On March 4, 2022, HM Treasury’s Office of Financial Sanctions Implementation (OFSI) published an updated version of its Russia guidance and issued two new general licences permitting the wind down of positions with Sberbank and involving Bank Otkritie, Promsvyazbank, Bank Rossiya, Sovcombank, and VEB. The UK government also put forward a series of amendments to the Economic Crime (Transparency and Enforcement) Bill proponents say is needed to crack down on corrupt elites and ramp up pressure on President Putin’s regime.
OFSI Updates Russia Guidance
OFSI’s updated and reissued Russia guidance reflects the amendments made to The Russia (Sanctions) (EU Exit) Regulations 2019 (Russia Regulations) since February 28, 2022, addressing the new restrictions that that have been introduced in respect of transferable securities, money-market instruments, loans and credit arrangements, correspondent banking relationships and the provision of financial services for the purpose of foreign exchange reserve and asset management. The FAQ section of the guidance has not yet been updated to reflect the expanded scope of the Russia Regulations following the recent amendments.
New General Licences Issued
OFSI has issued two new general licences permitting persons subject to UK sanctions jurisdiction to wind down positions with a number of recently sanctioned Russian banks, as follows:
- INT/2022/1298776 – This general licence relates to the wind down of positions with Sberbank. Under the licence a person subject to UK financial sanctions jurisdiction may provide financial services to Sberbank or any entity owned or controlled by Sberbank (Sberbank Subsidiary) for the purpose of winding down that activity. The person, a relevant institution, Sberbank or a Sberbank Subsidiary also can carry out any activity reasonably necessary to effect this; and
- INT/2022/1295476 – This general licence concerns the wind down of positions involving Bank Otkritie, Promsvyazbank, Bank Rossiya, Sovcombank, and VEB (DPs). Under the licence a person – other than the DPs, Novikombank or any entity owned or controlled by any of the DPs (DP Subsidiary) – may wind down any transactions to which it is a party, involving the DPs, Novikombank or a DP Subsidiary, including the closing out of any positions. The person, a relevant institution, the DPs, Novikombank or a DP Subsidiary also can carry out any activity reasonably necessary to effect this.
Both new general licences took effect on March 4, 2022 and will expire on April 3, 2022.
Amendments to Economic Crime (Transparency and Enforcement) Bill
Prime Minister Johnson and Foreign Secretary Truss have issued a press release announcing a series of amendments to The Economic Crime (Transparency and Enforcement) Bill (Bill). In pertinent part, the amendments, if passed into law, would allow the UK to “align more rapidly with the individual designations imposed by the [UK’s] allies” such as the United States, European Union, Canada and Australia by introducing an urgent designation procedure.
The procedure would give the UK government the legal ability to sanction individuals on the basis of other countries’ designation decisions while it builds up its own evidential case for designation. According to press reports, designations under the procedure would be permitted for a 56 day period, allowing the UK government time to build a legal case in support of a designation.
Currently, the UK government is required to consider whether a particular designation would be appropriate having regard to the purposes of the particular UK regime under which the designation would be made and the likely significant effects the designation would have on the designated person. The proposed amendments to the Bill would remove this “appropriateness test,” enabling the UK government to act more quickly and make changes to further facilitate the designations of groups and individuals.
Foreign Secretary Truss said of the changes that they “will allow us to go faster and harder on those closest to Putin, including oligarchs, as we continue to ratchet pressure in the face of illegal and unprovoked Russian aggression.”
The Bill also contains provisions designed to strengthen the enforcement of UK financial sanctions. Under the current law, OFSI may only impose a monetary penalty for breaches of UK financial sanctions when it can prove on the balance of probabilities that an individual or company is in breach and knew or had “reasonable cause to suspect” that its activity was in breach.
The Bill proposes to remove this requirement with the effect that OFSI could issue a monetary penalty fine on a strict liability basis in circumstances where it is satisfied, again on the balance of probabilities, that a company or individual subject to UK sanctions jurisdiction has breached UK financial sanctions. This would make it easier for OFSI to impose financial penalties for violations of UK financial sanctions regimes in the future and is similar to the approach taken by the US Treasury Department’s Office of Foreign Assets Control (OFAC).
The Bill will be expedited through all its stages in the House of Commons on March 7, 2022 and the UK government is looking for the Bill to be passed swiftly in the House of Lords, permitting it to receive royal assent as soon as possible.
For information on EU sanctions announced on February 27, 2022, see this Steptoe blog post.
For information on the US sanctions announced between February 24 and 26, 2022, see this Steptoe blog post.
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