The UK government is reported to be investigating 37 UK-affiliated companies over possible violations of Russian oil sanctions.
The BBC reported that, as of August this year, the 37 firms were being probed while investigations into another 15 companies had already been concluded. So far, there have been no fines imposed or prosecutions brought against any of those companies investigated, which are believed to include maritime insurance firms and ship owners, operators and brokers.
Sanctions on Russia include a ban on dealing with firms exporting Russian crude oil priced at more than $60 a barrel. Some companies are thought to be dodging the price cap by charging no more than $60 for a barrel of oil but setting higher than normal fees for other services.
The report is likely to place further pressure on the UK’s Office of Financial Sanctions Implementation (OFSI), which has been criticised for not enforcing the UK’s sanctions regime as effectively as possible. While the UK government is alert to the possibility of companies looking to exploit loopholes in the sanctions regime - and is looking to close those loopholes - the UK sanctions regime is not perfect.
Challenges
The UK’s sanctions regime aims to be robust when it comes to proactive enforcement and the scrutiny of even the most established sectors, such as legal services, where breaches may be more complex and less obvious.
The fact that these alleged breaches have occurred highlights both the challenges in enforcing sanctions across all business sectors and businesses’ need to ensure they are fully compliant with them. For companies – especially those in high-risk sectors – these investigations underline the importance of ensuring that due diligence and compliance procedures are always fit for purpose. The investigations illustrate a trend among some jurisdictions to increase scrutiny on particular industries – even some that were previously considered low-risk on the sanctions landscape.
Oil is an area that is particularly susceptible to sanctions evasion for a number of reasons. Global demand, the large volumes and financial amounts involved, the multinational supply chains, and intermediaries who may be willing to assist in circumventing sanctions prohibitions are all factors that may make the oil sector vulnerable to sanctions breaches.
As oil is a critical commodity worldwide, the enforcement of sanctions on the oil sector should ideally be consistent across jurisdictions. This, however, is often difficult, if not impossible, to achieve.
