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OFSI Enforcement: Latest Action Explained

Author: Dr. Angelika Hellweger  28 September 2022
2 min read

Angelika Hellweger’s most recent Rahman Ravelli Sanctions Monitor piece details the latest enforcement action by the Office of Financial Sanctions Implementation.

On 26 April 2022, OFSI (the Office of Financial Sanctions Implementation) imposed a £30,000 monetary penalty on the UK-registered company, Hong Kong International Wine and Spirits Competition Ltd (HKIWSC) for contravening regulations 3(1) and 6(1) of the Ukraine (European Union Financial Sanctions) (No.2) Regulations 2014 (the UK Regulations) and articles 2(1) and 2(2) of the Council Regulation (EU) No 269/2014 (Ukraine Misappropriation and Human Rights) (the EU Regulation).

The breaches in this case occurred between 2017 and 2020. OFSI has now published details about this enforcement case, as HKIWSC did not succeed in challenging the ministerial review in August 2022.

Although HKIWSC cooperated fully with OFSI during the investigation, a penalty reduction discount could not be applied as the company did not make a voluntary disclosure. The investigation started following a third party report.

The Case

Between 2017 and 2020, HKIWSC was said to have received three payments and 78 wine bottles from Massandra, the State Unitary Enterprise of the ‘Republic of Crimea’ Production-Agrarian Union – which is a listed entity - for entry into competitions. HKIWSC received £3,919.62 in tangible economic resources. Furthermore, the company is said to have provided publicity (which is considered an intangible economic resource) to Massandra.

In considering the case, OFSI stated that:

  • UK financial sanctions apply to all legal entities established under UK law (including their branches) and other entities operating within the UK.
  • All UK companies must ensure they comply with UK financial sanctions that are in force, irrespective of where their activities take place.
  • Foreign companies operating in the UK must ensure their operations within the UK comply with the applicable UK financial sanctions.

It added that:

  • Companies should consider their potential sanctions risk exposure broadly.
  • Companies should pay attention to the financial sanctions imposed by the UK, as well as the UN, and those that are subject to them.
  • Financial sanctions apply to all sectors. Companies cannot solely rely on the banking sector to conduct due diligence on their behalf.
  • Companies need to ensure they have put in place sufficient measures not to breach financial sanctions.
  • For this purpose, companies should assess all aspects of the business, including the international scope of their activities (global customers, high-risk regions), appropriate due diligence measures and the management of potential risks of breaching financial sanctions.
  • They should identify whether any companies or individuals they are conducting (or are considering conducting) business with appear on the consolidated sanctions list or are owned or controlled by any listed persons.
  • The potential provision of intangible economic resources, including certain types of intellectual property, is prohibited in the same way the provision of tangible resources is.
  • OFSI values voluntary disclosure and, if done by the person who has committed a breach, may be considered a mitigating factor when OFSI assess the case.

Conclusion

While the case does not involve huge amounts, the circumstances of it and OFSI’s statements show that OFSI is starting to enforce more rigorously and is interpreting the legislation widely. The wide interpretation here is that OFSI holds the view that public relations, which are intangible, are considered as providing economic resources to a designated entity.

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Dr. Angelika Hellweger

Legal Director

angelika.hellweger@rahmanravelli.co.uk
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Angelika is a specialist in international, high-level economic crime investigations and large-scale commercial disputes. She has widely-recognised expertise in representing corporates and conglomerates in Europe, the Middle East, Africa and United States.

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