In the latest of our regular sanctions updates, we cover the latest UK and EU developments in response to the conflict in Ukraine. As ever, the position continues to change rapidly and we will continue to provide updates via the blog.
UK
New General Licences
On 4 March, the UK's Office of Financial Sanctions Implementation ("OFSI") published two additional General Licences ("GLs") as set out below.
GL INT/2022/1295476 is a "wind-down licence" which applies to the following designated persons:
- Bank Otkritie;
- Promsvyazbank;
- Bank Rossiya; Sovcombank; and
- VEB (together, the "DPs").
The GL provides that a person (other than the DPs, Novikombank or any entity owed or controlled by any of the DPs) may wind down any transactions to which it is a party, involving any of the above entities, including the closing out of any positions. Any person, relevant institution (financial institution, clearing house, counterparty or payment system operator), or the DPs, Novikombank or their subsidiaries may carry out any activity reasonably necessary to effect this.
This GL expires on 3 April 2022 and the relevant publication notice can be found here.
The second new GL relates to Sberbank. To recap, two GLs had previously been issued for the purposes of reg.17A of the Russia (Sanctions) (EU Exit) Regulation 2019 ("UK Regulation"), which prohibits certain sterling payments involving Sberbank and the other designated banks, and the provision of correspondent banking services to Sberbank and those banks. In respect of the previous two GLs:
- GL INT/2022/1277878 permits the maintenance of correspondent relationships with Sberbank and the processing of payments until 31 March 2022;
- GL INT/2022/1277877 permits the processing of payments for the making available of Relevant Energy Products (as defined) for use in the UK and expires on 24 June 2022.
The new GL INT/2022/1298776 relates to the restrictions under reg.18A of the UK Regulation, which prohibit the provision of "financial services" to the Central Bank, National Wealth Fund, Ministry of Finance, persons that they own/control directly or indirectly and persons acting on their behalf (thus including Sberbank). The new GL provides that, until 3 April 2022, a person may provide financial services to Sberbank, or a subsidiary of Sberbank, for the purposes of winding down that activity. As above, a person, relevant institution or Sberbank/its subsidiaries may carry out any activity reasonably necessary to effect this. It remains the case that at present Sberbank is not subject to asset freezing provisions.
In common with the other "wind down" GLs issued in respect of Russian designated persons, neither of the new GLs permits any act which the person carrying out the act knows, or has reasonable grounds for suspecting, will result in funds or economic resources being dealt with or made available in breach of the UK Regulations (save as permitted under the GL or any other licence granted under the Russia Regulations).
New OFSI guidance
Also on 4 March, OFSI published new Russia sanctions guidance (the "Guidance") which provides a high level overview of the amended financial sanctions applicable to Russia. The FAQ section of the Guidance has not yet been updated to reflect the recent changes to the Russia Regulations, so it may be that, when this has taken place, OFSI will add further guidance to assist companies in interpreting the various new restrictions that have been introduced.
The Guidance covers the following areas of restrictions:
- asset freezes;
- transferable securities and money market instruments (including splitting out the different securities within scope of the Russia Regulations based on date of issue, maturity and issuer);
- loan and credit arrangements;
- correspondent banking;
- foreign exchange reserve and asset management; and
- investment in relation to Crimea.
The Guidance also provides an overview of available licensing grounds in respect of these restrictions.
Proposed amendments to Economic Crime Bill (not yet in force)
In a 4 March press release, the Foreign Commonwealth & Development Office announced that the government would be putting forward a series of amendments to the Economic Crime (Transparency and Enforcement) Bill (the "Bill") to "allow the government to move faster and harder when sanctioning oligarchs and businesses associated with the Russian Government".
The stated intention of the amendments is to allow the UK to align more rapidly with individual designations imposed by other jurisdictions, in particular by removing the current "appropriateness" test in the Sanctions and Money Laundering Act 2018 ("SAMLA"). That test (contained in section 11(2) of SAMLA) provides that ministers cannot designate an individual or entity by name unless they consider that the designation of that person is appropriate, having regard to the purpose of the relevant regime-specific regulations, and the likely significant effects of the designation on that person. Removal of this test would mean that persons may be designated based on the minister having reasonable grounds to suspect that the person is or has been involved in a particular activity specified in the relevant regime-specific regulations (or is owned or controlled by, acting on behalf of, or is a member of or associated with such a person).
Various other amendments to the Bill have been proposed, including in relation to the deadline for overseas companies to register their beneficial owners and increasing penalties for non-compliance with the registration requirement.
The Bill will be expedited through all of its House of Commons stages on Monday (7 March), and the press release states that the government is seeking swift passage through the House of Lords in order to get Royal Assent as soon as possible. Please see our previous blogpost for more information on the Bill.
The press release also notes that the UK is also applying a full asset freeze to three more Russian banks, although no further designations had been announced at the time of writing.
EU
New sanctions whistleblowing process
On 4 March, the European Commission announced the rollout of a new whistleblower tool to facilitate the reporting of possible sanctions violations. This is a secure online platform through which whistleblowers (from anywhere in the world) can anonymously report "past, current or planned" EU sanctions violations.
If the Commission considers that the information received is credible, it will share the anonymised report, and any additional information gathered during its internal inquiry into the case with the national competent authorities in the relevant Member State.
The tool can be accessed here although the Commission also encourages (non-anonymous) reports by email.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.