This blog post provides an overview of the legal framework governing the enforcement of sanctions in the UK. It outlines the basis for liability regarding breaches of financial and trade sanctions and examines the potential penalties that may arise.
In summary, two regulatory frameworks are in place: civil and criminal. The civil framework imposes monetary penalties for violations of financial sanctions and compound penalties for breaches of trade sanctions. Conversely, the criminal framework establishes liability for breaches of sanctions, circumvention of trade sanctions, and violations of export controls, with potential punishments including imprisonment and fines.
UK financial sanctions can be imposed under the Regulations enacted by the Sanctions and Anti-Money Laundering Act 2018 (SAMLA). According to subsection (1)(a) of SAMLA, the Secretary of State has the authority to impose an asset freeze on designated individuals. An asset freeze is a broad prohibition on any dealings involving the funds or economic resources owned or controlled by the designated individual. The terms "funds," "economic resources," and "freeze" are defined in Section 60 of SAMLA.
An asset freeze and certain financial service restrictions extend to entities that are directly or indirectly owned or controlled by a designated person. These entities may not be designated themselves, nor will they appear on the government’s consolidated list of asset freeze targets; however, they remain subject to financial sanctions. The Office of Financial Sanctions Implementation (OFSI) provides general guidance that details the circumstances under which an entity is considered to be owned or controlled by another person.
Sanctions Regulations generally outline a series of prohibitions, such as asset freezes, along with positive obligations for specific parties, such as reporting requirements for those identified as "relevant firms."
All UK persons, which includes entities incorporated in the UK, are subject to UK sanctions obligations regardless of their location (SAMLA s.21). Consequently, they may be held liable for sanctions violations committed outside the UK.
Non-UK persons are also subject to UK sanctions concerning actions taken within the UK and the Isle of Man. Under English criminal law, a person can be liable for a criminal offense—even when outside the UK—if their conduct is intended to have effects within the UK, as established in Office of the King's Prosecutor, Brussels v Cando Armas (HL) [2006] 2 A.C. 1. Thus, UK authorities may pursue prosecution and extradition of non-UK individuals for such conduct, even if it occurred outside the UK.
It is important to note that the prohibitions established by financial sanctions are subject to exceptions and a licensing regime, which allows the Treasury, through OFSI, to grant licenses for actions that would otherwise breach sanctions.
