The UK sanctions regime: an overview
As global tensions continue to rise and the UK sanctions regime continues to evolve, businesses across all industries are being compelled to continuously evaluate their relationships including with suppliers, service providers, clients, and company personnel at all levels.
For UK businesses, the key legislative act governing the UK sanctions regime is the Sanctions and Anti Money Laundering Act 2018. Following Brexit, the UK can now autonomously implement and enforce sanction measures therefore UK businesses with a presence in the EU or elsewhere will also need to separately consider the EU sanctions regime as well as any other sanction regimes that may impact their business activities.
The UK government is responsible for maintaining the official UK Sanctions List that details individuals and entities (i.e. designated persons) subject to sanctions. For those listed in the Sanctions List, the law restricts you from dealing with such persons and doing so knowingly or intentionally could amount to a criminal offence. However, there are certain (very limited) circumstances under which a business may be permitted to deal with designated persons.
The UK has imposed sanctions on countries, individuals, and entities in response to issues such as violations of international law, human rights abuses, and destabilising activities. Some countries are subject to more targeted sanctions while countries like Russia and the Democratic People’s Republic of Korea are subject to comprehensive sanctions with Russia having recently become the most sanctioned country and the UK imposed its largest package of sanctions last month against Russia since 2022.
To whom the sanctions will apply
The applicability of the UK Sanctions regime is very broad. It applies to conduct by UK persons, which includes:
anyone in the UK (including its territorial waters);
UK nationals outside the UK; and
bodies incorporated or constituted under the laws of any part of the UK.
Types of sanctions
The main types of sanctions include:
Financial sanctions: these are restrictions that can:
limit the provision of certain financial services
restrict access to financial markets, funds and economic resources e.g. through asset freezes.
Trade sanctions: these are prohibitions or restrictions on:
import, export, transfer, movement, making available and acquisition of goods and technology
provision and procurement of services related to goods and technology
provision and procurement of certain other non-financial services
involvement of UK people in the above activities.
Travel bans: those subject to these restrictions will be refused leave to enter or remain in the UK.
Arms embargoes: these are restrictions on the trade or other activity related to military items.
Sectoral Sanctions: these are targeted measures on specific sectors of the economy of certain countries, such as oil, banking, or technology.
What businesses need to consider
Where you conduct your business
The starting point is to identify the sectors, industries, countries, entities or individuals with which the business is involved. For example, businesses providing financial services may be restricted from providing their services in certain countries, to individuals or entities subject to financial sanctions.
Exemptions or licences
If you are engaged in a business activity that impacted by sanctions, in some circumstances the business activity may be exempt from sanctions. This means that the business can carry out the activity lawfully despite the sanctions.
If you are engaged in a business activity that is sanctioned and is not exempt, it may be possible for the business to apply for a licence. Licences are issued in limited circumstances and, depending on the type of sanctions, different bodies are responsible for processing and approving licence applications. While the government has provided examples for when licences may be granted, a key consideration for the bodies responsible is to ensure that the business activity for which a licence may be granted does not contravene the purpose of the sanctions.
Business risk management
As discussed in the next section, failing to comply with sanctions carries a great deal of risk because the consequences are the same whether the business breached the sanctions knowingly or unknowingly. Some practical considerations include:
Due diligence and compliance: do you have a proper understanding of who you are working with; have you carried out appropriate checks; and are you continuously monitoring such entities and individuals?
Compliance policies: have you got in place appropriate policies and procedures for your staff to deal with potential or actual concerns?
Contracts: have you entered into any contracts that may be impacted as a result of the sanctions? You need to carefully consider how to deal with these, if so.
Failure to comply with UK sanctions
The consequences of failing to comply with the UK sanctions could be civil (fines and monetary penalties) or criminal (imprisonment).
The law has recently been updated and it is now a strict liability offence to breach sanctions regulations. This means that the knowledge or intention of a party that has breached the sanctions is not relevant. Simply causing a breach is enough to incur a monetary penalty.
Monetary penalties will vary depending on the type of sanctions in question. For example, non-compliance with trade sanctions can result in a maximum penalty that is the greater of £1,000,000 or 50% of the estimated value of the breach or failure to comply.
The period of imprisonment for a breach of certain trade sanctions can be up to ten years; up to seven years for breaches of other sanctions; and up to two years for reporting and information offences.
How we can assist you
We know that sanctions are a particularly complex area. Whether you are looking for general advice on sanctions including how you can comply with sanctions or you have an agreement that you think is affected by sanctions, get in touch with our Commercial team and we will assist you.
You can contact me at deeva.shah@laytons.com to set up a free initial call.
This insightful article is written by Deeva Shah and endorsed by our Head of Commercial, Technology and Data Protection, Sharon Zachariah.
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Disclaimer: This publication is provided by Laytons LLP for informational purposes only. The information contained in this publication should not be construed as legal advice. While reasonable care is taken to ensure accuracy, the materials may not reflect the most current legal developments. Any questions or further information regarding the matters discussed in this publication can be directed to Laytons LLP and its Commercial team.