Over the last 10 years, sanctions regimes have grown in both volume and complexity in the face of increasing geo-political unrest.

The impact has been significant, particularly in the energy sector. Post Brexit, the UK has introduced its own sanctions regime, including creating regulatory bodies responsible for enforcement.

Following our Risk Resilience in the Energy Sector Conference on 4^th September 2024, we have outlined below the top 10 things you need to know to manage the risk and ensure effective sanctions compliance defences.

1. UK sanctions are governed by the Sanctions and Anti-Money Laundering Act 2018 (SAMLA). Sanctions may apply to a regime, country or be thematic (such as international counterterrorism and cyber activity). Lists of individuals, entities and assets targeted by sanctions can be updated daily.
2. Restrictions on entities include those which are “owned or controlled by” a designated person. Ownership and control are based on shareholding, voting rights, control of management, or other overarching control. Due diligence should consider how any counterparty’s activities are directed.
3. Risk registers should take all relevant sanctions risks into account. Sending samples overseas, logistics chains, paying dividends, or employing remote workers – you might inadvertently be exposed to sanctions risks.
4. Licensing is possible. General Licences are available for certain actions or activities which are otherwise prohibited by the UK sanctions regime, or an application could be made for a Specific Licence where there is no relevant General Licence in place. There is no guarantee a Specific Licence will be granted and even where they are, this can take months.
5. Overlapping or contradictory sanctions regimes in different jurisdictions may apply. UK and US sanctions impose restrictions on persons, wherever in the world they are based – this can include activities of subsidiaries. Blocking regulations can prevent UK persons from complying with the US restrictions, causing problems if the company and its employees are subject to two different conflicting regimes.
6. Sanctions enforcement may include the seizure of goods, civil or criminal penalties, and imprisonment in serious cases. UK regulators with enforcement powers include OFSI (the Office of Financial Sanctions Implementation), OTSI (the Office of Trade Sanctions Implementation), and HMRC.
7. OFSI used “name and shame” disclosure powers for the first time in 2023, which allow for details of sanctions violations to be published, including identifying the entity that carried out the breach – even if no other enforcement action is taken.
8. On 10 October 2024, OTSI is set to take over the civil enforcement of trade sanctions from HMRC, who will remain responsible for the criminal enforcement of trade sanctions breaches.
9. The first UK sanctions strategy was published this year, entitled “Deter, Disrupt, and Demonstrate”. This strategy outlines an increased focus on sanctions enforcement in the UK.
10. Self-reporting (to OFSI, OTSI or HMRC) can be important mitigation, and should be carefully considered if you become aware of a sanctions breach in your organisation. Carrying out sanctions due-diligence, and keeping records of any checks carried out, will help you to prevent breaches before they occur, and defend your position effectively if a breach is alleged.

If you are reviewing your own processes, taking on a new business, or responding to a potential breach and need assistance, please get in touch with our sanctions team for support.

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