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FINANCIAL SANCTIONS GUIDANCE (RUSSIA)
Last Updated: 25 July 2022
Members will be aware of recent developments in Ukraine and the ongoing imposition of further financial and trade sanctions on Russian Government officials and other named individuals and entities, by countries around the world, including the UK, US and the EU.
These recent measures are directly relevant to both members in business and practice, as well as to those working in the charity and Not for Profit sector.
Whether in practice or in business, Members must comply fully with their legal and professional obligations relating to the Sanctions regimes in their respective jurisdictions; AIA expects that they will be willing to play their part in helping companies across the economy cope with any consequent disruptions.
We expect firms to have established systems and controls to counter the risk that they might be used to further financial crime, including compliance with financial sanctions obligations.
Where the AIA identifies failings in financial crime systems and controls, we can impose restrictions and/or take enforcement action. Additionally, the Office of Financial Sanctions Implementation (OFSI) has the power to levy civil monetary penalties for breaches of financial sanctions and works with law enforcement for the most egregious cases where criminal prosecution may be considered.
Our expectations of firms’ systems and controls in relation to compliance with financial sanctions are set out inAML Guidance for the Accountancy Sector (AMLGAS). Where clients give rise to concerns about sanctions evasion or money laundering you should also consider you obligations to report to the UK Financial Intelligence Unit (UKFIU) at the National Crime Agency (NCA) under the Proceeds of Crime Act 2002.
The purpose of the alert is to provide information from law enforcement and the legal and financial services sectors on some of the common techniques designated persons and their UK enablers are suspected to be using to evade financial sanctions.
The Republic of Ireland and European Union have imposed financial sanctions and other economic measures on the Russian Federation in response to its unprovoked and unjustified military aggression against Ukraine, including:
A ban on the sale, supply, transfer or export of Euro banknotes to Russia or to any natural or legal person, entity or body in Russia is being introduced. This includes the government and the Russian central bank.
The removal of 7 Russian banks from the SWIFT system with a 10 day lead in time. This includes any entity that the listed banks own 50% or more of. The banks affected are:
A prohibition on investing in, participating or contributing to projects co-financed by the Russian Direct Investment Fund.
A ban on broadcasting or enabling the broadcast of RT-Russia Today or Sputnik tv channels.
Most recent measures imposed on Belarus in response to its unprovoked and unjustified military aggression against Ukraine:
An EU travel ban and asset freeze in respect of 22 persons associated with the Belarusian military and Ministry for Defence. These measures are imposed under the existing sanctions regime in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine.
Further restrictions on trade between the EU and Belarus, relating to the trade of goods used for the production or manufacturing of tobacco products, mineral fuels, bituminous substances and gaseous hydrocarbon products, potassium chloride (“potash”) products, wood products, cement products, iron and steel products and rubber products.
Additional restrictions on exports of dual-use goods and technology and related services, as well as restrictions on exports of certain goods and technology which might contribute to Belarus’ military, technological, defence and security development, together with restrictions on related services.
Updated 9 March 2022
On 9 March 2022, the EU published a further set of measures. These include:
Introduction of further restrictions on the export of maritime navigation goods and technology;
Expansion of the list of legal persons, entities and bodies subject to the prohibitions related to investment services, transferable securities, money market instruments, and loans;
Further clarification (in respect of previous restrictive measures) that “transferable securities” includes crypto-assets.
Limiting the financial inflows from Belarus to the Union, by prohibiting the acceptance, from Belarusian nationals or residents, of deposits exceeding certain values; the holding of accounts of Belarusian clients by the Union central securities depositories; and the selling of euro-denominated securities to Belarusian clients;
Exemptions under the sanctions measures, for Swiss, EU and EEA nationals in Belarus, in that deposits exceeding €100,000 can be accepted from them.
Introduction of clarifications on the exception for the provision of financing for small and medium-sized enterprises, as well as certain provisions in the Annexes, relating to prohibited goods and technology;
Adding 146 members of the Russian Federation Council to the sanctions list, as those individuals ratified the government decisions of the ‘Treaty of Friendship, Cooperation and Mutual Assistance’ between Russia and the two break-away regions in Donetsk and Luhansk;
Adding 14 persons to the sanctions list, as they supported and benefited from the Government of the Russian Federation and/or provided substantial revenue to it; or are associated with listed persons or entities.
Prohibition on the listing and provision of services, on Union trading venues, in relation to shares of Belarus State-owned entities;
Prohibition on transactions with the Central Bank of Belarus;
Restrictions on the provision of specialised financial messaging services (SWIFT) to certain Belarusian credit institutions and their Belarusian subsidiaries. These are:
Development Bank of the Republic of Belarus
Additional obligations on the Network Manager for air traffic management network functions of the single European Sky, particularly that the Manager rejects all flight plans that violate the Regulations;
Further clarification (in respect of previous restrictive measures) that “transferable securities” includes crypto-assets.
The measures that came into force on 16 March include:
a ban on credit ratings agencies from providing ratings on Russian Federation debt.
further trade restrictions concerning iron and steel, as well as luxury goods;
expanding the list of persons connected to Russia’s defense and industrial base, to apply tighter export restrictions on dual-use goods and technology. A total of 81 persons and entities have been added;
prohibitions on new investments in the Russian energy sector and export restrictions on related equipment, technology and services, with the exception of nuclear industry and energy transport;
a ban on all transactions with certain State-owned enterprises which are already subject to refinancing restrictions. A total of 13 companies are listed;
a ban on the provision of insurance and reinsurance to any legal person, entity or body operating in the energy sector in Russia;
Derogations have been provided for activities necessary for ensuring critical energy supply within the EU, as well as the transport of fossil fuels, in particular coal, oil and natural gas, from or through Russia into the EU; and where humanitarian considerations arise.
The measures that come into force on 8 April 2022 include:
A prohibition on being a beneficiary, acting as a trustee or in similar capacities for Russian persons and entities, as well as a prohibition on providing certain services to trusts has been introduced.
An import ban on coal from Russia from 10 August 2022;
A full transaction ban on four key Russian banks. These four banks will now be fully excluded from the EU market. The banks affected are Otkritie, Novikombank, Sovkombank and VTB;
A ban on any vessel registered under the flag of Russian from accessing EU ports. This includes yachts and recreational craft. Some derogations are granted for the transport of medical, pharmaceutical, agricultural and food products, humanitarian aid, energy and other products as set out in the Regulations;
A ban on Russian and Belarusian road transport operators traveling the European Union, Switzerland, EEA and western Balkans, limiting their access to key goods;
Further targeted export bans on items such as quantum computers and advanced semiconductors, sensitive machinery and transportation equipment;
Specific new import bans on a range of goods as well closing loopholes between Russia and Belarus. This will be achieved by sanctioning certain individuals and entities used to bypass previous sanctions; • A €10,000 limit on crypto asset transactions;
Securities in all EU Member State currencies will now be banned from sale to Russia/Belarus and Russian/Belarusian entities;
A general EU ban on participation of Russian companies accessing public procurement in Member States;
An exclusion of all financial support at a national and European Union level to Russian public bodies; and
Listing of an additional 216 individuals who are Russian, members of 'the People’s Council' of the Donetsk and Luhansk breakaway republics as well as 18 new entities. The list also includes Oleg Deripaska and the 2 daughters of Vladimir Putin.
In light of Russia’s continuing war of aggression against Ukraine and Belarus' support to it, as well as the reported atrocities committed by Russian armed forces in Ukraine, the Council decided today to impose a sixth package of economic and individual sanctions targeting both Russia and Belarus.
The agreed package includes a series of measures intended to effectively thwart Russian abilities to continue the aggression.
The EU decided to prohibit the purchase, import or transfer of crude oil and certain petroleum products from Russia into the EU. The phasing out of Russian oil will take from6 months for crude oilto8 months for other refined petroleum products.
A temporary exception is foreseen for imports ofcrude oil by pipelineinto those EU member states that, due to their geographic situation, suffer from a specific dependence on Russian supplies and have no viable alternative options.
Moreover,BulgariaandCroatiawill also benefit from temporary derogations concerning the import of Russian seaborne crude oil and vacuum gas oil respectively.
De-SWIFTing of additional Russian and Belarusian banks
The EU is extending the existing prohibition on the provision of specialised financial messaging services (SWIFT) to three additional Russian credit institutions - Russia's largest bankSberbank,Credit Bank of Moscow, andRussian Agricultural Bank- and theBelarusian Bank For Development And Reconstruction.
The EU is suspending the broadcasting activities in the EU of three more Russian state-owned outlets:Rossiya RTR/RTR Planeta,Rossiya 24 / Russia 24andTV Centre International. These structures have been used by the Russian Government as instruments to manipulate information and promote disinformation about the invasion of Ukraine, including propaganda, with the aim to destabilise Russia's neighbouring countries and the EU and its member states. In line with the Charter of Fundamental Rights, these measures will not prevent those media outlets and their staff from carrying out activities in the EU other than broadcasting, e.g. research and interviews.
The EU is expanding the list of persons and entities concerned by export restrictions regardingdual-usegoods and technology. Such additions to the list include both Russian and Belarusian entities. Moreover, the EU will expand the list of goods and technology which may contribute to thetechnological enhancement of Russia’s defence and securitysector. This will include 80 chemicals which can be used to produce chemical weapons.
The EU will prohibit the provision ofaccounting,public relationsandconsultancy servicesto Russia.
On 21 July, the European Union published a new set of restrictive measures in relation to Russian actions in Ukraine. Measures Include:
The current packages of sanctions have been extended for an additional 6 months, until the end of January 2023;
The import of Russian origin gold is prohibited from 22nd July 2022 onwards;
An additional 51 items have been added to the export control list, mostly from the industrial and advanced technology sectors;
An additional 48 individuals and 9 entities are subject to an asset freeze, including Sberbank and Credit Bank of Moscow (which are already removed from Swift messaging system;
The acceptance of deposits of €100,000 from any Russia national/resident, or Russian/Russian resident controlled (50% or more) entity or body from anywhere outside the EU, is now prohibited.
Prior authorisation required for accepting deposits needed when trading non-prohibited items between the EU and Russia.
Clarification that Russian ships cannot dock at canal locks in order to circumvent the ban on entering EU ports;
In addition to this package, new restrictive measures have also been introduced against military forces that have been aiding (directly and indirectly) the military actions of Russia in Ukraine. These measures add 6 Syrian individuals and 1 Syrian entity to an asset freeze and travel ban list.
Please find below details of the most recent measures imposed In light of the escalating war and illegal annexations in Ukraine. These measures include:
Extending the list of restricted items which might contribute to the Russian Federation’s military and technological enhancement or to the development of its defence and security sector, by including in that list certain chemical substances, nerve agents and goods which have no practical use other than for capital punishment, torture or other cruel, inhuman or degrading treatment or punishment, or which could be used for those purposes
Prohibiting the sale, supply, transfer or export of firearms, their parts and essential components and ammunition
Extending the import ban on steel products that either originate in the Russian Federation or have been exported from it
Applying an import ban on wood pulp and paper, certain elements used in the jewellery industry such as stones and precious metals, certain machinery and chemical items, cigarettes, plastics and finished chemical products such as cosmetics. This also includes items which could contribute to the enhancement of Russian industrial capacities and restrictions are imposed on the sale, supply, transfer or export of additional goods used in the aviation sector
introducing an exemption from the prohibition to provide technical assistance, brokering services or financing or financial assistance, related to the maritime transport to third countries of crude oil or petroleum products which originate in or are exported from Russia, purchased at or below a pre-established price cap agreed by the Price Cap Coalition
Expanding the prohibition to engage in any transaction with certain Russian State-owned or State-controlled legal persons, entities or bodies by including a ban on EU nationals to hold any posts on the governing bodies of those legal persons, entities or bodies
Applying a transaction ban on the Russian Maritime Register of Shipping
Extending the port access and lock ban in the territory of the EU to vessels certified by the Russian Maritime Register of Shipping
Removing the threshold for the existing prohibition on the provision of crypto-asset wallet, account or custody services to Russian persons and residents, thereby banning the provision of such services regardless of the total value of such crypto-assets
Extending the existing prohibition on the provision of certain services to the Russian Federation by banning the provision of architectural and engineering services as well as of IT consultancy services and legal advisory services
Adding 30 persons and seven entities to the list of those subject to a travel ban and asset freeze
The Department of Finance ask that all entities familiarise themselves with the measures introduced and how they can comply with the sanctions. The relevant Statutory Instruments are available on the Irish Statute Book.
Further information on restrictive measures can be viewed also at:
D/Foreign Affairs – who also have domestic guidance on the implementation of sanctions at the bottom of that page
The measures agreed at an EU level also outlined on the EU Council website.
The European Union sanctions whistleblower tool is accessible via the Commission’s website. It facilitates the anonymous reporting of possible violations of EU sanctions. It can be used to report past, ongoing or planned sanctions violations, as well as attempts to circumvent EU sanctions. More details about the tool are available here.
Please monitor the websites referenced above closely in the event that further information is available or further restrictive measures are adopted. It is important that all Members in Practice operating within the Republic of Ireland keeps up to date on developments.
The recent imposition of further sanctions on Russia and named individuals and entities has increased the potential risk of money laundering as individuals and business may seek to evade these respective sanctions regimes.
Recent developments in Russia and Ukraine may also potentially impact on the classification of new and existing clients and cause them to fall within the definition of Politically Exposed Persons (“PEP”).
Members in Practice are reminded of their obligation under the UK Money Laundering Regulations 2017 and the Republic of Ireland Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 (as amended) respectively, to conduct risk assessments and to perform Enhanced Due Diligence checks where required.
In particular, Members should ensure that they fully understand the source of funds and wealth in relation to their clients identified as high-risk.
Since many of those who are subject to sanctions may also be PEPs, Members are reminded of their obligation to ensure that they have adequate and up to date procedures in place to identify whether a client, or the beneficial owner of a client, is a PEP or a family member or known close associate of a PEP.
Firms should be aware that these sanctions are subject to change and should maintain up to date screening processes.