On December 14, 2023, a new UK Iran sanctions regime originally announced in July 2023 came into effect as The Iran (Sanctions) Regulations 2023 (“New Iran Regulations”) and The Iran (Human Rights) (EU Exit) Regulations 2019 (“Iran Human Rights Regulations”) were revoked.  The new regime has been developed to respond to an escalation in threats from the Iranian regime, including efforts to undermine peace and security across the Middle East and plots against individuals on UK soil.  The new regime also incorporates new trade sanctions targeting Iran’s drone programme that strengthen existing export restrictions on drone components and new powers to introduce transport sanctions on ships involved in contravening existing sanctions or that are owned or controlled by sanctioned individuals.Continue Reading New UK Iran Sanctions Regime Comes into Force

On December 6, 2023, the UK’s National Economic Crime Centre (“NECC”) issued a red alert concerning the export of high-risk goods that Russia is using on the battlefield in Ukraine.  The red alert outlines sanctions evasion red flags for the financial services, transportation, and logistics sectors, including features of suspicious transactions, customers, requested services, and items.  In addition, HM Treasury’s Office of Financial Sanctions Implementation (“OFSI”) has designated 46 individuals and entities based in Russia, Belarus, China, Serbia, Turkey, the United Arab Emirates (“UAE”), and Uzbekistan suspected of supplying the Russian military with sanctioned goods and technology. 

On December 11, 2023, Industry and Economic Security Minister, Nusrat Ghani, also announced the creation of the Office of Trade Sanctions Implementation (“OTSI”), a new unit focused on the civil enforcement of UK trade sanctions that will launch in early 2024.  OTSI’s remit will include the investigation and enforcement of sanctions evasion.

These developments underscore the UK government’s continued commitment to cracking down on the evasion of sanctions (particularly under the Russia sanctions regimes), as well as an increased focus on using designation powers to target behavior outside the scope of UK sanctions enforcement jurisdiction that the UK government considers undesirable from a foreign policy perspective.Continue Reading UK Publishes Red Alert on Sanctions Evasion, Makes New Designations, and Announces the Creation of Trade Sanctions Civil Enforcement Body

On September 8, 2023, the UK Departments for Business and Trade and International Trade jointly published guidance on the scope of the sanctions on certain Russian iron and steel products processed in a third country that will come into effect under Part 5, Chapter 4CA of The Russia (Sanctions) (EU Exit) Regulations 2019 (“Russia Regulations”) on September 30, 2023 (“Guidance”).  The measure seeks to reduce circumvention of sanctions on the covered Russian iron and steel products by limiting market participants’ ability to conceal the Russian origin of these items through third country processing.  The Guidance confirms that there will be no exceptions or transitional period in relation to the goods covered by the prohibition that was introduced in The Russia (Sanctions) (EU Exit) (Amendment) Regulations 2023 in April 2023, making it important for impacted companies to promptly assess the Guidance to determine the likely impact of the sanctions on their business activities and put in place controls to ensure compliance with the new restrictions timely.Continue Reading UK Publishes Guidance on the Scope of Sanctions Targeting Russian Iron and Steel Products Processed in Third Countries

On September 6, 2023, the Financial Conduct Authority (“FCA”), the UK regulator for financial services firms and markets, published a review of its assessment of sanctions systems and controls in place at financial services firms in the UK.  The review sought, in particular, to assess firms’ response to the rapid expansion in the size, scale, and complexity of sanctions following Russia’s invasion of Ukraine.  The FCA’s review considered sanctions compliance systems and controls at over 90 firms spanning various aspects of the financial services sector, including payments, retail banking, wholesale banking, wealth management, insurance, and electronic money.  The objective of the review was to assess the adequacy and effectiveness of firms’ systems and controls in addressing sanctions risks and their ability to respond promptly to changes in the UK’s sanctions regime.Continue Reading FCA Publishes Findings of its Assessment of UK Financial Services Firms’ Sanctions Systems and Controls

On August 18, 2023, the UK High Court issued a judgment in the first sanctions designation challenge pursuant to the UK’s Russia sanctions regime under Section 38 of the Sanctions and Anti-Money Laundering Act 2018 (“SAMLA”).  The challenge was brought by Eugene Shvidler (“Mr. Shvidler”), a UK-US dual national businessman, following an unsuccessful ministerial review in which Mr. Shvidler sought to reverse his UK designation.  The High Court rejected the challenge on the grounds that the decision to maintain Mr. Shvidler’s designation was proportionate and non-discriminatory.  Mr. Justice Garnham’s judgment addressed both the threshold for a UK listing and the balance that must be struck between the rights of a designated person and the public interest when assessing a designation decision under Section 38 of SAMLA, points which will have broader relevance to future UK delisting cases.Continue Reading UK High Court Rejects First Delisting Challenge Under the UK’s Russia Sanctions Regime

On August 31, 2023, OFSI made its first use of the disclosure enforcement power granted to it pursuant to the Economic Crime (Transparency and Enforcement) Act 2022 (“ECA”) in relation to a case involving Wise Payments Limited (“Wise”) making funds available to a company owned or controlled by a UK designated person contrary to the Russia (Sanctions) (EU Exit) Regulations 2019 (“Russia Regulations”).  The exercise of OFSI’s disclosure power was accompanied by a blog post from OFSI Director, Giles Thomson, as well as the publication of an update to the OFSI Enforcement and Monetary Penalties for Breaches of Financial Sanctions Guidance (“Monetary Penalties Guidance”) outlining how OFSI intends to make use of the disclosure power and the process associated with its exercise of the power.  Among other things, the updated Monetary Penalties Guidance sets out an evolution of OFSI’s categorization of breach cases that includes additional categories to reflect this new enforcement tool and make good on OFSI’s commitment to proportionate enforcement action for breaches of financial sanctions following the introduction of strict civil liability in June 2022.Continue Reading OFSI Makes Use of Disclosure Enforcement Power for the First Time Against UK Fintech Company

On June 8, 2023, The Republic of Belarus (Sanctions) (EU Exit) (Amendment) Regulations 2023 (“Regulations”) were laid before parliament.  The Regulations significantly expand the UK’s package of sanctions targeting Belarus in response to the continued facilitation of Russia’s invasion of Ukraine by the Belarusian regime.  The new measures expand the criteria pursuant to which persons can be designated under the regime, target Belarusian imports used to fund the Lukashenko regime, crack down on Russia’s efforts to circumvent sanctions, and seek to limit the spread of propaganda by Belarusian organisations in the UK.  The new measures come into effect on June 9, 2023. 

In a press release announcing the measures, the Foreign, Commonwealth and Development Office stated that the Belarusian regime has facilitated Russia’s invasion of Ukraine by permitting the use of its territory and airspace by Russia to conduct missile and drone strikes against Ukraine, as well as providing significant training and logistical support to Russian forces.  Foreign Secretary, James Cleverly, also underscored that the UK’s “support for Ukraine will remain resolute for as long as it takes and the UK will not hesitate to introduce further measures against those who prop up Putin’s war.”Continue Reading UK Significantly Expands Sanctions Targeting Belarus

On May 22, 2023, the Department for Business and Trade’s Export Control Joint Unit published new guidance on trade sanctions circumvention under the UK’s Russia sanctions regime (the “Guidance”).  While direct trade between the UK and Russia reportedly has fallen significantly since the introduction of a broad package of trade sanctions in response to Russia’s invasion of Ukraine, there is a growing associated risk of displacement of trade and diversion of goods to Russia via indirect routes.

The Guidance seeks to prevent the trade sanctions, export controls, and other measures implemented in response to Russia’s invasion of Ukraine being undermined by raising awareness of the risks associated with trade in goods subject to UK trade sanctions and export controls and the obligations that trade in such goods places on those subject to UK jurisdiction to conduct appropriately robust due diligence that considers certain key risks associated with the product, customer, and destination.Continue Reading UK Issues New Russia Trade Sanctions Circumvention Guidance

On March 21, 2023, HM Treasury’s Office of Financial Sanctions Implementation (“OFSI”) designated all individuals and entities that currently are subject to an asset freeze under the Russia (Sanctions) (EU Exit) Regulations 2019 (the “Regulations”) for the additional purpose of the trust services sanctions measures outlined in Regulation 18C(1) of the Regulations.  As a result, persons subject to UK sanctions jurisdiction are now prohibited from providing trust services to, or for the benefit of, those UK designated persons absent an available exception or licence.  OFSI also has issued a wind down General Licence and updated its Russia Sanctions Guidance (“OFSI Guidance”) to address the interaction between the asset freeze, trust services, and professional and business services prohibitions. 

In a blog post announcing the measure, OFSI indicated that the move represents a conscious effort close off perceived loopholes in the existing trust services prohibitions in response to intelligence from enforcement agencies suggesting that UK-based trust service providers have been offering their services to persons for the purpose of reducing the impact of sanctions in the event that they become subject to them.   Continue Reading UK Expands Designations of All Subject to Asset Freeze Sanctions Under the Russia Regime to Include a Ban on the Provision of Trust Services

On March 16, 2023, HM Treasury’s Office of Financial Sanctions Implementation (“OFSI”) published an updated version of its Enforcement and Monetary Penalties for Breaches of Financial Sanctions Guidance (“OFSI Guidance”).  The OFSI Guidance outlines OFSI’s compliance and enforcement approach as well as providing an overview of the civil monetary penalty regime and how potential financial sanctions breaches are assessed.  The latest update to the OFSI Guidance sets out the framework within which OFSI will assess breaches of UK financial sanctions that flow from, or involve, an incorrect assessment of the ownership and control of an entity by a UK designated person. 

The publication of the updated OFSI Guidance follows repeated calls for clarity regarding the ownership and control test and OFSI’s enforcement stance in relation to it, particularly following the significant expansion of the Consolidated List in response to Russia’s invasion of Ukraine in February 2022 and the UK’s introduction of strict civil liability for financial sanctions breaches in June 2022.Continue Reading OFSI Updates Enforcement and Monetary Penalty Guidance to Address the Assessment of Ownership and Control