What is this about?
The UK has announced new sanctions to be imposed on entities and individuals connected with Russia. This brief article is about these new sanctions along with an overview of the UK sanctions regime.
What are sanctions?
Generally-speaking sanctions can be divided into:
- Those which restrict trade and business regarding certain countries and often impose prohibitions or licensing requirements; and,
- Those in the sphere of finance which restrict dealings in money and providing financial service and funds to certain countries, individuals or entities.
What are the UK sanctions?
The UK put legislation in place some time ago to be able to deal post-Brexit with sanctions (and money-laundering) under the Sanctions and Anti-Money Laundering Act 2018 (“SAMLA 2018”, which can be found here: https://www.legislation.gov.uk/ukpga/2018/13/contents/enacted).
Under SAMLA 2018 UK Ministers have the power to make sanctions regulations either:
- To comply with a UN or other international regulation; or,
- To achieve one of a number of defined so-called “discretionary purposes” including preventing terrorism, promoting national and international peace and security, and responding to gross human rights violations.
Where a Minister seeks to introduce sanctions regulations for a “discretionary purpose” they must be satisfied that:
- The purpose of the measure is one permitted under SAMLA 2018;
- There are good reasons to pursue that purpose; and,
- The imposition of sanctions is a reasonable course of action for achieving that purpose.
The different types of sanctions that can be imposed under SAMLA 2018 are essentially:
- Financial sanctions – measures designed to have an adverse financial impact on particular individuals or corporate entities;
- Immigration sanctions – here particular individuals become “excluded persons” for the purposes of the Immigration Act 1971, so that they may not enter or remain in the UK;
- Trade sanctions – measures designed to disrupt various trade activities involving particular individuals, prescribed countries and/or specified ships, including in connection with goods, technology, land, military activities, and/or services (generally, or of a prescribed description);
- Aircraft and shipping sanctions – measures designed to impose prohibitions or requirements or to authorise directions with respect to aircraft connected with particular individuals and/or prescribed countries & measures designed to do the same with respect to ships that are connected with particular individuals and/or prescribed countries, and/or that are specified ships.
In territorial terms SAMLA 2018 is enforceable against those within the UK and also UK individuals abroad.
There may be exceptions to the prohibitions or requirements made under SAMLA 2018, and/or ministers may issue licences and/or direct exceptions to those prohibitions or requirements.
The UK has adopted its own particular approach to sanctions in certain respects, e.g. sanctions in the form of an asset freeze may be adopted on individuals by description rather than by specific name.
The latitude allowed to ministers under the UK sanctions regime is broader than the EU sanctions framework, allowing for UK sanctions to operate more flexibly than their EU equivalents. This fact, together with an historic reluctance from some in the EU to sanction some individuals connected with Russia, may result in the UK diverging from the EU sanctions regime in some respects.
The Foreign, Commonwealth & Development Office leads on UK foreign policy for sanctions, and HM Treasury’s Office for Financial Sanctions Implementation (OFSI) leads on policy for domestic terrorism sanctions. OFSI is also the main agency that deals with financial sanctions enforcement issues, including making exceptions and issuing licences.
What are the new UK sanctions concerning Russia?
The UK already has various sanctions relating to Russia in place, including with regard to the situation in Ukraine (for more see here: https://www.gov.uk/government/publications/russia-sanctions-guidance/russia-sanctions-guidance).
Following recent developments in Russia, on 22 February 2022 the UK government imposed further (financial) sanctions freezing funds and economic resources of certain persons, entities or bodies involved in destabilising Ukraine or undermining or threatening the territorial integrity, sovereignty or independence of Ukraine, or obtaining a benefit from or supporting the Government of Russia (see here: https://www.gov.uk/government/publications/financial-sanctions-ukraine-sovereignty-and-territorial-integrity).
The following individuals and entities are now subject to an asset freeze:
- Gennadiy Nikolayevich Timchenko;
- Boris Romanovich Rotenberg;
- Igor Arkadyevich Rotenberg;
- Bank Rossiya;
- Black Sea Bank for Development and Reconstruction;
- Joint Stock Company Genbank;
- IS Bank; and,
- Public Joint Stock Company Promsvyazbank.
The individuals are also banned from travelling to the UK.
The OFSI’s official notice about these sanctions states that organizations and individuals must:
- Check whether any accounts are maintained or any funds or economic resources are held for the persons and entities set out above;
- Freeze such accounts, and other funds or economic resources and any funds which are owned or controlled by the persons and entities set out above;
- Refrain from dealing with the funds or assets or making them available (directly or indirectly) to such persons, unless licensed by the OFSI;
- Report any findings to the OFSI, together with any additional information that would facilitate compliance with the sanctions regulations;
- Provide any information concerning the frozen assets of so-called “designated persons” that the OFSI may request.
As the notice also points out, failure to comply with financial sanctions legislation or to seek to circumvent its provisions is a criminal offence.
These latest sanctions are expected to be just the first – later sanctions may be far more extensive. If your organisation is dealing with individuals or entities close to the current Russian regime, even if no sanctions apply, you may want to consider extra due diligence given that the scope of the sanctions regime may be extended. There are examples of some of the work we have done in this area here https://www.corderycompliance.com/sanctions/.
With regard to sanctions in general, organizations should consider doing the following:
- Undertake a rigorous due diligence screening against individuals and entities on sanctions lists;
- Do 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;
- Update 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,
- Train staff on sanctions issues.
We spoke at a recent 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 report about sanctions issues here: https://www.corderycompliance.com/news/.
For more information please contact André Bywater or Jonathan Armstrong 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)207 075 1785|