Daniela Turiccki is the Chartered Institute of Export & International Trade’s Export Controls Practice lead.
The government is changing how it approaches export controls and sanctions enforcement. While this is welcome in many ways, it also creates greater risk of non-compliance among businesses that trade.
In late January (29 January), Giles Thomas, director of the Office of Financial Sanctions Implementation (OFSI), published a blog announcing a series of changes to the way the government approaches sanctions and export controls enforcement.
A new revised framework would, he said, “support compliance, give firms greater certainty and ensure our approach to enforcing financial sanctions is fair, effective and robust.”
Takeaways
This is an important announcement for several reasons.
The major takeaway is there there’ll be more emphasis on settling, self-reporting and resolving cases before a penalty is issued. New schemes like the Early Account Scheme, the Settlement Scheme, and a Voluntary Disclosure and Co-operation Discount are being rolled out to encourage companies to come forward as quickly and as early as possible if they discover a breach.
Traders will get access to discounts on any baseline penalties – up to 30% – by voluntarily disclosing possible breaches and cooperating with OFSI and other regulators.
All of this, the government says, is designed to make things quicker and easier for companies involved in trade. This follows an increasing number of sanctions and export controls being introduced in recent years, driven by the Russian invasion of Ukraine, unrest in Iran and other supply chain disruptions.
Clarity
The introduction of these changes – which follow a consultation with industry – is designed to enhance clarity for businesses, enabling them to fully understand the consequences of non‑compliance.
As part of this, the government will be releasing a new case assessment matrix, outlining the approach it takes to enforcement. In theory, this should make OFSI’s approach more transparent and predictable, as businesses will be able to see the regulator’s rationale for each decision and react accordingly.
Together with a changed approach to enforcement, this measure should improve information flow, increase transparency and ensure the provision of adequate guidance.
Penalties
However, this policy shift also introduces higher penalties for non-compliance.
OFSI is doubling the penalty for sanction and export control breaches to a maximum of £2m (or half the total value of the breach) and strengthening its enforcement power when dealing with the most serious cases.
It is also highly likely that the government will continue to expand the list of sanctions, as London looks to protect its supply chains from foreign opponents and put pressure on Russia to end its illegal invasion of Ukraine.
Timely support
The Chartered Institute has long pushed for more clarity in order to help companies safely and compliantly trade with the rest of the world. As such, we welcome these timely measures that offer this critical support to traders.
These changes are also a reminder of the continued value of a strong compliance programme. Many of the new schemes rely on early and comprehensive disclosure of information to regulators: information that is difficult to obtain unless you have well-trained staff and the right systems in place.
The Chartered Institute’s recently announced export controls and sanctions compliance package provides tailored solutions, as well as ongoing monitoring and support for firms struggling to keep up in today’s fast-paced controls landscape.
