Russian Sanctions – how they may affect you or your business
The UK Government recently imposed sanctions on Russia in light of the ongoing crisis in Ukraine. Asset freezes have been imposed on a number of individuals and entities. More information on individuals and entities subject to an asset freeze (“designated persons”) can be found on the UK Government’s website: https://www.gov.uk/government/publications/financial-sanctions-consolidated-list-of-targets
This is a quickly developing area and only yesterday (24 March 2022) the Foreign Secretary announced 65 new sanctions against a number of individuals and industries. Further recent developments to the UK Government’s regime are that Russia is being denied access to the Most Favoured Nation tariff for hundreds of their exports. A number of goods (including vodka) will also face an additional 35% tariff (in addition to current tariffs). The UK is also banning the export of high-end luxury goods to Russia (including luxury vehicles, high-end fashion and works of art).
The sanctions cover trade, financial services, energy and technology and the regime seeks to encourage Russia to stop its actions in destabilising Ukraine, by isolating and excluding Russia from the UK’s financial system. The Russia (Sanctions) (EU Exit) Regulations 2019 form part of the regime, but the Sanctions (EU Exit) (Miscellaneous Amendments) (No. 2) Regulations 2020 and the Sanctions (EU Exit) (Miscellaneous Amendments) (No. 4) Regulations 2020 should be reviewed alongside the Russia (Sanctions) regulations. It should also be noted that the guidance recognises crypto assets as an economic resource, so they are caught by the sanctions regime.
The sanctions regime has introduced measures such as:
- Prohibiting transactions with the Central Bank of the Russian Federation, Russian Ministry of Finance and Russian National Wealth Fund
- Prohibiting UK financial or credit institutions from processing sterling payments or continuing a banking relationship with a designated person
- Extending the prohibitions on securities and money-market instruments
- Extending the prohibitions on issuing loans and credit
- Trade and aviation sanctions measures, including sanctions on products which could have military and civilian uses
There is a legal obligation to report to OFSI if you know or suspect that a breach of the sanctions regime has occurred.
You should be mindful of your responsibilities under the regime and consider the following:
- Are you/your business a UK entity, British national, UK company or branch of a UK company operating overseas? If so, you must adhere to the UK Government’s sanctions (failure to comply could potentially result in criminal proceedings, penalties and reputational damage).
- Are you contracting with/negotiating with any person or business who is sanctioned under the UK Government’s regime (a designated person)?
- Are you a financial institution/bank? The regime prohibits UK credit/financial institutions from establishing or continuing a banking relationship with a sanctioned person/entity if the UK organisation knows, or has reasonable cause to suspect, that the banking relationship is with a sanctioned person/entity. The regime prohibits UK credit/financial institutions from processing sterling payments to/from or via a sanctioned person/entity or a credit/financial institution owned or controlled by a designated person if the UK entity has reasonable cause to suspect that the sterling payment is to, from or via a designated person.
- Are you providing financial services or funds relating to goods which could be restricted by the UK Government’s regime?
The risks of failing to comply with the sanctions regime are potentially facing criminal proceedings, penalties and reputational damage. Bermans can help you understand your obligations and responsibilities. Please contact us to discuss.
Please note, this article is a general summary of the UK Government’s sanctions regime. It is not intended to constitute legal advice, which will differ depending on your circumstances. This information was correct at the time of writing.