Expect a renewed focus on sanctions breaches in 2024 - Stacy Keen

There have been three key substantive developments relating to sanctions in 2023, but Russia remains the top target with a raft of sanctions brought into force and numerous “designations” of individuals and entities being made.

Also targeted by those sanctions are so-called “enablers” – those that have enabled existing Russian sanctions targets to either disguise the ownership of their assets or otherwise circumvent sanctions restrictions. In 2024, we're likely to see increasing numbers of designations being made against non-Russian nationals/entities that are enabling sanctions evasion, or circumvention.

Iran has also been a focus area in 2023 – eight years on from the conclusion of the Iran deal which saw the lifting of sanctions by the UN, EU, UK and others. The US was originally a party to the Iran deal but its lifting of sanctions was comparatively limited and short lasting.

Certain nuclear-focused sanctions restrictions were scheduled to be lifted in October 2023 in line with the 2015 plan. However, the view of the UK, France and Germany was that Iran had failed to comply with its commitments under the plan, and that warranted the retention of sanctions.

Stacy Keen, Senior Associate and financial crimes and compliance expert at Pinsent Masons

These countries retain nuclear-related sanctions within their own domestic sanctions regimes and there have also been new restrictive measures imposed in view of Iran's military support of Russia's war of aggression in Ukraine. It is anticipated that Iran will continue to be in focus in the coming year.

Not strictly a sanctions development but related to export controls, is the increasing restrictions on movements of semiconductors across the globe, particularly between the US and China.

Semiconductors are used in a variety of different machines and components, and the impact that restrictions are having on global supply is really problematic for those that are trying to source such items, particularly in the energy, defence and aviation sectors.

Two other predictions for 2024 involve the enforcement of sanctions and the interplay between the civil courts and sanctions compliance. When looking at reports issued from UK government bodies, some may take the view that there has been very light enforcement of sanctions in 2023.

The Office of Financial Sanctions Implementations (OFSI), the body that enforces financial sanctions on a civil basis, published only one notice relating to financial sanctions enforcement in 2023, while HMRC – which enforces trade sanctions and export controls – published only two notices relating to civil penalties under the UK Russian sanctions regulations.

Investigations into these matters can be lengthy and complex, and they take time to come to fruition but we are aware OFSI and HMRC are actively investigating Russian sanctions breaches and also related export control breaches.

By May 2023, OFSI had received 127 voluntary disclosures of non-compliance with UK Russian sanctions and HMRC has seen the number of voluntary disclosures it receives double in the last two years and I anticipate we will see a considerably higher number of enforcement cases in 2024 as the OFSI and HMRC cases come to fruition.

The creation of a new Office of Trade Sanctions Implementation (OTSI) last month will also drive a renewed focus on breaches of trade sanctions.

Stacy Keen, Partner, sanctions and financial crime specialist at Pinsent Masons