UK-linked firms are breaching Russian sanctions

Reports that the U.K. government is carrying out at least 37 investigations into businesses relating to Russia-related sanctions violations signifies that the Office of Financial Sanctions Implementation – the U.K.’s equivalent to OFAC – is starting to flex their enforcement muscles. Last month, OFSI issued their first civil penalty for Russian sanctions evasion, and while the fine was de minimus, it served to demonstrate that the U.K. now has a framework to penalize companies for sanctions violations.

A BBC report highlighted that the U.K. government had closed 15 matters without civil penalties, but this is fairly ordinary regarding sanctions investigations. Governments often have multiple tools they can use shy of penalizing firms, from putting the firm on notice with a cautionary letter to supporting financial regulators who may require changes or additional resources to a bank’s compliance program to continue doing business.

Like OFAC, OFSI is not the only game in town within the U.K. when it comes to enforcing sanctions regulations. If the conduct is egregious enough, prosecutors can pursue criminal charges against companies who violate sanctions. Even responding to subpoenas from OFSI or other authorities is very expensive, and its not unusual for legal bills to cost the same – and sometimes even more – than the penalty a firm might receive.

The takeaway here is that OFSI is now wading into enforcement territory, and we can expect a lot more sanctions enforcement actions from the U.K. in the near future.