Rena Lalgie heads the Office of Financial Sanctions Implementation, or OFSI, which was created within the U.K. Treasury in 2016 to implement and enforce financial sanctions and to help firms better understand them. She has spent more than 15 years in public service, working in different roles in the Home Office, the Cabinet Office, the Department for Business, Innovation and Skills, and most recently as director of operations at the U.K. Trade and Industry, which is now the Department for International Trade. In Ms. Lalgie’s first interview with a major publication, she discusses OFSI’s new enforcement capabilities, the impact of Brexit on the U.K.’s financial sanctions programs, and corporate best practices.
What are the most typical kinds of enforcement actions that OFSI has taken since being created?
Ms. Lalgie: Enforcement action has tended to focus on preventing and stopping non-compliance and ensuring compliance improves in the future. We’ve used our information powers on numerous occasions to require companies which haven’t complied to tell us how they intend to improve their systems and controls in future. This signals that we won’t accept actions that may contravene financial sanctions and that, if these continue, they could lead to criminal prosecution. The new penalties fill the gap between prevention and criminal prosecution. Other measures being brought in by the Policing and Crime Bill will also strengthen enforcement, such as increasing the maximum criminal penalties for financial sanctions breaches.
How many inquiries does OFSI field in any given week from corporations? What is the most misunderstood area of sanctions implementation by businesses?
Ms. Lalgie: The number of enquiries we get from businesses and individuals can vary hugely from week to week. In 2015, the Treasury dealt with around 2,500 enquiries from business and the public regarding financial sanctions. Apart from general compliance enquiries, where individuals contact us to check if they can legally do something, and questions around specific country sanctions, many relating to Russia and Iran, we get lots of enquiries on ‘partial matches’–when a company identifies someone who may be a designated person, by referring to our published list, but isn’t sure. We normally work through other identifiers with the company, such as date of birth, to help them decide whether the person they’re dealing with is a designated person.
What is the most important action for a company to take to avoid falling foul of a sanctions violation?
Ms. Lalgie: Know your customers and promote active awareness among relevant staff of high-risk areas. If you do business with a country on the sanctions list, you need to be aware of what actual sanctions are in place. Companies doing business in certain overseas territories should definitely be more vigilant, whatever their goods and services. Companies must also make sure that they have appropriate procedures in place across the organisation and that these are understood by staff. These need to be kept up-to-date and continually monitored. Where sanctions are in place, companies should also recognise that it’s illegal to make any economic resources available, even on credit, without getting an OFSI license in advance.
With the expected ability to impose cash penalties on sanctions violations under the new bill, does OFSI expect to see a drop in the number of offenses? How effective a deterrent will cash penalties be?
Ms. Lalgie: The best kind of enforcement is 100% compliance, but measuring deterrence is difficult– you’re trying to understand why something doesn’t happen. I suspect that reaction will vary according to awareness of financial sanctions–we’ve already started raising awareness in more than just the obvious sectors such as the financial and legal sectors. And I’m keen for us to do more. I will remain focused on administering the penalty system in a way which will be fair, transparent, and robust as they’re an important part of a package of new measures to tackle non-compliance.
With Brexit on the horizon, how will the U.K.’s sanctions landscape be changed?
Ms. Lalgie: The government is totally committed to maintaining sanctions in support of our national security and foreign policy priorities. We remain a member of the E.U. and will continue to play an active role as a member while we are. We’re also still a proactive U.N. Security Council member. The outcome of the negotiations will have a significant impact on how we take forward work on sanctions. We are currently working through potential options, including requirements for new legislation and resource implications. This is important from both a foreign policy and trade and finance perspective. Regardless of the final approach, the government would look to continue working closely with key partners on sanctions, including the E.U.
The U.K. implements all E.U. and U.N. sanctions. Are there any sanctions imposed directly by the U.K.?
Ms. Lalgie: The U.K. imposes its own financial sanctions directly under TAFA [Terrorist Asset-Freezing Etc. Act 2010]. It also enforces, through TAFA, financial sanctions under the EU‘s terrorist asset-freezing regime. These collectively form the Terrorism & Terrorist Financing financial sanctions regime. Some E.U.-wide terrorism listings originally derive from U.K. listings. We also have two persons listed under ATCSA [Anti-terrorism, Crime and Security Act 2001] because of their involvement in the assassination of Alexander Litvinenko.
How large is OFSI’s team at the moment, and what are their main functions?
Ms. Lalgie: The team functions focus on implementing financial sanctions and terrorist asset freezes, working closely with partners and law enforcement on serious breaches; improving compliance with financial sanctions through awareness, support and guidance; and managing the risks associated with what we do.
What is OFSI’s role in helping prevent money laundering?
Ms. Lalgie: We’re focused on financial sanctions while anti-money laundering is handled by another part of the Treasury–it’s outside our remit. However, there is an overlap in stakeholders as many compliance teams within firms cover both anti-money laundering and financial sanctions. And a number of issues — such as due diligence requirements and de-risking–span both anti-money laundering and financial sanctions. We’re keen to ensure a joined-up approach in what we do and work closely with other Treasury teams, and we frequently speak at conferences that cover both so that we can reach the right people.