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New Year, New UK sanctions regimes

  • United Kingdom
  • Financial services disputes and investigations
  • Fraud and financial crime
  • Litigation and dispute management

06-01-2021

As of 11:00pm on Thursday 31 December 2020, the UK was no longer required to implement EU sanctions and the new UK sanctions regimes officially came into force under the Sanctions and Anti-money Laundering Act 2018 (the “Sanctions Act”). The regulations establishing these regimes apply in the whole of the UK, including in Northern Ireland.  A list of all sanctions regimes now imposed in the UK can be found here.

Who do the UK sanctions regimes apply to?

The UK sanctions regimes apply to:

  • any person in the UK
  • any UK citizen wherever they are located
  • any corporate entity operating in the UK
  • any corporate entity incorporated or constituted under the law of any part of the UK wherever located (including overseas branches of UK companies)

Key changes

The Office of Financial Sanctions Implementation (“OFSI”) issued a notice on 31 December 2020 to outline what changes have been made. At a high level, the key changes to be aware of are as follows:

  1. there is a new consolidated list of asset freeze targets which reflects designations that have been made by the UK (the “UK Consolidated List”)
  2. the new UK Consolidated List makes a number of changes such as the removal of 113 entries previously designated by the EU regulations who are no longer subject to asset freezes in the UK, the moving of some entries to other regimes, and the inclusion of aliases for certain entries already on the list
  3. the UK Freezing Orders asset freezing regime remains in place under the Anti-Terrorism, Crime and Security Act 2001
  4. OFSI now has a licence application process for licences to allow activity prohibited by UK financial sanctions. Further guidance can be found here
  5. OFSI has published a Bridging Document which has been designed to assist with processing the changes that have been made to the UK Consolidated List

What does this mean for you?

The introduction of the new UK sanctions regimes increases the sanctions compliance burden for organisations carrying out activities within or involving the UK. Whilst the new regulations broadly mirror those imposed by the EU, there are differences which organisations must be aware of (beyond simply different lists existing) and there is room for further potential divergence between the UK and the other key sanctions regimes, namely the EU and US, in the future.

Organisations falling in scope of the UK sanctions regimes must take steps to ensure that compliance with the new regimes is firmly embedded within relevant policies and procedures. As a minimum, organisations conducting business in the UK should screen against the new UK Consolidated List as the UK has already demonstrated that it will take steps to designate individuals or entities acting in contravention of its foreign policy objectives where it feels that it is necessary, even where such individuals or entities are not designated by the UN or the EU. In addition, organisations must be able to track and monitor developments in the new UK sanctions regimes as these developments are likely to be commonplace over the next 12 months and beyond (noting that guidance was issued on 4 January 2021 by OFSI in respect of the Libya regime, unauthorised drilling activities regime and the misappropriation of state funds regime).  Being able to react quickly to developments will be critical to maintain compliance.

The UK Government has made it clear that it is committed to its autonomous sanctions regime and co-operation with other international agencies and as a result we are likely to see OFSI becoming more active in terms of both its general implementation of the UK sanctions regimes and with respect to enforcement. In its 2019-2020 Annual Report, OFSI confirmed that between April 2019 and March 2020, it received 140 voluntary disclosures of potential sanctions violations related to transactions worth a total of £982 million. In recent years OFSI has also started to increase its enforcement activity, in order to demonstrate that it takes compliance with the UK sanctions regimes seriously and expects the same from those within its jurisdiction.

Similarly to the US sanctions regimes, it has also been predicted that the UK sanctions regimes will make use of General Licences to permit certain activity in specific circumstances which would otherwise require specific authorisation. The first General Licence has already been granted under Regulation 64 of The Russia (Sanctions) (EU Exit) Regulations 2019. This allows for payments to be made out of non-frozen funds for services provided at specific ports by the State Unitary Enterprise of the Crimean Republic “Crimean Sea Ports”, Gosgidrografiya, and Port-Terminal branches of the Crimean Sea Ports. The General Licence also allows persons to be reimbursed out of non-frozen funds for such payments. A full copy of the General Licence can be accessed here.

Other resources

For further information relating to what is covered by the new UK sanctions regulations, you can access the UK Finance Sanctions Statutory Instruments Review here.

In addition, multiple guidance documents have been published in order to assist with compliance with the new UK sanctions regimes, including specific guidance relating to each regime. These documents can be located on the UK Government website here.

For a country-by-country guide to sanctions, you can access the Eversheds Sutherland Global Sanctions Guide here.