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The UK’s sanctions landscape changes constantly, with new designations added and withdrawn regularly.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.