New Financial Sanctions relating to Russia.
On 24th February 2022, HM Treasury issued a Financial Sanctions Notice which provides for the freezing of funds and economic resources of certain persons, entities or bodies and has been implemented subsequent to the conflict with Russia. The Notice confirmed that the Foreign, Commonwealth and Development Office updated the UK Sanctions List on GOV.UK; the list contains details of those designated under the regulations made under the Sanctions Act.
On the above date, a total of 11 entities were added to the consolidated list and are now subject to an asset freeze. There have also been amendments to two of the entities which are still subject to an asset freeze.
Further to the above, on 25th February 2022, Vladimir Vladimirovich Putin and Sergei Viktorovich Lavrov were added to the list and are now subject to an asset freeze. Information in respect of both the individuals and entities subject to the recently imposed sanctions can be found on the Government website.
The Office of Financial Sanctions Implementation (OFSI) maintains two lists of those subject to financial sanctions:
The consolidated list.
This is a list of all asset freeze targets listed under UK financial sanctions legislation and UN sanctions; the individuals and entities listed are known as “designated persons”.
List of entities subject to capital market restrictions
A separate list of entities subject to specific capital market restrictions. These entities are not contained on the Consolidated List.
Businesses should make sure sanctions relating to Russia are implemented effectively to ensure compliance and avert the risk of enforcement action from OFSI. Law enforcement may therefore consider prosecution for breach of financial sanctions; penalties involve both civil and criminal enforcement options. The monetary penalty OFSI has the power to impose is up to £1 million or 50% of the breach, whichever is higher. Breaching sanctions is a criminal offence and the most serious cases could shortly incur prison sentences of up to seven years.
Who has to comply with Financial Sanctions?
UK financial sanctions apply to all individuals and legal entities who are within, or undertake activities within, the UK’s territory and all UK nationals and legal entities established under UK law, including their branches, must also comply with UK financial sanctions. This is irrespective of where their activities take place.
What do these changes mean for employers?
If financial sanctions apply, you are prohibited from carrying out certain activities or behaving in a certain way. Financial Sanctions involve a range of restrictions; the most common form is asset freezing.
Where the financial sanction is an asset freeze, it is generally prohibited to:
· deal with the frozen funds or economic resources belonging to or owned, held or controlled by a designated person;
· make funds or economic resources available, directly or indirectly, to, or for the benefit of, a designated person;
· engage in actions that, directly or indirectly, circumvent the financial sanctions prohibitions.
The funds and economic resources are to be frozen immediately by the person in possession or control of them. An asset freeze does not involve a change in ownership of the frozen funds or economic resources, nor are they confiscated or transferred to OFSI for safekeeping.
What must you do?
If you know or have ‘reasonable cause to suspect’ that you are in possession or control of, or are otherwise dealing with, the funds or economic resources of a designated person you must:
· freeze them;
· not deal with them or make them available to, or for the benefit of, the designated person, unless:
o there is an exception in the legislation that you can rely on; or
o you have a licence from OFSI
· You must always report them to OFSI
How to ensure compliance operationally
Check whether you maintain accounts or hold funds or economic resources for the designated persons set out in the UK Sanctions List. If the check comes back positive, freeze such accounts and other funds or economic resources and any funds which are owned or controlled by a designated person. You must then report your findings to OFSI, together with any additional information that would facilitate compliance with Regulations. You must also provide any information concerning the frozen assets of designated persons that OFSI may request. Information reported to OFSI may be passed onto the other regulatory authorities or law enforcement.