The UK already had sanctions in place against Russia, primarily in response to the annexation of Crimea, an incursion into Ukrainian territory which began on Thursday 27 February 2014.

In February 2022, the UK sanctions against Russia were contained in a Statutory Instrument that contained 94 regulations, 4 schedules and ran in total to 65 pages.

At the start of the third year of the conflict, the UK Statutory Instrument currently contains 176 regulations, 23 schedules and 489 pages. Many of the new prohibitions have been enacted under the Trade sanctions part and this now accounts for 80 per cent of the regulations. These measures are much more complex for financial services and the overlap with areas such as Export Controls increases the complexity of any trade business being undertaken.

2022 saw a significant volume of designations and prohibitions, while 2023 saw a lower, but more complex number of prohibitions.

Governments and regulators are placing increased importance on preventing circumvention and evasion and for 2024 the message is to prepare for enforcement. Sanctions cases often take 18 months to two years to be fully investigated, a window which we are now within.

The OFAC fines for recent years show a significant uptick for 2023, the highest fines by value for OFAC, eclipsing the previous highest value set in 2019 when there were 26 penalties issued for a value just under $1.3 billion.

With sanctions fines coming from a number of international regulators including FinCEN and NYDFS the OFAC component of a fine is often part of a much larger settlement, as was seen with the Binance settlement, $968.6 million of the $4.3 billion total fine was imposed by OFAC.

Global regulators have been very clear in their messaging that 2024 is the year that they look to enforcement, and we may see the 2024 total for OFAC hit a new high water mark, though as we come to the end of Q1 for 2024, OFAC have issued one fine, compared to three at this stage in 2023.

It is worth noting that OFAC issue fines on a per transaction basis, with a breach related to the International Emergency Economic Powers Act (IEEPA) carrying a fine which is the greater of $368,136 or twice the underlying transaction; while any breach of the Foreign Narcotics Kingpin Designation ACT (FNKDA) carries a fine of $1,829,177 per transaction.

Other global regulators may also issue penalties in 2024, in the UK OFSI hasn’t typically had the same level of enforcement as OFAC, but it does have the powers to issue a penalty when it believes the behaviour is egregious and we may see this power used this year. The latest OFSI annual report highlighted that there were 172 cases under live investigation, some of which may conclude during 2024.

Similarly, the FCA is undertaking sanctions controls testing, an investigative area which is now into it’s second phase and the FCA does have powers to issue fines for poor controls.

For global corporates, the enforcement notices are often for breaches that occurred a number of years ago, challenging the opportunity to learn any meaningful and timely lessons from the penalties.

One of the most useful documents remains the OFAC Compliance Framework and especially the final ‘Root causes of OFAC Sanctions Compliance Program Breakdowns…’ section.