Companies Need to Prepare for U.K. Sanctions Regime Rollout, Lawyers Say

According to the proponents of compliance with sanctions, companies should be informed of likely changes in the UK sanctions regime as the end of the Brexit transitional period approaches.

Natural and legal persons in the United Kingdom had to pay compensation during the transitional period, which ended on 31 December. After the transitional period, the United Kingdom will be able to implement its own sanctions regime.

On Thursday, Britain and the EU announced an agreement on their future post-Brexit relationship, covering issues such as sharing commercial information on security and law enforcement databases.

According to lawyers advising companies, after the transitional period, some companies will have to deal with at least three different sanction regimes – the United Kingdom, the United States and Europe – which will make compliance complex.

Businesses need to acknowledge the threat of disagreement and ensure that their oversight reflects what is happening under the British regime with regard to US and EU sanctions, said Chris Warren-Smith, a partner at the law firm Morgan, Lewis & Bockius LLP.

The agreement between Britain and the European Union took place on Thursday, a few days before the end of the year. It gives Britain a lot of freedom to deviate from EU rules and to conclude free trade agreements with other countries. Photo: Paul Grover / Pool

Where is it all happening?

The British Government is in the process of laying the legal basis for its own sanctioning arrangements pending the transition. The United Kingdom adopted the Anti-Money Laundering and Sanctions Act in 2018, which forms the basis for the imposition of sanctions by the government itself. The sanctions would take the form of an asset freeze, a visa ban or trade sanctions.

The Foreign, Commonwealth and Development Office, the agency that determines the UK’s sanctions policy, has, according to the Financial Sanctions Enforcement Authority, which implements and enforces UK financial sanctions, already laid down rules for more than 30 sanctioning regimes.

Although these provisions are supposed to have essentially the same political impact as the existing regulations, it should not be assumed that they are identical, the enforcement officer said in a blog post.

Under the new system, in July the British Government imposed sanctions on 49 individuals and organisations, including dozens of Russian and Saudi nationals, for alleged human rights violations.

What’s the next step?

The consolidated lists of financial penalty objectives maintained by the FOSI will be published on 31 December. December updated to reflect all financial designations made under UK rules, the authority said. Last week, the agency published a draft document to help companies deal with changes to the consolidated list, particularly when conducting automated reviews of sanctions.

According to the FOSI, individuals and companies may expect a number of changes in different areas as a result of the update.

What should companies do?

While the UK sanction list will approve much of the EU list, companies will need to be alert to changes in the UK that could conflict with sanction regimes outside the UK, Warren-Smith said. They have to be proactive, he said.

This may include process assessment and software control for sanction audits. It also means that we have to look at commercial activities, such as those relating to Iran and Cuba, where, according to Warren-Smith, the US and the EU have very different approaches.

According to Mr Warren-Smith, it is important that companies identify potential violations of UK sanctions as quickly as possible and report them to the regulators so that they can coordinate any enforcement action.

The FOSI stated that it would assess non-compliance on a case-by-case basis.

Anne Bradshaw, a partner at Peters & Peters Solicitors LLP, a London-based criminal and economic sanctions consulting firm, says companies also need to make sure they have a valid licence. Companies operating across Europe may need to apply for multiple permits for the same activity, she said.

The vast majority of authorisations issued by OFSI under EU law remain in force until they expire or are revoked, according to the Agency. The FOSI also reminded companies and individuals to contact the agency if they have any questions about the validity of their licences.

According to Mrs Bradshaw, licensing decisions in the United Kingdom may become much more unpredictable and immediately after the transitional period the processes may take longer than expected.

The UK may take a completely different view on which activities can and cannot be permitted from the point of view of EU Member States, she said.

Send an e-mail to Mengqi Sun at [email protected].

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