Is any new EU legislation expected to come into force and effect before the end of the transition period?
The Sanctions and Anti-Money Laundering Act received Royal Assent in May 2018 and creates a framework for the UK to implement its own sanctions regime. It is unlikely that further substantive legislation will be required before the end of the transition period.
Is a new regulator needed, or do additional powers to be given to an existing regulator?
No. The position in respect of financial sanctions has not changed. The Office of Financial Sanctions Implementation was established on 1 April 2016 (pre-Brexit referendum). Part 8 of the Policing and Crime Act 2017 creates powers for HM Treasury to impose monetary penalties for breaches of financial sanctions. OFSI will apply these powers.
Export control will continue to fall under the remit of the Department for International Trade.
Is there an existing "equivalence" or "recognition" regime for recognising Third Country regulatory regimes?
No. Sanctions are set at the EU level and implemented by Member States. There is no mechanism for recognising Third Country regulatory regimes.
Does current UK government policy mean that (subject to the terms of a future trade agreement between the UK and the EU) material changes to regulation or enforcement are likely post-Brexit?
It is likely that the UK will continue to implement EU sanctions legislation into UK law and work with the EU during the sanctions adoption process.
However, the new UK regime will give the UK the opportunity to create sanctions regimes that are broader than those regimes determined at the UN or EU level.
Enforcement of sanctions breaches has always been done on a Member State level, with each Member State being responsible for putting in place secondary legislation to create the offence of breaching EU sanctions. The enforcement regime, therefore, is unlikely to change post-Brexit.
What should businesses be doing now to prepare for Brexit?
Continue to make sanctions compliance a priority. Although significant enforcement action for sanctions breaches has not taken place since OFSI was established, it is likely that the UK will take a robust approach sanctions compliance. You should therefore ensure that:
- you have a robust sanctions compliance policy in place;
- the policy is widely known in the business, with a stress-tested escalation structure that includes reporting any breach to the OFSI; and
- all staff members receive training so that they are able to spot red-flags and escalate the matter appropriately.