The Office of Financial Sanctions Implementation (OFSI), which is a part of HM Treasury, is the UK's authority for implementing financial sanctions. Financial sanctions are designed to restrict access to financial resources and services for individuals, entities and bodies that engage in criminal activities, including the financing of terrorism or goods that can be used in the building of nuclear arms. Two of OFSI's key responsibilities include making designations under UK domestic regimes and imposing monetary penalties.
What do they do?
According to the former Chancellor, OFSI is responsible for ensuring that financial sanctions are properly understood, implemented and enforced in the UK. Financial sanctions were implemented to help achieve the UK's foreign policy and national security objectives, including the prevention of terrorist financing. These sanctions are also designed to maintain confidence in the integrity of the UK's financial service sector. All businesses must understand the various procedures and responsibilities involved with financial sanctions, as they're only effective if they're properly implemented.
Understanding financial sanctions
The Head of Enforcement and Engagement claims that the 'understanding' element of their responsibilities is the most important aspect of their role. To this end, OFSI offer businesses access to a range of resources designed to promote understanding and enable people to make the right decisions about their business and personal transactions.
Examples of these resources include the Consolidated List of Financial Sanctions Targets, which includes information to help firms to screen and identify designated persons subject to UK, EU and UN financial sanctions. Information on the consolidated list includes aliases, date of birth, passport details, nationality, last known address, employment or government role. The list is updated within one working day for all new UN, EU and UK listings coming into force in the UK, and within three working days for all other amendments. OFSI also provides email alerts on any list changes or other news to their subscribers, to ensure that businesses are as up to date as possible.
As part of their commitment to helping businesses understand financial sanctions, OFSI publishes guidance on their website, including detailed FAQs with information and advice about their enforcement powers. To spread the word about financial sanctions, they also speak at financial crime, financial services, foreign policy and other industry events and meetings. This kind of interactive engagement with the compliance community provides them with the opportunity to respond to any concerns regarding financial sanctions.
Implementing financial sanctions
In some ways, the 'understanding' and 'implementing' elements of OFSI's role conflate, as ensuring that businesses understand financial sanctions generally improves operation procedures. Therefore, OFSI's dedication to keeping the Consolidated List of Financial Sanctions Targets up to date also applies to their implementation responsibility.
OFSI is required to respond to reports from businesses regarding financial sanctions. If you have reason to suspect that you're dealing with a designated person, you're legally obliged to report this information to OFSI. OFSI take responsibility for processing and handling all of the information it receives in accordance with the relevant sanctions' legislation and the Data Protection Act 1998.
Enforcing financial sanctions
As part of their enforcement responsibilities, OFSI distributes licences that allow otherwise prohibited transactions to take place in some circumstances. To be eligible for a licence, the circumstances must involve specific and relevant licensing grounds. If you import or export goods, you may need a licence from OFSI as well as from the UK's Export Control Organisation (ECO).
OFSI is also responsible for monitoring compliance with financial sanctions and for assessing suspected breaches. Breaches of financial sanctions are criminal offences. OFSI has the power to impose criminal convictions (with sentences of up to 7 years) or monetary penalties. The fines are severe, with companies paying up to £1 million or 50% of the estimated value of the funds or resources. As part of their decision-making process, OFSI works with other parts of government, supervisory bodies and regulators to consider all cases reported to it.
Why are they important?
The HM Treasury's main objective is to achieve strong and sustainable growth for the UK's economy. Compliance with financial sanctions obligations can seem like a lengthy and complex process, and
OFSI recognise that it often costs businesses money. In response to this, however, they have spent the last two years working closely with the business community on guidance. Much time and effort have gone into ensuring more businesses understand what financial sanctions are and what it means to be compliant.
By complying with OFSI, companies ensure that they're conducting legitimate business both in the UK and abroad. Upholding the financial sanctions regime is also an essential component of protecting our country. By adhering to the obligations, firms are doing their part to avoid substantial fines and more significantly, to protect our country from potential harm.