Enhancing the US-UK Sanctions Partnership

The Directors of the UK Office of Financial Sanctions Implementation (OFSI) and the US Office of Foreign Assets Control (OFAC), Giles Thomson and Andrea Gacki, have announced, via a joint press statement¹, the details of the conclusion of a ‘multi-day technical exchange’ and an enhanced OFSI and OFAC partnership.

They noted that the partnership is “incredibly potent” and would further build on the aims of the US Department of the Treasury’s 2021 Sanctions Review, and support OFSI’s move to “a larger and more proactive organization.”

Key Elements of the Joint Statement

The statement provides valuable insight into OFAC and OFSI’s priorities and their plans for cooperation. The statement explains that:

• Over the coming months, OFAC and OFSI officials working on sanctions implementation and enforcement will be further “exchanging best practices” and “strengthening working relationships at all levels.”
• Financial sanctions will continue to be a “vital tool” in supporting the USand UK’s respective foreign policy and national security aims.
• The “commitment and willingness of stakeholders” to constructively engage with OFAC and OFSI has been very welcome.
• OFAC and OFSI intend to continue, “in close co-ordination with one another,” to assist stakeholders via outreach, by maintaining and updating sanctions-related products and by “making timely decisions regarding licenses.”

The statement notes that in response to the crisis in Ukraine, and that in administering Russia-related sanctions, OFAC has issued over 100 Frequently Asked Questions, two humanitarian-related fact sheets, over 2,000 responses to specific license and interpretive guidance requests, and over 50 General Licenses, and “engages regularly” with stakeholders including private sector entities, financial institutions, and non-government organizations. Meanwhile, OFSI has updated its Russia, Monetary Penalty and General guidance, “engaged extensively” with industry through webinars, roundtables and bespoke meetings, issued over 30 General licenses and is increasing its resource to over 100 staff members by the end of the financial year.

What this means for USand UK companies

Whilst we know that the US and UK have closely co-ordinated their response to the crisis in Ukraine and the implementation of sanctions targeting Russia, this statement shows the commitment to ongoing cooperation between the two agencies, both in relation to Russia and beyond.

In the UK, enforcement of UK sanctions measures has, to date, not been as extensive as OFAC’s enforcement of US sanctions, but there are several signals in the UK market that this could be set to change. Indeed, this statement follows a key legislative change over summer 2022 via the Economic Crime (Transparency and Enforcement) Act 2022 and whereby OFSI can now impose civil monetary penalties for breaches of UK sanctions measures on a strict liability basis. OFSI therefore no longer must demonstrate that a person (including corporate entities) had knowledge or reasonable cause to suspect that they were in breach of a financial sanction to issue a monetary penalty. This aligns with OFAC’s ability to impose civil penalties on a strict liability basis.

From a US perspective, this co-ordinated approach to economic sanctions provides greater visibility into trends related to violations, ensures increased overlap and redundancy with shared priorities, and offers greater potential to deconflict regulatory restrictions impacting humanitarian efforts.

The US has renewed focus on multilateral efforts to restrict the flow of goods, services, and finances in support of designated entities and individuals and to embargoed countries and region. To achieve the desired impact of carefully crafted sanctions, the US looks to increase its co-operation with the UK and other allies.

Top Tips

• Screening of transactions for sanctions risks has never been more critical – ensure your compliance program is in good working order.
• Maintain up-to-date policies and procedures that evolve with changes to international sanctions measures.
• Actively train employees and third-party agents to ensure that they understand sanctions compliance obligations, as well as how to recognize and address sanctions risk.
• Ensure procedures include escalation contacts, both for sanction enquiries and violation reporting.
• Ensure your contract terms and conditions protect you from trade, sanctions, and other risks.
• Expect continued scrutiny from investors, activities, and the public as to operations in/with Russia.
• Anticipate that the US and UK sanctions, export controls and other trade measures targeting Russia will last for a number of years.