Strict liability is all the rage these days.
From OFAC to OFSI, the trend toward strict liability is picking up and is unlikely to abate.
Never mind those pesky determinations of intent. They’re so subjective.
Nope, all the cool regulators are heading to the strict liability side, and we need to know what to do about it.
Strict liability means that any violation of the law counts against you, even if the individual or company didn’t know that the law existed.
Strict liability laws are scary because it’s easy to be caught by in a world of hurt with no way out.
Starting June 15…
Starting June 15, the UK’s Office of Financial Sanctions won’t have to prove that individuals or companies knew or should have known they were violating UK sanction measures. Instead, strict liability will be imposed.
The shift applies to all civil enforcement of all sanctions implemented in the UK, including those related to the Russian invasion of Ukraine.
The Director of OFSI (the enforcers of sanctions in the UK), wrote that “This change will strengthen OFSI’s ability to take appropriate enforcement action against persons…that fail to ensure they are not dealing with sanctioned entities.”
Other Strict Liability Fun
The U.S. has had many sanctions-related laws and regulations imposing strict liability.
Many recent sanctions issued against Russia are strict liability offenses. There are also sanctioning instruments with strict liability relating to North Korea, Iran, and Hizballah, among others.
The new strict liability offenses in the UK continue the trend there. The Bribery Act of 2010 shocked the compliance world with the new strict liability corporate offense of failing to prevent bribery. In 2017, the UK doubled-down with the new failure to prevent tax evasion strict liability offense.
Reversing the Disincentive
Matthew Burn, a lawyer with Kingsley Napley in London, said that “the aim is to encourage companies of all types to institute some form of sanctions due diligence. This makes clear there’s nothing to be gained from covering your eyes.”
When related to FCPA offenses, the legal standard for culpability relies on whether the company “knew or should have known” that the promise, offer, or execution of a bribe was present. When it comes to sanctions, some have argued that not screening or not knowing can be better than being in a position to know.
Good News on the Mitigation Front
Still, there is good news.
Under the UK Bribery Act, companies with “adequate procedures to prevent bribery” are afforded a defense, as are companies with “reasonable prevention procedures” for tax evasion under the Corporate Criminal Offenses.
In the U.S., OFAC will “consider favorably” a company with a violation that either has a good sanctions compliance program or institutes one after they’ve found a problem. And, of course, the DOJ will evaluate whether an offending company has a good compliance program during the course of an investigation, which can mitigate fines and penalties under the Federal Sentencing Guidelines.
In addition, the OECD (Organization for Economic Co-operation and Development) listed the following countries as giving credit for having a strong compliance program with respect to antitrust/competition: Australia, Brazil, Canada, Chile, Germany, Hong Kong; China, Hungary, India, Italy, Japan, Malaysia, Netherlands, Peru, Romania , Singapore, Spain, Switzerland, UK, and the US.
What to Do Now
Here’s what to do with this information:
- Explain strict liability to your boss, executives and/or board. Make sure they’re aware of the risks.
- If at all possible, get some sort of sanctions screening software to automate the searching. There are changes literally everyday – it’s nearly impossible to keep track of them yourself.
- Keep improving your compliance program. Mitigation exists for many strict liability offenses and having a good program will get you credit if things go wrong.
- Make sure you’re on the list of a reputable law firm for client alert emails highlighting new sanctioning instruments and other important legal updates.
Strict liability is easier to manage than proving intent or knowledge, so it is appealing to prosecutors and regulators. The trend is unlikely to abate, so it pays to be prepared now.