Legal firms have been put at greater risk of breaching sanctions regulations by a lack of expertise in the private sector and at the Treasury’s dedicated watchdog, a conference heard today. 

Dentons partner Roger Matthews said sanctions expertise in businesses vulnerable to a breach, such as ’law firms and banks’, is ‘in the foothills’ of what is needed to ensure compliance, after the war in Ukraine ‘turbo-charged’ the sanctions regime.

‘There is a dearth of expertise in the private sector and in [the Office of Financial Sanctions Implementation],’Matthews told the Law Society’s anti-money laundering and financial crime conference.

‘It’s really difficult to find the right people,’ Che Odlum, head of financial crime at Clyde & Co, added.

Ukraine protest London

Ukraine protest in London

Matthews criticised OFSI’s decision to ‘name and shame’ Wise Payments Ltd in August this year. A deficiency in Wise’s systems allowed a customer to withdraw £250 from a business account using a debit card while a potential sanctions match was investigated. Wise had investigated and self-reported and no financial penalty was imposed.

OFSI classed the breach as ‘moderate severity’.

‘If that is moderate severity, what on earth is minor severity?’ Matthews asked. He said OFSI needs to take the sort of ‘risk-based’ approach to enforcement adopted by the SRA. ‘I hope OFSI will mature,’ he said. 

The UK sanctions regime was beefed up at speed in response to the Ukraine war, with economic crime and beneficial ownership legislation expedited. The result, civil servants from the Home Office and Department for Business and Trade stressed, was that key components continue to evolve.

Department of Business and Trade senior policy advisor Jacqui Griffiths said a number of provisions affecting the register of beneficial interests are set to change. These will include ‘significant changes’ to requirements on verification checks in 2024.

Companies House had imposed around £900,000 in penalties for failure to register under the legislation, Griffiths said. However, in response an audience question, she said none of those penalties had been paid ‘as of 10 days ago’. If unpaid, the penalties would become a charge on the entity, Griffiths added.