OFSI’s Enforcement Overhaul: Breaking the new consultation down
Are you keeping up with publications in the financial crime world? They're coming thick and fast at the moment! Let us help you - we've summarised OFSI's (Office of Financial Sanctions Implementation) consultation into a few key points.
What's new?
OFSI is consulting on proposals to enhance the effectiveness of its enforcement processes. The changes would only apply to OFSI's civil powers (not criminal cases) and only to breaches of financial sanctions (not trade or transport sanctions).
Why?
OFSI thinks the changes could help it resolve cases more quickly, which will be beneficial for both OFSI and subject firms or individuals. It could also improve transparency of the process. There have been significant changes in UK sanctions since Russia's invasion of Ukraine in February 2022, and the legal test for imposing penalties was changed to one of 'strict liability' in 2022, meaning defendants can be liable whether they intended to commit the offence or not. Since 2017, OFSI has issued 12 penalties totalling over £20m for breaches of sanctions. OFSI enforcement investigations are often extremely complex and take time to complete - OFSI wants to make the process simpler and more efficient and has proposed five changes as part of the consultation.
Five areas of consultation
A new case assessment matrix. Under the proposal, OFSI's response to the breach would be determined by a matrix which assesses both the conduct of the subject and the severity of the breach. More severe breaches would be dealt with via monetary penalty and less severe cases would receive a warning letter. They also propose changing the discount they apply for voluntary disclosure of breaches from 50% to 30% and apply it for co-operation as well as voluntary disclosure.
Introduction of a settlement option. This would apply in certain circumstances, with a 20% discount to incentivise subjects to agree to settlement, applied on top of any voluntary disclosure discount.
Introducing an Early Account Scheme (EAS). An EAS allows the subject of an investigation to give a detailed factual account of the potential breaches, all relevant materials and evidence at the beginning of the investigation. This would cut down on the investigation time and information requests needed from OFSI and aims to enable quicker investigation of cases. It is unlikely the EAS would be introduced if the settlement scheme is not introduced. In cases where the EAS is used, the available settlement discount would be increased to a maximum of 40%.
Streamlining processes. OFSI proposes to revise its penalty processes for information, reporting and licensing offences. There is a fair bit of detail in this one, but the summary is that OFSI is either proposing to publish an indicative list of monetary penalties for certain lesser-value offences or to introduce statutory fixed penalties set out in legislation for those offences.
Changes to the maximum statutory penalties for breaches of financial sanctions. The maximum statutory penalties have not been revised since 2017, and OFSI's view is that changes to these could help to further deter sanctions breaches. The maximum monetary penalty is currently from £1m or 50% of the estimated value of the funds or resources, if these can be estimated, whichever is greater. OFSI is proposing to amend these values to £2m and 100% respectively. In this section OFSI also consults on alternative views to calculating maximum penalties, such as basing the penalty on the subject firm's turnover, or having a penalty per breach rather than for the case as a whole.
Does it matter?
Some of the proposed changes are quite detailed, and you may be wondering whether to respond to the consultation. Ultimately, a strong and efficient enforcement regime for financial crime breaches, sanctions included, is good news for all of us trying to fight financial crime. OFSI have also noted that particularly small to medium sized firms can find it difficult to engage with an OFSI investigation. Although they don't say why, proposals which make the process more efficient have to be worth considering.
The consultation is open until 13 October 2025 and details on how to respond can be found here.
As always, if you're finding sanctions navigation a challenge, or struggling to keep pace with regulatory expectations more generally, get in touch.