Sanctions Overview – UK
What is the governing legislation?
When sanctions are imposed by either the United Nations or European Union, the United Kingdom gives effect to these either by enacting new secondary legislation or amending existing UK legislation, except where an EU Regulation has direct effect, which can bypass the need to pass domestic law to implement it.
Each sanctions regime has its own legislation, which will be updated as the restrictions change. Therefore, when considering compliance issues, it is important that the latest legislation relevant to the particular sanctions regime is checked.
Government departments responsible for sanctions in the UK
The Foreign & Commonwealth Office has overall responsibility for the UK’s policy on sanctions and embargoes. There are, however, various authorities in the UK that are responsible for different aspects of a sanctions regime. These includes the following:
- The Office of Financial Sanctions Implementation (OFSI) is responsible for the implementation and enforcement of financial sanctions in the UK.
- HM Treasury controls the sanctions list.
- The Department for International Trade, including the Export Control Organisation, administers export controls.
Who is required to comply with UK sanctions law?
Sanctions in force in the UK may apply to the following:
- Any person (irrespective of nationality) or entity (whether incorporated under UK law or under the law of any other jurisdiction) within the UK or carrying on activities within the UK.
- Any person who is a UK national or an entity established or incorporated under UK law irrespective of where their activities are carried on.
- Subsidiaries that are incorporated under UK law irrespective of where their activities are carried on.
- Overseas branches of UK entities.
What are the potential restrictions?
Types of activities that may be prohibited include:
- Arms embargoes, including restrictions on the export or supply of arms and associated technical assistance, training and financing. Such embargoes may include a ban on exporting equipment that might be used for internal repression and could also include dual-use goods i.e. those goods that have a possible civil and military use.
- Import licenses, including measures targeting the import of raw materials or goods from a sanctions target. This may include a total ban or a quota restricting the volume of goods. To allow imports to proceed into the UK, a relevant licence may need to be obtained.
- Export controls, including restrictions on the provision of goods to certain territories and individuals. The fact that goods may originate from outside of the UK may not matter to the scope of such restrictions.
- Financial sanctions, including restrictions that freeze assets and limit the provision of economic resources directly and indirectly to/from a sanctioned individual or entity. Persons subject to such financial sanctions can include individuals in government, government bodies and associated companies, terrorist groups and individuals associated with those groups
- Travel bans, restrictions may be placed on an individual’s ability to travel to UK territory.
What are the exceptions/defences?
There may be certain limited exceptions to the restrictions contained within the legislation itself, including the option to apply for a licence from the UK authorities permitting what would otherwise be a restricted transaction.
Where a party has breached UK sanctions, there may also be a defence to such a breach, for example those of a financial nature, where the person did not know, and had no reasonable cause to suspect, that their actions were in breach of the sanctions. This follows the defence provided for under the EU sanctions regime.
It is important to note that there is no de minimis level below which firms do not have to carry out due diligence on sanctions issues.
What are the penalties?
The penalties for breach of UK sanctions are set out in each statutory instrument. It is a criminal offence to breach a financial sanction and a breach of a sanction is subject to penalties ranging from fines to imprisonment.
UK’s vote to leave the EU (“Brexit”)
Following the UK’s vote to leave the European Union on 23 June 2016, no immediate changes to the UK regime on sanctions should be expected.
Looking ahead, those sanctions agreed at the UN Security Council (of which the UK is a permanent member), and which all EU Member States are required to adopt, are unlikely to change.
It is possible that those sanctions that supplement those of the UN Security Council (as with Iran, North Korea or Libya), and EU sanctions put in place in the absence of UN sanctions (on, for example, Syria, Russia or Myanmar) – especially those vetoed at the UN Security Council by Russia or China – may be affected following a UK withdrawal from the EU. Nevertheless, given that the UK has played an instrumental role in shaping such sanctions, there may be little change in the current status quo. It will, however, be important that businesses stay up to date with the sanctions position post-Brexit and we shall monitor developments in this area.