OFSI impose monetary penalty (and include compliance lessons for all)

The UK’s Office of Financial Sanctions Implementation (OFSI) announced on 27 September 2022 that it had imposed a £30,000 monetary penalty on a UK company for breaching sanctions. The UK company, Hong Kong International Wine and Spirits Competition Ltd (HKIWSC), breached sanctions by accepting 78 bottles of wine and three payments from a designated entity.

The total value of the funds and wine received by HKIWSC was estimated at £3,919.62. This relatively modest figure helps place the £30,000 fine in context – showing the uplift that can be applied in determining the level of penalty. As well as breaching sanctions through the receipt of funds and wine, OFSI also found that HKIWSC had breached sanctions by making publicity available to the designated entity; such publicity being held to be an intangible economic resource.

OFSI imposed the penalty in April 2022 and HKIWSC requested a ministerial review of the decision. This took place in August and resulted in OFSI’s decision being upheld in full.

HKIWSC did not benefit from a penalty reduction discount as they failed to make a voluntary disclosure of the breach. OFSI were notified of the initial concern by a third party and then used its information powers to identify further breaches.

OFSI’s penalty notice contains useful compliance lessons for those subject to UK sanctions, including:

• the drawbacks of failing to disclose a breach;
• a reminder that financial sanctions apply to all sectors, not just the financial sector;
• a clear message that companies cannot rely on the banking sector to conduct due diligence on their behalf;
• the need for companies to consider the international scope of their activities. In assessing their exposure, companies should implement due diligence measures to manage potential risks; and
• the definition of "economic resource" is wide and included in this case, the provision of publicity. There is no requirement to be able to ascribe a financial value to something in order for it to be an economic resource.