Sanctions tracker – latest UK sanctions imposed on Russia

Further to our post yesterday, we set out below the latest UK developments in response to the conflict in Ukraine. As ever, the position continues to change rapidly and we will continue to provide updates via this blog.

Further designations

On 1 March, the UK’s Office of Financial Sanctions Implementation (“OFSI”) announced two further designations: Russian Direct Investment Fund and its CEO. Both are now subject to the UK’s existing asset freeze measures.

New General Licences

On the same day, OFSI published two further General Licences (“GLs”), both of which relate to VTB Capital and its UK subsidiaries.

• GL INT/2022/1280976 applies to “relevant authorities”, namely those involved in the UK regulation of financial services, including the Financial Conduct Authority, the Financial Services Compensation Scheme, the Prudential Regulation Authority, and the Bank of England. The GL provides that anything may be done by a relevant authority in respect of VTB Capital or its UK subsidiaries for the purposes of the functions of that authority. This includes prudential supervision or protecting, maintaining or enhancing the stability of the UK’s financial system. The GL expires on 1 March 2023. OFSI has also issued a publication notice in connection with this GL.
• GL INT/2022/1280876 provides that VTB Capital and its UK subsidiaries (defined as the “UK Subsidiaries”) may, until 1 March 2023, make certain payments, namely in respect of:
  • basic needs including payment of insurance premiums, fees for property management services, remuneration/allowances/pensions of employees, tax, rent/mortgage payments and utility payments;
  • reasonable fees or service charges arising from the routine holding and maintenance of their frozen funds or economic resources; and
  • reasonable professional fees for the provision of legal services or reasonable expenses associated with the provision of legal services.

The GL authorises any person to receive payments in respect of the above, and “relevant institutions” (financial institutions, clearing houses, counterparties, or payment systems operators) to process such payments. When making a payment under the GL, the UK Subsidiary is required to provide written notice to OFSI and to retain accurate, complete and readable records for a minimum of six years. The publication notice relating to this GL is available here.

New sanctions legislation (in force from 1 March)

The Russia (Sanctions) (EU Exit) (Amendment) (No. 4) Regulations 2022 were published on 1 March and amend the Russia (Sanctions) (EU Exit) Regulations 2019 (the “Russia Regulations”) by introducing restrictions on Russian ships, as summarised below:

• prohibition on entry to UK ports;
• power to give movement or detention directions; and
• refusal to register ships in the UK.

The restrictions apply to (i) ships owned, controlled, chartered or operated by a designated person or a person connected with Russia, (ii) ships flying the flag of Russia, (iii) ships registered in Russia, or (iv) specified ships (which may be specified by the Secretary of State if used for any activity whose object or effect is to contravene or circumvent any provision of the Russia Regulations).

The Russia (Sanctions) (EU Exit) (Amendment) (No. 5) Regulations 2022 (the “Amendment No 5 Regulations”) also came into force on 1 March and add to the Russia Regulations a prohibition on the provision of financial services for the purpose of foreign exchange reserve and asset management to:

• the Central Bank of the Russian Federation;
• the National Wealth Fund of the Russian Federation;
• the Ministry of Finance of the Russian Federation; or
• a person owned or controlled (directly or indirectly) by any of the above or a person acting on behalf of or at the direction of any of the above.

“Foreign exchange reserve and asset management” means activities relating to the reserves or assets of the above entities, including money market instruments, foreign exchange, derivative products (including futures and options), exchange rate and interest rate instruments (including products such as swaps and forward rate agreements), transferable securities, other negotiable instruments and financial assets (including bullion), and special drawing rights.

OFSI may grant licences in respect of activity which would otherwise be prohibited under this provision on the following grounds:

• humanitarian assistance;
• financial regulation (i.e. authorising acts done by a financial authority such as the Financial Conduct Authority, Prudential Regulation Authority or Bank of England);
• financial stability of the UK;
• safety and soundness of a UK financial services firm; or
• extraordinary situations.

Economic Crime Bill (measures not yet in force)

As alluded to in previous statements by the Prime Minister Boris Johnson, the UK has also brought forward the publication of the planned Economic Crime Bill, published as the Economic Crime (Transparency and Enforcement) Bill  (the “Bill”).

A more detailed briefing on the provisions of the Bill will follow, however, a high level of changes introduced by the Bill appears below.

• Establishment of a register of overseas entities and their beneficial owners, and a registration requirement for overseas entities that own land. A factsheet on the register of overseas entities is also available.
• Amendments to the existing provisions in the Proceeds of Crime Act 2002 regarding unexplained wealth orders (“UWOs”), including providing that, where the respondent to a UWO is an entity, law enforcement can also apply for a UWO against a “responsible officer” of the relevant entity, namely a director, manager, secretary or similar (or a partner where the entity in question is a partnership).
• Amendments to the Policing and Crime Act 2017 which would allow OFSI to impose monetary penalties for the breach of financial sanctions on a strict liability basis (i.e. ignoring any requirements in the underlying sanctions legislation for the person to have acted knowingly or with reasonable cause to suspect). OFSI will also be given the power to publish reports in cases where a monetary penalty has not been imposed but where it is satisfied (on the balance of probabilities) that a person has breached a prohibition or failed to comply with an obligation imposed under financial sanctions legislation.

The UK government’s statement on the publication of the Bill also refers to the publication of a white paper on the reform of Companies House to “clamp down on illicit finance and improve corporate transparency”, and to the new “kleptocracy cell” within the National Crime Agency, which is being stood up immediately to investigate sanctions evasion.