OFSI publishes annual review 2020-2021

On 14 October 2021, the UK's Office of Financial Sanctions Implementation ("OFSI") published its annual review for the period April 2020 to March 2021 (the "Annual Review"). The purpose of the Annual Review is to give an overview of OFSI's operational work in the preceding financial year, providing key statistics from the different areas of financial sanctions. We have set out some of the key takeaways from this year's Annual Review below (for details of the 2019-2020 review, please see our previous blog post).

The Annual Review notes that this was the year in which Giles Thomson took over as Director of OFSI, noting that he is broadening OFSI's strategic objectives to "enhance the contribution of financial sanctions to wider UK economic crime objectives". Unsurprisingly, the Annual Review also focuses on Brexit, and the transition to the UK's new autonomous sanctions regime as a key development during this financial year, in particular the need for OFSI to update the UK's consolidated list of sanctions targets to reflect the changes associated with Brexit.

The Annual Review contains a series of statistics reflecting OFSI's work over the past year:

• There were a total of 1,950 changes to the consolidated list (excluding the changes made at the end of the Brexit transition period), including 258 additions.
• As at September 2020 (when the most recent review of frozen assets was carried out), a total of over £12 billion of frozen funds and economic resources were reported as being held by UK firms. The vast majority of these relate to the Libyan sanctions regime.
• A total of 43 new licences were issued (representing a 7.5% increase on the preceding year), along with 75 amendments to existing licences. Again, the majority of these related to the Libya regime. The majority of licences issued were under the grounds relating to basic needs and legal fees.
• The Annual Review also notes that three more amendments were made to licences issued under multiple grounds than in the previous year (although it does not confirm how many of these "combination" licences were issued). In this case, the licences were issued under a combination of the basic needs and routine holding and maintenance grounds; OFSI notes that this is an illustration of its work to consolidate licences and ensure that licensed activity is captured in as few new licences and amendments as possible.
• OFSI considered 132 reports of potential financial sanctions breaches, representing a slight decrease on the prior year. "Many" of these were deemed not to be breaches following investigation by OFSI.

The Annual Review also contains observations on sanctions compliance trends, noting that suspected breaches relating to Iran sanctions continue to make up a significant proportion of the reports received by OFSI, although many of these are historic in nature and relate to activity in force prior to the entry into force of the Joint Comprehensive Plan of Action in 2016. OFSI has reported an increase in the diversity of organisations reporting suspected breaches, although the majority continue to be reported by the banking and financial services sector. There has also been a notable increase in the receipt of suspected breach reports and referrals from national and international governmental and regulatory bodies.

In terms of priorities for the next financial year, the Annual Review states that OFSI plans to consolidate the work undertaken so far and ensure that UK sanctions are "thoroughly understood, implemented and enforced" and that it will continue to contribute to wider economic crime work, ensuring that sanctions have a place alongside other financial crime measures such as anti-money laundering.

As part of this work, OFSI states that it will continue to work through bilateral and multilateral partnerships across the globe, and that it remains committed to helping industry better understand financial sanctions and become more effective at implementing them. The Annual Review also notes that OFSI will consider issuing a general licence "where it may be appropriate to help ease any unintended consequences on stakeholders". It is not entirely clear what this means, and what situation(s) such a general licence might seek to address, but the continued use of this power by OFSI is likely to be welcomed by companies to bring greater flexibility into the UK sanctions regime.