Russian sanctions: companies may be liable for inadvertent breaches under proposed Economic Crime Bill

According to global independent financial and strategic consulting firm, Accuracy, the government’s proposed Economic Crime (Transparency and Enforcement) Bill 2022 will introduce a strict liability approach to sanctions breaches, meaning companies could be liable for inadvertent breaches.

Currently, a company will only be liable for a sanctions breach if it is aware or has “reasonable cause to suspect” it is in breach of sanctions. The government’s proposals mean companies may be liable for sanctions breaches even if senior management were unaware of a breach within the organisation – for example, if an individual member of staff is conducting business with a sanctioned entity.

The Bill includes a host of provisions aimed at cracking down on ‘dirty money’ flowing into the UK. Morgan Heavener, partner at Accuracy, said: “These measures are intended to make it much easier for the Office for Financial Sanctions Implementation to impose fines, even if sanctions rules are breached inadvertently.

“Given these proposed changes, many businesses will want to take a closer look at their current compliance programs to assess whether they are adequate to address these heightened risks.”

The government has also announced plans to reform the system of unexplained wealth orders (UWOs). UWOs require individuals to identify the source of their wealth, and their property may be confiscated if they cannot identify a legitimate source of wealth, without direct proof of criminality.

The proposed changes to the UWOs system include expanding its scope to include those who hold property in a trust and limiting the potential legal costs law enforcement agencies can currently incur in connection with unsuccessful UWOs.

Under the proposed changes, individuals who have incorrectly been served with an UWO will be unable to claim their legal costs back from enforcement agencies, if those agencies are judged to have put forward a ‘reasonable case’.

Critics suggest plans may not align with principles of the UK legal system and there is a concern that the changes will be introduced without proper discussion.

Morgan Heavener said: “While the Government is understandably focused on pursuing illicit Russian funds in the UK given the crisis in Ukraine, it will be important to ensure fundamental principles of justice are upheld in the way these changes are applied.”