The UK government introduced new reporting requirements under The Russia (Sanctions) (EU Exit) Regulations 2019 (“Russia Regulations”) in December 2023, with the goal of strengthening transparency in relation to assets frozen under the regime and assisting HM Treasury’s Office of Financial Sanctions Implementation (“OFSI”) to monitor compliance with, and detect evasion of, financial sanctions administered under the Russia regime.  The two new reporting measures are the immobilized assets reporting measure and the designated persons asset reporting measure.  On February 12, 2024, OFSI’s Director, Giles Thomson, published a new blog explaining the practical implications of these new measures.  OFSI also has updated its Russia sanctions guidance to include new FAQs addressing the implementation of the second new reporting obligation.

The Immobilized Assets Reporting Measure

Regulation 70(1ZA) of the Russia Regulations requires relevant firms to inform OFSI as soon as practicable if they know or have reasonable cause to suspect that they hold funds (i.e., financial assets of any kind) or economic resources (i.e., assets that can be used to obtain funds, goods, or services) for a prohibited person when the information on which the knowledge or suspicion is based came to the firm in the course of carrying on its business.  The “prohibited persons” are those persons to whom financial services must not be provided under Regulation 18A(1) of the Russia Regulations; namely, the Russian Central Bank (“CBR”), National Wealth Fund (“NWF”), and Ministry of Finance (“MoF”), as well as any person that is owned or controlled directly or indirectly by, or that acts on behalf or at the direction of, one of the CBR, NWF, or MoF.

A “relevant firm” for this purpose is defined in Regulation 71 of the Russia Regulations and includes: (i) persons with permission to carry on regulated activities under Part 4A of the Financial Services and Markets Act 2000; (ii) currency exchange offices and money transmission businesses; (iii) statutory and local auditors; (iv) providers of accountancy, legal, notarial, or tax affairs services; (v) certain trust or company service providers; (vi) estate agents; (vii) holders of casino operating licenses; (viii) certain precious metals or stones businesses; and (ix) cryptoasset exchange and custodian wallet providers.

Relevant firms are required to report to OFSI on or before October 31 in each calendar year with the report covering the nature, amount, or quantity of the funds or economic resources held by that firm as of September 30 in the same calendar year.  The Immobilized Assets Reporting Document can be used by in-scope firms to satisfy this reporting obligation.  

The immobilized assets reporting measure is intended to provide the UK government with a more comprehensive picture of the value and nature of CBR, NWF and MoF assets held in the United Kingdom.  It also is intended to enable OFSI to track these assets over time, enhancing the UK’s ability to keep these assets immobilized.

The UK government also intends to share the information garnered from these reports with its international partners through various channels, including the Russian Elites, Proxies and Oligarchs Taskforce.

Designated Persons Asset Reporting Measure

Regulation 70A of the Russia Regulations requires UK designated persons to proactively report certain of their assets to OFSI within set time periods, as follows:

  • UK designated persons that are UK persons (i.e., UK nationals or UK incorporated entities) must report the nature and value of any funds or economic resources that they own, hold, or control in any jurisdiction, as well as the location of such funds/economic resources; and
  • all other UK designated persons must report the nature and value of any funds or economic resources that they own, hold, or control in the United Kingdom, as well as the location of such funds/economic resources.

The UK government also intends to extend this reporting requirement to persons designated under its Belarus sanctions regime in early 2024.  OFSI’s updated Russia sanctions guidance notes, at FAQ 54, that assets must be reported under this measure if their value exceeds £10,000.  If multiple assets of the same type (e.g., art, bank accounts, or jewelry) taken together exceed £10,000 they also must be reported.

The timetable for making the required reports is dictated by the date upon which the individual or entity became a UK designated person.  If a person was designated prior to the reporting obligations coming into effect on December 26, 2023, they are required to make the necessary report by March 5, 2024.  Persons designated on or after December 26, 2023 are required to make the applicable report within ten weeks of their date of designation.

UK designated persons also are obliged to update their reports to OFSI as soon as practicable when there is a change in the nature, value, or location of the reported funds or economic resources.  OFSI’s updated Russia sanctions guidance clarifies, at FAQ 56, that updates must be provided to OFSI when the value of the designated person’s reportable funds or economic resources when taken together has changed by an amount exceeding £10,000 compared with the previous report filed with OFSI.  Updates also must be provided to OFSI if there is a change in the nature or location of funds or economic resources exceeding £10,000 in value (including when multiple funds/economic resources of the same type taken together exceed £10,000).  OFSI has issued template reporting forms for use by both UK person and non-UK person designated persons.

This requirement strengthens OFSI’s compliance toolkit, allowing it to cross-verify information provided by relevant firms and also placing accountability for asset reporting on those who are designated.

Refusal or failure to comply with these reporting requirements without reasonable excuse is a criminal offence, as is knowingly or recklessly providing materially false information.  In his blog post, OFSI’s Director notes that a bespoke civil monetary penalty threshold has been established for the enforcement of breaches of this provision to reflect the seriousness of non-compliance and ensure that the UK government can penalize those who fail to comply with the reporting requirement.  He also notes that the civil enforcement of this measure will be applied on “a true strict liability basis” with refusal or failure to report assets being treated as an offence subject to a civil monetary penalty where it is appropriate to do so, including regardless of whether the designated person had a reasonable excuse for a failure to report. 

Any civil monetary penalties issued in relation to breaches of this reporting requirement will still be subject to the usual right to obtain a review of the monetary penalties issued and, according to OFSI’s Director, does not alter or weaken the ability to further challenge OFSI’s monetary penalties at the Upper Tribunal.  For more information on these developments, contact the authors of this post, Alexandra Melia or Elliot Letts, in Steptoe’s Economic Sanctions team in London.