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Companies are being Urged to Self-Report

Author: Zulfi Meerza  1 November 2023

The advice from OFSI and OFAC is outlined by Zulfi Meerza.

Sanctions enforcers in the US and UK are urging companies to report their unintended financial sanctions breaches, even though they are strict liability offences in both countries.

The heads of the UK’s Office of Financial Sanctions Implementation (OFSI) and the US Office of Foreign Assets Control (OFAC) told a legal industry conference in London that companies do not need to fear severe penalties if they self-report accidental sanctions breaches.

OFAC director Brad Smith said: “If people are acting in good faith, unless it involves circumstances of what we would describe as fairly egregious – i.e. wilful, grossly negligent behaviour – we probably aren’t going to be coming after you looking for a massive, hefty penalty.”

This sentiment was echoed by OFSI director Giles Thomson, who emphasised that the UK agency has a similar policy regarding self-reporting.

He added: “We’re not going to come after people with a sledgehammer who are seeking to do the right thing. We’re not gonna clobber people who have put in place appropriate due diligence.”

Brad Smith explained that OFAC wants companies that have mistakenly breached sanctions to report this to the agency so it can track down third parties that may have tricked businesses into committing a violation.

While breaching financial sanctions has been a strict liability offence in the US for a number of years, it only became one in the UK in 2022; under the Economic Crime (Transparency and Enforcement) Act 2022.

But while this means that the agencies do not have to prove that a person or business had knowledge - or suspected - that they were in breach of financial sanctions to bring an enforcement action, both directors told the conference that they do not tend to punish companies that unintentionally breach sanctions. Brad Smith explained that OFAC closes about 1,000 enforcement cases each year – and only a few dozen result in public enforcement action. Giles Thomson said that while OFSI’s annual total of completed cases is “in the low hundreds”, few result in a public fine or reprimand.

When persons subject to financial sanctions discover that they have - or might have - breached any prohibitions, it is imperative that they have a robust response strategy in place. This includes preparing a comprehensive self-report to OFSI as soon as practicable.

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Zulfi Meerza

Senior Associate Solicitor

zulfi.meerza@rahmanravelli.co.uk
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Zulfi’s in-depth expertise in corporate crime investigations, serious regulatory matters and complex commercial litigation makes him a logical choice to represent corporates, board members, senior business figures and high net worth individuals.

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