Financial Sanctions

Financial sanctions are a foreign policy tool, imposed in order to coerce the change of behaviour and signal disapproval of the state, entity or individual actions. Once imposed, financial sanctions seek to constrain or deny access to key resources required to continue the alleged offending behaviour and send a broader political message to the international community.

The most common types of financial sanctions include:

  • Asset freezes, which can apply to entities and individuals and restrict their access to and ability to use funds and economic resources.
  • Restrictions on a wide variety of financial markets and services, e.g. investment bans, restrictions on access to capital markets, requirements to seek authorisation before certain payments are made or received (licence), and restrictions on the provision of financial, insurance, brokering and advisory services, or other financial assistance.
  • Directions to cease all business of a specified type with a specific person, group, sector territory or country.

When a person or a legal entity is subject to an asset freeze, it is prohibited to deal with those assets or make them available to, or for the benefit of, a designated person unless there is an exception in the legislation you can rely on, or you have a valid licence. OFSI is an authority that consider and process licence applications asking for permission to deal with otherwise frozen assets. Licences may also be issued for certain activities that sanctions measures would otherwise prohibit.

Are you impacted by UK financial sanctions?

If you are sanctioned in the UK, you will ordinarily receive a letter from the Foreign, Commonwealth and Development Office stating that you have been designated. You will also know if you are sanctioned in the UK if your name appears in a list published by OFSI of all those subject to financial sanctions imposed by the UK. A similar list is maintained in the US and EU. Gherson continually keeps itself up-to-date with these lists and conducts routine ongoing monitoring on the status of its clients.

You are also impacted by financial sanctions if you are dealing with sanctioned individuals/entities. You can search OFSI’s consolidated list, or the US and EU lists to see if the individual/entity you are dealing with is sanctioned. Gherson keeps continuous track of e-alerts and is notified when there are updates to the lists. Often, it takes more effort to establish if a company is subject to financial sanctions. Gherson has experience understanding complicated ownership structures and conducting checks beyond the scope of the sanctions lists and can advise if you are dealing with a sanctioned entity.

When OFSI suspects and investigates a potential breach of sanctions, it will examine the risk assessment conducted by the breacher. If an incorrect assessment of ownership and control of an entity is relevant to the commission of the breach, OFSI would assess the degree and quality of research and due diligence conducted on the ownership and control of that entity. Gherson’s risk assessments of dealing with sanctioned individuals/entities is transparent, accountable and auditable, therefore the team is best placed to help you with sanctions risks assessments to ensure that you remain compliant with the ever evolving and complex UK sanctions legislation.

What can you do if you are impacted by UK financial sanctions?

If you are impacted by financial sanctions, you can carry out activities specified as permitted under an OFSI-issued General Licence or apply for permissions under a specific licence. Should you make use of any licence issued by OFSI, it is imperative that you comply with the relevant reporting requirements detailed therein. Assisting with this is something that Gherson has considerable experience and expertise with. You may be able to apply to OFSI for permissions by way of a specific licence under limited grounds (e.g. to allow payments for your basic needs). Generally speaking, it will be necessary to provide details of why the licence criteria is met and (where applicable) it is often advisable to provide supporting evidence in respect of the same.

The Gherson team have extensive experience in applying for licences and engaging with OFSI on licence related matters.

Gherson regularly engages with the compliance community in the UK to gain and promote a clear and consistent understanding of the sanction’s regime. This up-to-date understanding of the ever-changing requirements, licensing grounds and processes enables the Gherson team to assist clients in making informed decisions about their business and personal transactions.

What are the penalties for a breach of UK financial sanctions?

A breach of financial sanctions may be a criminal offence, punishable upon conviction by up to 7 years in prison and/or a fine. There are both civil and criminal enforcement options to remedy breaches of financial sanctions. Gherson has extensive experience advising clients in respect of their compliance with financial sanctions. Financial sanctions also impose reporting obligations and failure to comply with them is an offence. In this regard, Gherson keeps pace with changes in the sanctions regime and reporting requirements and can assist those impacted by sanctions in maintaining timely compliance with their reporting obligations.

Other Financial Sanctions (including the EU and the US)

If you are impacted by sanctions in other jurisdictions, such as the EU and the US, Gherson also engages with lawyers practicing in other jurisdictions, including in the EU and US who can assist you in getting licences in their respective countries.