Sanctions tracker – round-up of recent UK sanctions developments

In this post, we summarise recent developments regarding the UK sanctions imposed on Russia.

New asset freeze designations

On 19 May, the UK announced the addition of 86 further entries to its asset freeze list. The targeted individuals and entities include:

• individuals and entities said to be connected to the theft and resale of Ukrainian grain;
• companies connected to Rosatom, which produce advanced materials and technology;
• individuals and entities connected to metals production in Russia;
• individuals and entities connected to transport services, including six major shipping companies;
• executives of defence companies and certain entities operating in the defence industry; and
• five financial institutions.

A full list of the new asset freeze targets is set out in HM Treasury’s notice which also confirms that three individuals have been removed from the list.

UK announces further trade sanctions

On the same day, Prime Minister Rishi Sunak announced the imposition of further sanctions against Russia, namely a ban on the import of Russian diamonds, copper, aluminium and nickel. The announcement states that legislation in respect of these new measures will be introduced ‘later this year’.

Notice to Exporters – trade sanctions circumvention

On 22 May the Export Control Joint Unit published a Notice to Exporters on trade sanctions circumvention (the ‘NTE’).

The NTE seeks to assist companies in managing the risk that Russian parties will seek to procure restricted goods via indirect and/or non-transparent routes and sets out various key risk indicators which may indicate an attempt to circumvent existing trade controls. The NTE notes that strong due diligence on counterparties and internal governance in relation to sanctions is essential and that, even on established counterparties, due diligence will need to be repeated at intervals to ensure that the risk has not changed.

New prior obligations general licence

Also on 22 May, the Office of Financial Sanctions Implementation (‘OFSI’) issued a new general licence (‘GL’): GL INT 2023/3024200.

The new GL permits designated persons (under both the Russia and Belarus sanctions regimes (‘DPs’)) to transfer funds or economic resources to UK persons in satisfaction of a contractual obligation of a DP, provided that:

• the obligation arose before the date on which the DP became designated;
• the payment is for the benefit of a UK person;
• the total value of the funds or economic resources due under any such contractual obligation does not exceed £200,000 (incl. VAT and allowing for market currency fluctuations); and
• with the exception of the processing of payments by a DP bank, no payments are directly or indirectly made to another DP.

The GL also permits the receipt of funds or economic resources in satisfaction of a prior obligation, under the same conditions as above.

The permissions in the GL only apply where there is a ‘clear, demonstrable and enforceable contractual obligation’ agreed prior to the DP’s designation. Importantly, the GL does not apply to a number of types of contractual obligation, which are listed in Annex A of the GL. This list comprises the following (all of which are defined in Annex A):

• bonds,
• derivative contracts / derivatives;
• credit default swaps;
• repo transactions;
• professional legal fees;
• ongoing prior obligations (i.e. pre-designation obligations where services have been provided post-designation);
• prior obligations over £200,000;
• non-DP bank accounts held with DP banks, i.e. the use or withdrawal of funds by a UK person from an account held at a DP bank; and
• obligations of non-DPs made through DP banks.

Anyone wishing to rely on the GL must report to OFSI within one month of receiving payment under the GL and is required to keep accurate, complete and readable records of any relevant activity for a minimum of six years.

Regular updates on sanctions and other developments that may impact businesses with interests or operations in Ukraine and/or Russia are available on our FSR and Corporate Crime Notes blog here.