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.Continue Reading OFSI Publishes Update on New Russia Sanctions Reporting Requirements
The UK’s National Economic Crime Centre (“NECC”) recently issued an amber alert concerning the sanctions evasion, money laundering, and trafficking in cultural property risks presented to UK industries linked to artwork storage facilities and the art storage sector (the “Amber Alert”). The Amber Alert highlights that criminals are finding ways to utilize the art market to conduct illicit activity and includes case studies and key indicators that those operating within the art storage sector can use to detect such activity. This development underscores the UK government’s continued commitment to cracking down on the evasion of sanctions (particularly under the Russia sanctions regime), as well as an increased focus on identifying and targeting more avenues for sanctions evasion so that counter measures can be implemented to thwart those efforts. It also highlights the increasingly interconnected approach the UK government and law enforcement are adopting to address activity with potential touchpoints to a range of financial and other crimes. Continue Reading UK NECC Publishes Amber Alert on Sanctions Evasion in the Art Storage Sector
On December 11, 2023, the UK’s Department for Business & Trade (“DBT”) published a General Trade Licence of indefinite duration concerning measures related to third-country processed iron and steel, pursuant to The Russia (Sanctions) (EU Exit) Regulations 2019 (the “Russia Regulations”) (the “GL”). The GL has been introduced to provide additional clarity in key areas for traders navigating these sanctions.Continue Reading UK’s Department for Business & Trade Issues New General Trade Licence for Third-Country Processed Iron and Steel Measures
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 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 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
On February 7, 2023, the UK Department for International Trade (“DIT”) published an expanded version of its guidance on supplying professional and business services to a person connected with Russia (“DIT Guidance”), following a broadening of the types of services covered by the ban in December 2022. The DIT Guidance sets out additional details regarding the services falling within the scope of these sanctions, enforcement, applicable exceptions, and the licence application process. For more information on the ban on the supply of professional and business services, see our previous blog post (here).Continue Reading UK Expands Guidance on the Supply of Professional and Business Services to Persons Connected with Russia
On February 5, 2023, the UK ban imposed by Part 5, Chapter 4IA of The Russia (Sanctions) (EU Exit) Regulations 2019, as amended (“Russia Regulations”), on the maritime transportation of certain Russian oil products and related services came into effect. Ahead of the measure coming into force, on February 4, 2023, HM Treasury’s Office of Financial Sanctions Implementation (“OFSI”) published an updated version of its guidance on the UK Maritime Services Prohibition and Oil Price Cap (“OFSI Guidance”), which outlines how the oil products price cap will be implemented, OFSI’s approach to enforcement, and the requirements on involved persons. OFSI also issued two new General Licences that establish the level of the oil products price cap and establish a wind-down period with respect to certain Russian oil products.Continue Reading UK Oil Price Cap for Russian Refined Oil Products Comes into Effect