What’s this about?
The UK sanctions regime concerning Russian individuals and entities with regard to the war in Ukraine has continued to develop; for more about how the UK sanctions regime works see the What is the UK sanctions regime? section of our article here https://www.corderycompliance.com/add65uksanctions/. This article sets out in brief the latest developments.
What are the most recent substantive and other developments concerning UK sanctions on Russia?
The most recent sanctions developments include the following:
- On 4 July 2023 the UK’s Foreign, Development and Commonwealth Office (“FDCO”) amended the Russia sanctions guidance, introducing guidance on the addition of the prohibition of legal advisory services to the UK Russia sanctions regime. For more about this see the “Russian sanctions: guidance” here: https://www.gov.uk/government/publications/russia-sanctions-guidance#full-publication-update-history;
- On 6 July 2023 the UK’s Office of Financial Sanctions Implementation (“OFSI”) issued an official Notice where one entry on the consolidated list was removed, and so is no longer subject to an asset freeze;
- On 7 July 2023 the OFSI issued an official Notice where one entry on the consolidated list was amended and is still subject to an asset freeze;
- On 17 July 2023 the OFSI published an official Notice where fourteen entries were added to the consolidated list and are now subject to an asset freeze. These include eleven individuals involved in the forced deportation of Ukrainian children, two propagandists and a Russian Minister. Ten entries were amended and are still subject to an asset freeze;
- On 17 July 2023 the Financial Conduct Authority (“FCA”) published a webpage setting out what confirmations an issuer needs to provide to the FCA in relation to sanctions under the UK Russia and Belarus sanctions regimes before the FCA can begin work on a vetting, guidance or listing application request. For more about this see here: https://www.fca.org.uk/markets/listing-transactions-russia-belarus-sanctions;
- On 20 July 2023 the OFSI published an official Notice where one entry on the consolidated list was removed and one entry was amended;
- On 20 July 2023 the FCDO reported the issuing of thirteen new sanctions for individuals and businesses linked to the actions of the Wagner Group (already sanctioned in the UK and now also considered as a terrorist organization) causing violence and instability in Africa. These include the designation of three top officials in mercenary groups in Mali and the Central African Republic as well as five businesses and individuals involved in threatening peace and stability in Sudan. For more on this see here: https://www.gov.uk/government/news/uk-sanctions-wagner-group-leaders-and-front-companies-responsible-for-violence-and-instability-across-africa;
- On 21 July 2023 the OFSI published an official Notice where one duplicate entry on the consolidated list was removed;
- On 26 July 2023 the OFSI updated its financial sanctions guidance with changes about the OFSI’s refusal to issue licences, outlining the various measures which can be taken in the event of a refusal. The options available are to: re-apply with new or supplementary evidence or new supporting arguments, re-apply under a different derogation (where applicable) or seek to challenge the decision in court. For more information see Section 6.12 of the “Financial sanctions: guidance” here: https://www.gov.uk/government/publications/financial-sanctions-ukraine-sovereignty-and-territorial-integrity#full-publication-update-history;
- On 28 July 2023 the OFSI published an official Notice where two entries on the consolidated list were amended, and are still subject to an asset freeze;
- On 31 July 2023 the OFSI published an official Notice where six entries were added to the consolidated list and are now subject to an asset freeze. One entry has been amended and is still subject to an asset freeze;
- On 1 August 2023 the OFSI issued a General Licence which allows payments and other permitted activities to take place in relation to insolvency proceedings associated with two Irish GTLK Companies, which takes effect from 1 August 2023 and expires on 31 July 2025;
- On 1 August 2023 the FCDO issued sanctions actions against six key figures involved in the trial of Vladimir Kara-Murza, after his appeal was rejected. The dual British-Russian national, who is an opposition politician, journalist and human rights activist, had been charged with treason and spreading “knowingly false information” about the Russian armed forces;
- On 4 August 2023 the OFSI updated its compliance forms, and instructions for using them, on the UK Russian Oil Services ban;
- On 8 August 2023 the FCDO announced twenty-five new sanctions that target Russia’s access to foreign military equipment. Twenty-two of these sanctions target individuals and businesses outside of Russia, whilst the remaining three sanctions are against Russian companies that import UK-sanctioned western microelectronics used in Russian military equipment;
- On 8 August 2023 the OFSI published an official Notice where nineteen entries were added to the consolidated list, and are now subject to an asset freeze. One entry was corrected and is still subject to an asset freeze;
- On 11 August 2023 the FCDO updated the “Russia sanctions: guidance” introducing a licensing ground for the restrictions on legal advisory services. For more on this see here: https://www.gov.uk/government/publications/russia-sanctions-guidance#full-publication-update-history;
- On 11 August 2023 the UK’s Export Control Joint Unit released a General Licence for the provision of certain legal advisory services which allows for the legal offering of advisory services to be direct or indirect, regarding following specific laws or regulations. These rules include restrictions, in relation to Russia, which would otherwise be forbidden under the UK Russian sanctions regime. For more on this see here: https://www.gov.uk/government/publications/notice-to-exporters-202316-new-general-trade-licence-russia-sanctions-legal-advisory-services, and here: https://www.gov.uk/government/publications/general-trade-licence-russia-sanctions-legal-advisory-services;
- On 17 August 2023 the OFSI published an official Notice where one entry on the consolidated list was amended, which is still subject to an asset freeze; and,
- On 31 August 2023 the OFSI used its new disclosure enforcement power for the first time. Under this power the OFSI can publish details of financial sanctions breaches where the OFSI decides that the breaches are not serious enough to justify a civil monetary penalty. For more on this see here: https://ofsi.blog.gov.uk/2023/08/31/ofsi-uses-disclosure-power-for-first-time/, and here: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1181392/Wise_Payments_Limited_Disclosure_Notice_31AUGUST23.pdf.
Whilst the UK’s Office of Financial Sanctions Implementation (“OFSI”) is responsible for implementing and enforcing financial sanctions in the UK the UK’s Financial Conduct Authority (“the FCA”) is responsible for supervising regulated firms to help ensure that they maintain adequate systems and controls to mitigate the risk of breaching sanctions and facilitating evasion. Recently the FCA looked into financial services firms’ sanctions systems and controls and firms’ responses to increased sanctions due to Russia’s invasion of Ukraine.
The FCA engaged in a major programme of work assessing the systems and controls relating to sanctions compliance for over ninety firms across a range of sectors including retail banking, wholesale banking, wealth management, insurance, electronic money, and payments, to ensure that firms’ financial sanctions systems and controls were:
- Adequate and effective at addressing sanctions risk; and,
- Appropriate to respond swiftly to changes in UK sanctions regimes
This involved proactive assessments of firms’ controls, using a new analytics-based tool, as well as the use of specific intelligence and reporting.
The FCA found good practice, in the form of:
- A proactive approach by firms to identifying sanctions exposure to Russia;
- Firms’ sanctions screening systems; and,
- Tool calibration.
But, the FCA also found many deficiencies and “areas that need improvement”, namely with regard to:
- Governance and oversight: (a) senior management oversight of sanctions risks; (b) global sanctions policies; (c) over-reliance on third party sanctions screening tools; and, (d) contingency planning;
- Skills and resources;
- Screening capabilities;
- Customer Due Diligence (“CDD”) and Know your Customer (“KYC”); and,
- Breach reporting to the FCA.
The FCA will continue its supervisory focus on sanctions to ensure that firms have effective sanctions systems and controls, and it has stated that “Where we identify issues, we will seek out the root causes and ensure effective remediation, which could include the use of regulatory tools.”
More information about the FCA’s investigation can be found here: https://www.fca.org.uk/publications/good-and-poor-practice/sanctions-systems-and-controls-firms-response-increased-sanctions-due-russias-invasion-ukraine.
With regard to sanctions in general, organisations should consider doing the following:
- Undertaking a rigorous and thorough due diligence screening against individuals and entities on sanctions lists;
- Checking whether any accounts are maintained or any funds or economic resources are held for sanctioned persons and entities;
- Freezing sanctioned accounts, and other funds or economic resources and any funds which are owned or controlled by sanctioned persons and entities, and refraining from dealing with the funds or assets or making them available (directly or indirectly) to sanctioned persons (unless licences have been granted);
- Reporting any findings to the regulator and co-operating with any investigations that the regulator may undertake;
- Doing a contracts clauses check on relevant contracts to ensure that provisions concerning warranties, force majeure, termination, and, liability are all up to scratch as regards sanctions;
- Updating policies, procedures and risk assessments – be prepared to deal with sanctions breaches;
- Where possible, and of use, (either as an alternative or a complement to contract breach risk), considering obtaining insurance (export credit, political risk, and, trade disruption) against sanctions risks; and,
- Training staff on sanctions issues.
We last wrote about sanctions here: https://www.corderycompliance.com/russia-sanctions-0723-3/ and our other articles about sanctions can be found here: https://www.corderycompliance.com/category/sanctions/.
We spoke at an event about Russian sanctions, where we focused on sanctions policies & due diligence/screening issues https://www.corderycompliance.com/rbcc-dit-russia-uk-02-dec/.
We have also written about the UK Economic Crime (Transparency & Enforcement) Act 2022 here https://www.corderycompliance.com/uk-ecte-act-sanctions-russia-belarus/.
For UK official guidance about the UK sanctions on Russian see here https://www.gov.uk/government/collections/uk-sanctions-on-russia, and the UK sanctions list can be found here https://www.gov.uk/government/publications/the-uk-sanctions-list.
The UK Sanctions and Anti-Money Laundering Act 2018 can be found here https://www.legislation.gov.uk/ukpga/2018/13/contents/enacted.
For more information please contact Jonathan Armstrong or André Bywater who are lawyers with Cordery in London where their focus is on compliance issues.
|Jonathan Armstrong, Cordery, Lexis House, 30 Farringdon Street, London, EC4A 4HH||André Bywater, Cordery, Lexis House, 30 Farringdon Street, London, EC4A 4HH|
|Office: +44 (0)207 075 1784||Office: +44 (0)207 347 2365|