New regs mean range of UK businesses now risk fines for not reporting ‘sanctioned’ clients

New regulations that have now come into force mean that a range of businesses and professions could face significant financial penalties if they don’t inform the UK authorities that they are acting on behalf of clients who are subject to international financial sanctions, HM Revenue & Customs reminded business owners in a website update this week. 

The UK tax authority has been reminding those in the tax advice, trusts, corporate services, legal and similar professions about the new rules for some months, ahead of the new European Union Financial Sanctions (Amendment of Information Provisions) Regulations 2017 coming into force.

According to a 32-page guidance document, published by the UK’s new sanctions watchdog, the Office of Financial Sanctions Implementation, the fines for those found to have failed to report their sanctioned clients to the UK authorities have been set at £1m or 50% of the “estimated value of the funds or resources” in question, whichever is greater.

(The full text of the legislation may be viewed by clicking here.)

HMRC also has a document for those who are interested in learning more about the new sanctions, which includes information on accessing the lists of individuals who are currently considered to be officially “sanctioned”, and thus might best be avoided as clients. This 73-page document may be viewed by clicking here. 

Commentators on the new regulations have noted that such monetary penalties are in wide use in the US but a relatively new phenomenon in the UK, where action, when taken, tended to be in the form of a warning letter or formal prosecution.

“The proposals within the 2017 Act certainly suggest a stricter stance toward sanctions enforcement, and will bring the UK sanctions enforcement regime closer to the US model,” observes Karim Bouali, a partner at the London law firm of CCG Legal, in an analysis of the new regulations on the firm’s website.

“The OFSI will be keen to flex its new muscles as it builds internal expertise toward a new [US Office of Foreign Assets Control]-style of enforcement in the UK.

“General counsel and in-house counsel, financial crime, as well as risk and compliance teams need to be aware of the OFSI’s new powers, and must be prepared to engage with them in the near future.

“This means ensuring risk assessments and sanctions compliance programmes are upgraded to reflect the new civil penalties, cognisant of the lower civil burden of proof.

“Companies will need to more carefully monitor with whom they transact and who transacts on their behalf.

“The OFSI’s new powers herald a trend toward increasing regulatory pressure upon business conduct. This will place a premium on companies to bolster their compliance and risk-based policies and procedures to meet this challenge.”

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