We don’t hear from the UK sanctions regulator OFSI as often as we hear from its US counterpart OFAC. But OFSI’s latest enforcement is interesting to say the least, as it sets a noteworthy precedent for GCC-based employers subject to UK sanctions regulations.
OFSI fined a UAE-based subsidiary of a UK company for flying an employee home with a sanctioned Syrian airline.
Via its penalty notice, OFSI informed the public yesterday that it imposed a penalty of £15,000 (approx. $18,200) against Tracerco Ltd., an oil-and-gas measuring products and services provider. Tracerco is a UAE subsidiary of UK specialty chemicals company Johnson Matthey PLC.
The Misconduct
Tracerco flew an expatriate employee home (as is customary in the UAE and wider GCC region, as part of employment remuneration packages) a few times between 2017-2018. In doing so, the company made payments to a sanctioned airline, Syrian Arab Airlines (SAA).
As per OFSI, the company booked the flights through a UAE travel agency and then paid the agency for the flights. SAA had been sanctioned by the EU (including the UK) since 2012, for being controlled by the Syrian government which the EU considers responsible for violent repression against Syrian civilians. Therefore, Tracerco made funds available for the benefit of a person designated under the Syria sanctions regime.
The EU sanctions freeze assets and prohibit transacting with or making funds available to the blacklisted entities, including for the payment of goods and services.
The regulator said the company voluntarily disclosed the breach, therefore it was eligible to get its fine discounted by 50%.
It is worth noting that the company was fined £15,000 for two flights of a total value of £2,956.43. OFSI considered Tracerco knew or had reason to suspect the payments would breach financial sanctions restrictions. Being based in the region, the group is expected to be reasonably aware of the ongoing political situation in Syria, and the strategic priority of the financial sanctions regime to the UK. The group additionally had a group compliance function whose oversight technically applied to Tracerco as well.
UK Sanctions, Some Compliance Thoughts
Subsidiaries of UK companies operating in the GCC, and particularly in the UAE (which does not quite recognize Western sanctions, and has historically served as a hub for Western sanctions evasion), ought to therefore note that OFSI’s enforcement would now extend to traditionally accepted employment practices.
Food for thought for UAE based employers: before flying employees home, make sure, it isn’t aboard a sanctioned airline. The fact several sanctioned airlines are still allowed to fly to/from the UAE, does not make sanctions compliance obligations disappear .
Earlier this month, OFSI announced it would impose stricter standards in sanctions enforcement following Russia’s invasion of Ukraine. As of 15 June 2022, OFSI will be able to impose civil monetary penalties on a strict civil liability basis.
Whilst previously OFSI had to prove that a person had knowledge or reasonable cause to suspect that they were in breach of financial sanctions, this will no longer be the case. OFSI still bear the burden of proof to establish that there was a breach of financial sanctions prohibitions, but instead, sanctions violations will be evaluated by on a strict liability basis—meaning that OFSI will only have to prove that a sanctions violation occurred, not what a company or individual knew about the violation.
The change, which was part of the economic crime bill passed in March, brings the UK sanctions regime closer to the US sanctions regime.
