Considering the UK’s sanctions regime is an essential part of compliance reviews, whether you are an international company doing business in the UK, or a UK entity with activities abroad. In this entry we look at seven of the most common questions regarding the UK regime.
- Do I have to comply with UK sanctions?
Generally, all persons within the UK, and all UK-based persons operating abroad, are obliged to comply with UK sanctions. This means:
- People and entities carrying out any activities in the UK.
- UK nationals and entities (including their branches), carrying out activities anywhere in the world.
- What type of sanctions can be imposed?
Trade sanctions, which include:
- Arms embargoes.
- Prohibiting import and export of certain goods and technologies.
- Prohibiting certain services.
Financial sanctions, which include:
- Assets freezing, restricting access to funds and economic resources.
- Investment bans.
- Restrictions on access to capital markets.
- Directions to cease banking relationships and activities.
- Other restrictions on financial services.
Immigration sanctions, i.e. personal travel bans.
Aircraft and shipping sanctions – including de-registering or controlling the movement of aircraft and ships.
It is important to have all these types of sanction on your radar – companies are usually aware of controlled goods and embargoes, but can miss relevant matters such as financial sanctions.
- Who could be subject to sanctions?
Sanctions may be related to a particular issue (e.g. chemical weapons, cyber-activity, misappropriation of state funds) or to a particular country or region (such as Belarus, DRC, Iran, Russia, Myanmar and Venezuela).
People, entities and ships that have been designated are included in the Foreign and Commonwealth Development Office’s “UK sanctions list” published here, and the UK Treasury also publishes a list of financial sanctions targets, available here. It is possible to subscribe to the UK Treasury’s e-alerts here which alerts subscribers when there is a change to existing financial sanctions.
Crucially however, some persons or entities may be subject to sanctions despite not being included in these lists. Cases of this include:
- Persons connected with a particular country.
- An entity owned or controlled directly or indirectly by a designated person. This means that when entering into a transaction with any organisation, it is important to find out who is the ultimate beneficial owner.
- Specified groups, such as groups of persons connected to a specific country in a certain way.
- Entire sectors of the economy of a country, or specified activities in relation to a particular country.[VZ1] For instance, there are trade sanctions related to the provision of financial services or funds to or for the benefit of the Myanmar’s armed forces (or persons acting on its behalf or under its direction).
Remember to conduct compliance checks with regular frequency; sanctions are dynamic and could change over time.
- I already have compliance checks to comply with US and EU sanctions. Do I need to have additional measures for UK sanctions?
Yes, if you are obliged to comply with UK sanctions (see question 1 above).
The UK could have a different sanctions policy from the US and the EU. Even if the UK has the same public policies as the EU or the US regarding a country or person, it could still have different rules.
- One of my clients / customers has been included in a UK sanctions list, so what do I do now?
The answer depends on the goods or services that you provide to your client or customer, and on the type of sanctions imposed against it.
You may have to stop dealing with assets owned, held or controlled by your client or customer. You may be barred from making assets available to your client or customer (or for its benefit), and from participating in activities whose object or effect is to circumvent sanctions prohibitions. You may also have some reporting obligations.
There may be a potential risk that you could even be designated yourself in certain circumstances.
You may also want to consider applying for a license in order to comply with any pending obligations that arose before the sanction was imposed.
From a contractual point of view, it is important to include sanctions clauses in your contracts with your clients or customers, so you can regulate the risk of any sanctions imposed on your client and have more certainty as to what the result would be of one party becoming listed. This could significantly reduce the scope of potential disputes.
- What could happen if I inadvertently deal with a designated person in breach of UK sanctions?
In general, a person could commit an offence by breaching sanctions rules if it knows, or suspects, or has a reasonable cause to suspect, that the relevant transaction or activity is prohibited.
A sanctions breach could lead to fines, restrictions and even criminal liability punished with imprisonment, in addition to reputational damage.
- I have been included in a sanctions list, but I disagree with this designation. Is there something I could do?
Yes, a designated person can generally make a request to have its designation revoked. They can rely on reasons including that the reasons for your designation are incorrect, the designation is not appropriate, or it is incompatible with human rights. A government guidance and the review request form are available here.
A request for sanctions to be revoked is treated as an administrative challenge. The FCDO will consider the request and may take the decision to revoke the designation.
If the request is refused, you can apply to the High Court for a judicial review of this decision. However, the Court will apply the judicial review principles, which is a limited assessment of the way the decision was taken (it is not a full re-evaluation of the merits of the designation).