manufactured goods consumed in the West, the impact of any new sanctions is hard to predict.  

Chinese diplomatic relationships also complicate the sanctions landscape. President Xi Jinping’s expression of support for the Russian invasion of Ukraine in 2022, for example, created speculation that China would follow Russia’s lead by attempting to impose its rule on neighbouring Taiwan – an outcome that would force Western governments to take action. 

While many Western countries currently implement China sanctions programmes, a China-Taiwan conflict would lead to fresh rounds of penalties, and force companies around the world to adjust their sanctions screening solutions in order to comply. China’s response to new sanctions will also be significant. Xi Jinping’s government recently established its own international sanctions programme, with measures that affect a range of Western individuals. 

Many firms were caught off-guard by the swift (and ongoing) implementation of sanctions against Russia. To help your firm be ready to react to any emerging risk, we’ve put together a guide to the current state of play on the China sanctions landscape.

China Sanctions: Global Overview

Western governments have imposed sanctions against China in response to a number of recent international incidents, including espionage activities and human rights violations. Key global China sanctions programmes include:

United States

Most of the US’ current sanctions against China were imposed during the Trump administration in response to Chinese espionage activities and human rights abuses. Those sanctions included a 2018 ban on US agencies using Huawei products, and targeted sanctions against Chinese officials in response to the repression of Uyghur Muslims in 2020. In that year, the US also sanctioned Hong Kong and Chinese officials for undermining democracy in Hong Kong. 

In 2022, the Biden administration imposed sanctions against Chinese businesses for supplying technology to Russian military networks in the conflict against Ukraine. The ban applies to advanced computing and semiconductor technology. 

United Kingdom 

In 2021, the UK imposed sanctions against China for the first time in response to human rights violations against minority Uyghur Muslims. The sanctions targeted the Xinjiang Productions and Construction Corps, and 4 Chinese officials. 

Canada

In coordination with other Western allies, Canada imposed sanctions on China in 2021 in response to its treatment of the Uyghurs. Canada’s China sanctions programme includes a ban on the export of sensitive technologies, and imposes investment and travel bans.

The European Union

The EU has responded to China’s crackdown on Uyghur Muslims with the imposition of new economic sanctions in 2021. The sanctions targeted four Chinese officials and introduced export bans on technologies that could be used to conduct surveillance activities on the minority group.

Recent Changes to China Sanctions

The most recent global sanctions against China have broadly focused on addressing espionage and China’s ongoing support for Vladmir Putin’s invasion of Ukraine. The measures have typically been led by the US. 

• In 2023, the US issued sanctions against Spacety China for providing the Russian military with satellite surveillance imagery of Ukraine, The US also sanctioned Chinese companies for providing technology to Iranian drone manufacturers which, in turn, supplied the Russian military. 
• Following incursions by Chinese spy balloons into US airspace in February 2023, the US sanctioned several Chinese aviation and technology companies. The sanctions banned the export of parts and technologies, including valuable computer chips, from the US. 
• In April 2023, the US also imposed sanctions on entities within China for supplying chemicals used in the production of fentanyl by Mexican drug cartels. 
• In May 2023, the EU proposed a new sanctions package against 7 Chinese entities in response to their support for the Russian invasion of Ukraine. 

China’s Sanctions Programme

It’s important to remember that China has also implemented its own sanctions programme to counter Western measures. China sets out its sanctions targets in the Unreliable Entity List (UEL), which was introduced in 2019 and is administered by the Ministry of Commerce (MOFCOM).  

China has designated numerous Western targets on the UEL, focusing predominantly on US, UK, EU, and Canadian politicians. Recent designations on the UEL followed Western sanctions imposed in response to the Hong Kong democratic protests and the oppression of Uyghur Muslims, but China has signalled that it may expand its measures to counter new geopolitical pressures. 

In 2022, China imposed sanctions against a number of Taiwanese officials following a visit by US House Speaker Nancy Pelosi, and followed up in 2023 with a second round of sanctions, which included Taiwan’s de-facto ambassador to the US. There are also indications that China will retaliate against US tech sanctions by placing sanctions on the export of certain technical components alongside some biotechnology.  

The Future of China Sanctions

Xi Jinping’s support for the war on Ukraine will continue to have a significant effect on China sanctions programmes. In addition to the EU’s proposed sanctions, it is likely that the US will broaden its ban on the export of technologies to China, with a continuing focus on the export of microchips and semiconductors. The US may also broaden the scope of sanctions to more Chinese business entities, to capital flows into China, and to other Chinese industries, including biopharmaceuticals and medical software, both of which rely heavily on US intellectual property. 

While the US typically has the capacity to act unilaterally against China, it is likely that other countries, including the EU, will adjust their sanctions posture depending on the outcome of geopolitical events – including the war in Ukraine, and the Chinese government’s treatment of Taiwan.

Taiwan

China’s position on Taiwan will be a significant factor in any future Western sanctions. While Taiwan has been governed independently since 1949, China has made clear that it intends to eventually bring the island under its full administrative control. To that end, China has engaged in recent actions to emphasise that objective, including military provocations against Taiwan and its Western allies, and issuing sanctions against high profile individuals who undermine China’s claim. 

Any escalation of those actions may lead to conflict between China and Taiwan, and would force Western governments to impose new sanctions. In the wake of the coordinated action against Russia, it’s likely that new sanctions against China will be severe, and have a similar impact on Western businesses, affecting much of the industrial landscape and creating a significant new compliance burden. 

In the event of a China-Taiwan conflict, firms will have to keep pace with governments in order to avoid penalties. To mitigate risk, it’s a good idea to begin compliance preparations now, rather than waiting until sanctions become a reality. Practically, this means that firms should closely monitor geopolitical developments concerning China and Taiwan, and review current levels of risk exposure, including supply chain and third party risks. Similarly, firms should update their sanctions screening solution to capture emerging risk factors, with particular attention to adverse media searches and multilingual name screening capabilities. 

Screening Solutions

Given the obligations that China sanctions impose, it’s vital that firms consider the specific screening challenges of hypothetical targets. While firms should screen regularly for updates to official sanctions lists, there are other specific screening challenges, including: 

Multi-Lingual Screening

In order to detect China sanctions risk effectively, firms must be capable of capturing data written in Chinese characters. To that end, solutions should include multi-lingual and multi-script name matching capabilities, and account for the following factors: 

• Use of non-Latinate characters, for example: 习近平 (Xi Jinping).
• Transliteration of names from native to Western characters. 
• Use of Asian naming conventions, such as the reversal of first names and surnames, or approximations of anglicised spellings. 
• Misidentification of similar-sounding or similar-spelled names, and variant spellings.

Accounting for multi-lingual challenges means integrating a software solution with sophisticated screening capabilities and, ideally, recruiting compliance teams with the relevant language expertise. 

Adverse Media Screening

Emerging sanctions risks are often revealed by news and other media sources before they are officially implemented in government sanctions lists. Investigative journalists, for example, may expose evasion of China sanctions, along with the firms that facilitate that activity. 

With that in mind, to stay ahead of the compliance curve, and anticipate emerging sanctions risk, firms should focus on screening adverse media or negative news for stories that involve their customers, with searches taking in traditional screen and print media, along with websites, social media, forums, blogs and so on. Adverse media screening should have a global scope, including searches of domestic, Chinese, and global data sources, and firms should apply the same multi-lingual approach as they apply to other screening processes. 

Next Generation Screening

China sanction screening solutions should facilitate fast, efficient searches that minimise noise and false positives, and empower firms to make confident decisions. To achieve that goal, firms must integrate flexible technology that can manage the quickly evolving challenges of both the sanctions and adverse media landscapes. 

Ripjar’s Labyrinth Screening platform is capable of searching thousands of global data sources, combining official sanctions list screening with multi-lingual adverse media searches. Labyrinth searches in real time, in over 20 foreign languages, in order to provide meaningful, contemporary data in seconds, and inform strong, speedy decision making. Powered by next generation machine learning technology, Labyrinth also enables firms to extract the most relevant data points, building more accurate customer risk profiles while minimising false positive alerts.   

To learn more about China sanctions screening and compliance, contact us today

EU Russia Sanctions Update

Following the Russian invasion of Ukraine on 24 February 2022, Western countries, including the UK, the US, the EU, Canada, and Australia, imposed an unprecedented amount of sanctions against President Vladmir Putin’s regime. Those sanctions have included import and export bans, asset freezes, and travel bans, and focused on both degrading Russia’s ability to fund its military action and on punishing the individuals that fund it. Collectively, the global sanctions response against Russia has targeted hundreds of Russia entities, including banking and media organisations, and thousands of individuals, including military figures, politicians, and members of Putin’s elite inner circle. 

On 6 October 2022, the EU issued its 8th package of sanctions against Russia. The new sanctions followed Russia’s declared annexation of four Ukrainian regions, and Putin’s repeated threats to use nuclear weapons against Ukrainian forces. The new sanctions package generally broadens the scope of existing EU Russia sanctions, banning the export of a wider range of goods to Russia, targeting more members of Putin’s elite, and depriving Moscow of billions of euros in revenue. The UK joined the EU in imposing new Russia sanctions. 

Key measures from the EU’s latest Russia sanctions update include:

Ban on IT consulting, architectural, engineering, and legal services

While the EU had already sanctioned the provision of financial services to Russian entities, the new sanctions package extended that ban to include IT consultancy, architectural, engineering, and legal advisory services.

Crude oil price cap

While the purchase, import, or transfer of crude oil products originating in Russia was banned under the EU’s 6th sanctions package, under the 8th package the EU has banned the maritime transport of those products – subject to a price cap. Ths means that EU countries may now trade Russian oil with third countries as long as the price of that oil remains below a price cap set by the European Council.

New import and export bans

The EU has expanded its import bans to Russian iron, steel, jet fuel, plastics, machinery and appliances, vehicles, ceramics, textiles, footwear, jewellery, and certain chemical products. The new import restrictions are estimated to be worth around €7 billion. 

The 8th sanctions package also expands export bans, with a focus on firearms, military goods and technology, and other products that could be used to develop Russia’s defence sector or fuel Putin’s aggression against Ukraine. The export ban specifically targets:

• Goods and technologies with potential military use, including semiconductors, electronic integrated circuits, certain chemical substances and nerve agents.
• Small firearms, and goods with no practical use other than torture, punishment, or degrading treatment.
• Aviation products including certain oils, tyres, and brake pads. 
• Products that could enhance Russian industrial capacities, including certain types of coal.

RMRS Ban

The EU has applied a transaction ban to the Russian Maritime Register of Shipping (RMRS), which carries out classification and inspection activities of Russian and certain non-Russian ships. From 8 April 2023, any Russian vessel certified by the RMRS will also be banned from accessing EU ports and locks.

Crypto ban

The EU has tightened its existing restrictions on Russian crypto assets by issuing a complete ban on all crypt-asset accounts, wallets, or custody services to Russian customers. The ban previously only applied to assets worth more than €10,000.

Sanctions expansion to Kherson and Zaporizhzhia oblasts

The EU has expanded its trade and investment ban to the non-government controlled areas of Ukraine’s Kherson and Zaporizhzhia oblasts. The ban previously only applied to the non-government controlled areas of Donetsk and Luhansk oblasts. The expansion follows Putin’s order that Russian armed forces enter those areas.

Russian asset freezes

The EU has expanded the list of individuals subject to asset freezes, with two new designations: 

• PJSC Kamaz, a Russian military and vehicle manufacturer
• The National Settlement Depository, Russia’s central securities depository

The EU has also introduced a mechanism to freeze the assets of persons that facilitate Russia sanctions evasion.

Sanctions Impact

The EU’s 8th package of Russia sanctions demonstrates the bloc’s commitment to maintaining pressure on Vladmir Putin’s regime while the conflict in Ukraine is ongoing, and  requires firms within the EU to adjust their customer screening and monitoring solutions to account for new designations.

In practice, this involves collecting and analysing a diverse range of customer data, including sanctions list and watchlist data, and information from media sources from around the world. The Russia sanctions landscape evolves rapidly and, as revealed by European Commission Chief Ursula von der Leyen, the EU is already discussing a 9th package of sanctions “to hit Russia where it hurts to blunt even further its capacity to wage war on Ukraine”. 

Given the scope of the Russia sanctions challenge, it is important to implement an automated screening solution with the power to manage vast amounts of customer data, and with the flexibility to adapt to evolving compliance requirements. Ripjar’s Labyrinth Screening platform is designed for exactly that purpose: integrating cutting edge machine learning technology, Labyrinth is capable of searching customer names against thousands of data sources, including sanctions lists, watch lists, and adverse media in over 20 languages. Labyrinth delivers real time results, and screens on an ongoing basis, enabling you to generate more accurate customer risk profiles, and know as soon as possible when that risk changes.

To learn more about Russia sanctions
compliance screening, contact us today.

UK Sanctions: Everything You Need to Know

As an influential global power, the UK imposes economic sanctions in order to punish wrongdoing, maintain peace, and achieve foreign policy goals. UK sanctions are developed, implemented, and enforced by a number of governmental organisations, and the names of their relevant designated targets are featured on sanctions lists. UK entities are typically forbidden from doing business with sanctions targets and must check the UK sanctions list to ensure that they are not violating the law. UK economic sanctions typically consist of prohibitions on trade and transactions in general, investment, and business relations, and may target entire countries, organisations, or individuals. 

The UK’s sanctions landscape changes constantly, with new designations added and withdrawn regularly. In February 2022, for example, along with other Western countries, the UK moved quickly to impose what Prime Minister Boris Johnson called “the most severe package” of economic sanctions against Russia, with businesses expected to comply with new restrictions as they were introduced. Similarly, the UK recently introduced a new global human rights sanctions regime (GHSR), intended to target individuals around the world (rather than entire countries) that commit serious breaches of human rights. 

UK sanctions are implemented under the authority of the Sanctions and Anti-Money Laundering Act 2018. Given the complexity of the regulatory regime, it is important that businesses understand how these sanctions work, and how to remain compliant in a changing regulatory environment. 

Who Imposes Sanctions in the UK?

The following government departments and bodies are responsible for the management and implementation of the UK’s sanctions regime: 

The Foreign, Commonwealth and Development Office (FCDO): The FCDO, formerly known as the Foreign and Commonwealth Office (FCO), is responsible for developing and implementing the UK’s sanctions policy. That work includes setting out all international sanctions regimes and their designations. The FCDO is also responsible for negotiating the UK’s international sanctions, which means working with legal officials and economists to devise the substance and duration of restrictive measures against foreign targets, while considering their impact on UK interests.

The Office of Financial Sanctions Implementation: OFSI is the department of HM Treasury tasked with ensuring that sanctions are implemented correctly and that they “make the fullest possible contribution to the UK’s foreign policy and national security goals”. In practice, OFSI is responsible for enforcing the country’s sanctions, including assessing breaches of regulations, and imposing monetary penalties for violations. OFSI maintains and publishes sanctions guidance and resources for UK firms in order to promote regulatory compliance. 

Department for International Trade: The DIT maintains a special unit known as the Export Control Joint Unit that is responsible for implementing the trade sanctions and embargoes set out in the UK sanctions regime. 

Department for Transport: The DfT is responsible for the implementation of transport sanctions. In practice this relates to the movement of ships and aircraft in jurisdictions controlled by the UK. 

Home Office: The Home Office is responsible for implementing travel bans against countries and individuals designated by UK sanctions. 

HM Revenue and Customs: HMRC is responsible for enforcing breaches of trade sanctions, including imposing monetary penalties against those responsible. 

National Crime Agency: The NCA works with other UK authorities and government departments to investigate and enforce breaches of the country’s sanctions. 

Types of UK Sanctions 

UK sanctions vary by their targets and by the severity of the issue they are intended to address. The most common types of UK sanction measures include: 

• Asset freezes: Targeted asset freezes may be deployed against individuals and entities, blocking access to funds and other economic resources such as property. 
• Market restrictions: The UK may restrict access to financial markets and financial services for sanctions targets. This type of restriction may be applied as embargoes, investment bans, capital access restrictions, restrictions on the provision of advisory services, and directions to cease business relationships or activities.
• Directions to cease business: UK authorities may direct specific types of business or person to cease all business with sanctions targets. 
• Travel bans: The UK may impose travel bans on foreign sanctions targets or restrict travel to and from a target country.  

Sanctions Risks in the UK

Most individuals and companies seek to adhere strictly to UK sanctions in order to avoid aiding criminals and exacerbating international conflicts and human right abuses. However, persons that fail to comply risk criminal prosecution, financial penalties, and significant reputational damage. 

HM Treasury may impose sanctions penalties following an investigation of a violation in which wrongdoing is found. Criminal punishments for sanctions violations include a maximum of 7 years imprisonment. Exact financial penalty amounts vary by the severity of the offence and are imposed under the following criteria:

• Monetary penalties for sanctions violations may be imposed up to a value of 50% of the breach, or up to £1 million (if that amount is greater than the value of the breach).
• OFSI takes the facts of individual cases into account when deciding on penalty amounts and may apply reductions where cases have been voluntarily disclosed. 

How to Comply with UK Sanctions

UK firms must be ready to screen new customers against the relevant sanctions lists both at onboarding and throughout the business relationship. In practice, this means matching new and existing customer names against the UK sanctions list, which is updated regularly with new designations. 

It is important that the sanctions screening process is conducted thoroughly, efficiently, and accurately, and captures the level of compliance risk that each customer presents. With this in mind, UK firms must ensure their sanctions screening solution is supported by the following measures and controls: 

• Identity verification: UK firms must establish and verify their customers’ identities in order to match them to sanctions designations with a high degree of accuracy. Firms should also establish beneficial ownership of companies where that is unclear.
• Transaction screening: Firms must screen customer transactions for signs of suspicious activity, including transactions with counterparties that feature on the UK sanctions list.
• Adverse media screening: News stories may indicate that a customer has been sanctioned or is likely to be sanctioned before that information is confirmed by official sources. Accordingly, firms should screen foreign media sources for stories that indicate a customer’s sanctions status has changed. 

Next Generation Sanctions Screening

The Russian invasion of Ukraine, and the subsequent package of sanctions imposed against Vladimir Putin’s regime demonstrate just how quickly the UK sanctions landscape can change. While the first round of Russia sanctions was announced in February 2022, new measures quickly followed throughout March, April, June, and July. Adding to the challenge, the UK government introduced new sanctions enforcement regulations, further increasing the compliance burden on UK firms. 

To achieve UK sanctions compliance, firms should implement a screening solution that meets the unique challenges of their environment. Ripjar’s Labyrinth Screening solution has been designed with that challenge in mind, integrating next-generation name matching software capable of analysing real time data from global sanctions and watch lists, and from adverse media sources across 21 languages. Our solution utilises artificial intelligence to make balanced risk management decisions about client profiles – and to ensure that you are informed whenever new risks emerge.

To learn more about how Labyrinth Screening can support your UK sanctions compliance and global sanctions risk management, get in touch with Ripjar today.

Russia Sanctions UK: OFSI Introduces Stricter Enforcement Measures

The UK’s Office of Foreign Sanctions Implementation (OFSI) has introduced stricter economic sanctions enforcement measures for UK firms. The measures were set out in the Economic Crime (Transparency and Enforcement) Act 2022 which was fast-tracked to Parliament in March 2022 in response to Russia’s invasion of Ukraine. 

The sanctions enforcement measures included in the Economic Crime Bill will bring the UK sanction regime into closer alignment with US sanctions programmes and will, according to OSFI Director Giles Thomson, ‘strengthen OFSI’s ability to take appropriate enforcement action against persons…that fail to ensure they are not dealing with sanctioned entities’. 

With the new rules now in effect, it is crucial that UK financial institutions understand their sanctions compliance obligations. 

OFSI Sanctions Enforcement Powers 

The rules set out in the Economic Crime Act concern sanctions enforcement and monetary penalties for persons that breach sanctions regulations. As of 15 June, 2022, the following measures are in effect: 

Strict liability: Breaches of UK sanctions regulations will be evaluated on a strict liability basis regardless of an individual’s intent or knowledge that they were in violation. 

Proportionate penalties: OFSI has the power to impose monetary penalties for sanctions breaches ‘proportionately and effectively’ and where it is ‘in the public interest to do so’. The rules emphasise the importance of self-disclosure and attempts to prevent sanctions breaches as mitigating factors in any subsequent punishment.  

Publication of breaches: OFSI has the power to make the details of sanctions breaches public where a monetary penalty has not been imposed. 

Penalty reviews: Senior UK officials may now conduct reviews of monetary penalties for sanctions breaches, in addition to UK ministers. 

The Changing Sanctions Landscape

The OFSI sanctions enforcement changes are designed to make the UK’s sanctions regime more impactful and responsive to global threats. 

Prior to 15 June, OFSI was not able to prosecute sanctions breaches unless there was ‘reasonable cause to suspect’ that the person breaching the rules knew that they were doing so. This meant that many sanctions violations went unpunished as a result of a lack of supporting evidence – and allowed sanctions targets to continue to perpetrate illegal activity. 

Similarly, where a sanctions breach previously did not result in a monetary penalty, OFSI was unable to release details of the persons responsible to the public. Under the new rules however, firms will still risk reputational damage for sanctions violations even if they are not punished financially. 

Finally, by extending the power to review sanctions penalties to senior officials, OFSI intends to speed up the UK’s sanctions enforcement process and ensure that the measures remain a useful diplomatic deterrent. 

The fast-tracking of the Economic Crime Act, and its relevant sanctions enforcement measures, reflects the UK’s attitude to ongoing Russian aggression in Ukraine, and the threat that poses to regional and global stability. The UK’s reputation as a financial destination for Russian oligarchs, including members of President Vladimir Putin’s elite inner circle, meant that a huge amount of Russian assets were held in UK banks and financial institutions when the invasion began. With that in mind, UK sanctions against Russia represent a significant part of the collective global response to the invasion, and the 2022 enforcement measures a way for OFSI to act more decisively against organisations and individuals that take action to prolong the hostilities. 

UK Business Challenges

OFSI’s new sanctions rules, and in particular the introduction of strict liability, require UK businesses to review their sanctions screening solutions carefully. In the context of Russia’s war with Ukraine, and the global sanctions landscape, new designations are added and withdrawn from watchlists regularly, which means UK firms must ensure that their solutions are updated continuously to ensure they are not doing business with the UK’s Russian sanctions targets, or any targets on the UK government’s autonomous sanctions watchlist. 

Given the urgent need for sanctions compliance, UK firms must implement a screening solution capable of collecting and analysing vast amounts of customer and transaction data, and of reacting to a constantly changing regulatory environment. In practice this means:

• Conducting suitable due diligence to establish customer identities and build accurate customer risk profiles.
• Screening customer transactions for suspicious activity.
• Screening customers against relevant sanctions lists and watch lists.
• Screening customers for involvement in adverse media stories from around the world.

With that purpose in mind, Ripjar’s Labyrinth platform incorporates cutting-edge screening technology, including multi-lingual name matching tools, automated data management, and real time updates from global sanctions watchlists, including the UK sanctions list, the US OFAC sanctions list, and the EU sanctions list. 

To find out more about how our next generation screening technology helps businesses achieve sanctions compliance, get in touch today

The UK Economic Crime Bill and Russia Sanctions

Following Russia’s invasion of Ukraine, the UK joined the international community in condemning Vladimir Putin’s regime and in issuing an unprecedented package of severe economic sanctions. While its international actions have been swift and significant, the UK government has also announced that it will be taking major steps with domestic legislation to detect and prevent members of Russia’s elite – so-called ‘oligarchs’ – from misusing the economic system.  

To that end, Prime Minister Boris Johnson has brought forward plans for the UK’s new Economic Crime Bill, in order to enable financial institutions and authorities to target Russian oligarch finances held in UK banks. Prime Minister Johnson said that the bill would ensure that President Putin and his supporters would have “nowhere to hide” their illegal money.

What is the Economic Crime Bill?

The Economic Crime (Transparency and Enforcement) Bill is a long-awaited legislative measure intended to target the anonymity of money launderers that exploit the UK’s financial system. Britain’s legal and financial community has urged the government to implement the Economic Crime Bill for years. First drafted in 2018, the bill was delayed as new priorities emerged: the invasion of Ukraine changed those priorities, prompting the UK government to fast-track the legislation, along with additional financial measures to follow in coming months. 

The Economic Crime Bill was introduced into the UK’s Parliament on 1 March 2022. The new version of the bill contains the following legislative measures:

Overseas Entities Register

The Economic Crime Bill introduces a UK register of overseas entities that own property in the UK. The register will include information on the beneficial owners of those entities. UK companies are already required to provide beneficial ownership information to a register of People with Significant Control (PSC) and the new rules are intended to create parity for foreign entities. 

The register will be retroactively applicable, extending to properties bought by foreign persons up to 20 years ago in England and Wales, and to properties bought since December 2014 in Scotland. Noncompliance with the regulations may result in fines of up to £500 per day, and prison sentences of up to 5 years.

Unexplained Wealth Orders

Unexplained Wealth Orders (UWO) require their targets to explain the source of their assets, including their properties, to the authorities. Where that explanation is unsatisfactory or inadequate, the authorities may assume the asset was obtained unlawfully, and confiscate it from its owner. 

UWOs were introduced in the UK in January 2018 with the goal of addressing foreign criminals laundering money through property ownership. However, UWOs have proved difficult to enforce: only 9 UWOs have been issued since their introduction, with the most recent case ending in defeat for the UK’s National Crime Agency (NCA) at a cost of £1.5 million to the taxpayer. No UWOs have been issued since 2020. 

The Economic Crime Bill has been designed to make UWOs easier to issue and enforce. Under the new rules, law enforcement authorities: 

• Will have a longer period of time in which to review materials presented in response to a UWO. 
• Will incur lower legal costs if an UWO prosecution is ultimately unsuccessful. 
• Will be able to issue UWOs to the directors, officers, and trustees of a target asset, making it easier to address property ownership hidden behind foreign corporate structures. 

Sanctions Enforcement

The Economic Crime Bill also reforms the UK’s sanctions enforcement rules by introducing strict liability for noncompliance. Under the current system, the Office for Financial Sanctions Implementation (OFSI) can only prosecute sanctions breaches if it has ‘reasonable cause to suspect’ that the person involved knew they were breaking the rules. New measures in the Economic Crime Bill will introduce a ‘strict civil liability test’, enabling OFSI to impose financial penalties for sanctions breaches regardless of any awareness of wrongdoing. 

The introduction of strict liability will make it easier for OFSI to impose fines, and punish sanctions noncompliance. The new rules will also allow OFSI to publicly release the names of organisations that breach sanctions but that do not receive a fine.

Economic Crime Bill: Compliance

Given the current escalation in sanctions activity against Russia and against Russian oligarchs and politicians, it is vital that firms stay ahead of their regulatory responsibilities. In practice, this means implementing an effective risk management process that enables fast, efficient client name matching. 

Ripjar’s risk screening solution integrates next generation name-matching software to ensure you maximise true positive hits on global sanctions and watchlists, and minimise false positives, across a range of language systems and character sets. Powered by machine learning technology, our solution includes advanced adverse media monitoring tools capable of analysing a spectrum of news sources across 21 languages in order to ensure you are informed as soon as your client’s risk profile changes. 

Give yourself the best opportunity to understand and mitigate risks early: speak to Ripjar about how our screening technology can deliver significant commercial advantages.

Get in touch to learn how Ripjar can help your compliance with the Economic Crime Bill.