Articles Posted in United Kingdom (UK)

Earlier this week, the U.S. Office of Foreign Assets Control (OFAC) and the UK Office of Financial Sanctions Implementation (OFSI) published a Memorandum of Understanding (MoU), which was previously signed on October 9, 2024, formalizing a framework to govern cooperation including in relation to exchanging information, coordinating investigations, training personnel, discussing regulatory expectations and economic analyses.

Part of a Broader Trend of U.S.-UK Collaboration

The MoU represents a significant step within a broader shift toward increased collaboration between the U.S. and UK on sanctions adoption and enforcement. Several key developments exemplify this trend:

1. OFAC-OFSI Partnership: The MoU formalizes the growing partnership between OFAC and OFSI, which has been developing through initiatives such as the deployment of OFAC secondees to OFSI and the establishment of regular communication channels.
2. Joint Guidance: U.S. and UK authorities have increasingly worked together to issue joint guidance (such as this Humanitarian Assistance and Food Security guidance note), streamlining compliance expectations and providing unified directions to stakeholders.
3. Coordinated Sanctions Adoption: Both countries have increasingly aligned their sanctions measures, particularly in response to geopolitical crises such as Russia’s invasion of Ukraine. Sanctions have been adopted not only bilaterally but also in coordination with allies through forums such as the G7, the Five Eyes community and in collaboration with the EU, signaling a commitment to unified enforcement. By way of recent example, last week, OFAC and OFSI jointly designated two Russian energy companies, Gazprom Neft and Surgutneftegas.

The UK Sanctions Regime’s Shift Toward a U.S.-Style Framework

The MoU has emerged in the context of a broader transformation of the UK sanctions regime, which has gradually been evolving to align with the U.S. regime. Key examples of this shift include:

1. Civil Strict Liability Powers: As reported previously, the UK has introduced civil strict liability enforcement powers for OFSI and the newly established Office of Trade Sanctions Implementation (OTSI). Absent from the UK sanctions regime prior to Brexit, these powers bring the UK’s sanctions regime closer in line with the U.S. strict liability approach to sanctions enforcement, without a requirement to prove intent or negligence.
2. Increased Use of General Licenses: The UK has significantly expanded its use of General Licenses, a tool that mirrors OFAC’s approach and provides flexibility in sanctions implementation by permitting UK sanctions authorities to adopt general exemptions for specific activities otherwise prohibited under sanctions laws.
3. Post-Brexit Autonomy: Following the UK’s exit from the EU, the UK has sought to collaborate with other allies and partners with the intention of pooling expertise, sharing and developing ideas, and extending collective reach to maximize the impact of sanctions and to address loopholes. The UK’s collaboration in this regard with the U.S. (and its approach in general, as referenced in the UK government’s policy paper on the UK sanctions strategy published in February 2024) has spanned sanctions strategy, design, implementation and enforcement, and has also sought to prevent circumvention.

Implications

The MoU between OFAC and OFSI marks a significant turning point in the enforcement of sanctions, underscoring growing alignment between U.S. and UK authorities. At its core, the MoU enhances the ability of the U.S. and the UK to collaborate on key areas such as information sharing, joint investigations, and regulatory alignment. This increased coordination means that businesses must prepare for greater scrutiny and the possibility of facing enforcement actions simultaneously in both jurisdictions.

For companies, the impact of this cooperation extends beyond compliance obligations. Internal controls and monitoring systems must be robust enough to withstand the enhanced scrutiny that comes with shared intelligence and enforcement efforts between regulators. Compliance programs should be harmonized to address both U.S. and UK requirements so as to reduce the risk of oversight in a rapidly converging regulatory environment.