UK Sanctions on Russia

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UK and Russian Flag

Andre BywaterPost By: André Bywater (andre.bywater@corderycompliance.com), Lawyer (Partner) with Cordery Compliance, London, UK (https://www.corderycompliance.com/)

 

What is this about?

While the US sanctions on Russia may be getting most of the headlines, they are not the only ones. The UK (along with many other countries) has also imposed them. This blog looks at this in brief. The views expressed are those of the author and do not constitute legal or other professional advice – if you require legal or other advice you should consult your professional adviser for this.

What is the UK sanctions regime?

The UK put legislation in place some time ago to be able to deal post-Brexit with sanctions under the Sanctions and Anti-Money Laundering Act 2018 (SAMLA 2018). 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;
  • Trade sanctions – measures designed to disrupt various trade activities involving particular individuals, prescribed countries etc., including in connection with goods, technology, land, military activities, and/or services;
  • Immigration sanctions – these are basically travel bans to neither enter nor remain in the UK; and,
  • Aircraft and shipping sanctions – measures imposing restrictions on the movement of aircraft and ships.

There may be exceptions to the prohibitions or requirements made under SAMLA 2018, including granting licences.

In territorial terms SAMLA 2018 is enforceable against those within the UK and also UK individuals abroad. The Treasury’s Office for Financial Sanctions Implementation (OFSI) is the main agency that deals with financial sanctions enforcement issues, including issuing licences. Failure to comply with financial sanctions legislation or to seek to circumvent its provisions is a criminal offence.

The latitude under the UK sanctions regime is broader than the EU sanctions framework which allows for UK sanctions to operate more flexibly than their EU equivalents, so there may be divergences between the UK and EU sanctions regimes in some respects.

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. Following the Russian invasion of Ukraine, the UK government has been imposing further sanctions aimed at encouraging Russia to cease actions destabilising Ukraine or undermining or threatening the territorial integrity, sovereignty or independence of Ukraine.

After an initial set of sanctions imposed on a number of further individuals and entities subjecting them to an asset freeze, other much wider and deeper sanctions have also been imposed, including:

  • Restrictions to prohibit UK individuals from undertaking financial transactions involving the Central Bank of the Russian Federation, the Russian National Wealth Fund, and the Ministry of Finance of the Russian Federation;
  • Restrictions against Russian financial institutions;
  • Measures to prevent Russian companies from issuing transferable securities and money market instruments in the UK, in addition to the prohibition of the Russian state raising sovereign debt in the UK;
  • A power to prevent designated banks from accessing UK Sterling and clearing payments through the UK – banks subject to this measure will be unable to process any payments through the UK or have access to UK financial markets;
  • A prohibition against the export of a range of high-end and critical technical equipment and components in sectors including electronics, telecommunications, and aerospace; and,
  • A ban on Aeroflot and all other Russian commercial and private jets from UK airspace, and a ban on the entry of Russian ships into UK ports.

UK sanctions will also apply to Belarussian individuals and organisations that have supported the Russian invasion.

It also looks like there are further sanctions to come.

What about EU sanctions?

The EU has also been imposing its own sanctions on Russia along with other measures, including more recently:

  • A ban on transactions with the Russian Central Bank;
  • A ban on the overflight of EU airspace and on access to EU airports by Russian carriers of all kinds;
  • Sanctions on a number of persons and entities;
  • Freezing the assets of Vladimir Putin, the President of Russia, and Sergey Lavrov, Minister for Foreign Affairs of Russia; and,
  • A € 500 million support package to finance equipment and supplies to the Ukrainian armed forces.

Takeaways

With regard to sanctions in general, organisations should consider doing the following:

  • Undertaking a rigorous 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 licenses 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.