FINANCIAL SANCTIONS GUIDANCE (RUSSIA)

Last Updated: 25 July 2022

Introduction

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.

United Kingdom

Following the United Kingdom Prime Minister’s statement to the House of Commons on 22 February 2022, the UK has announced a tranche of sanctions on Russia. The full details of the measures are available on the Foreign, Commonwealth & Development Office website. If you require a licence to permit any activity which would otherwise be prohibited by sanctions regulations, you must contact the relevant department.

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.

Firms should screen current and new clients against the UK Sanctions List to meet these new sanctions measures and screen against the OFSI list of asset freeze targets for financial sanctions obligations. You are legally obliged to report to OFSI if you know or suspect that a breach of financial sanctions has occurred; if a person you are dealing with, directly or indirectly is a designated person; if you hold any frozen assets; if knowledge or suspicion of these come to you while conducting your business. You must contact OFSI at the earliest opportunity.

Our expectations of firms’ systems and controls in relation to compliance with financial sanctions are set out in AML 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.

For further details on financial sanctions you should contact OFSI or, for trade and export sanctions, you should contact the Department for International Trade’s Economic Control Joint Unit. Applications must be made in advance of any business agreement or transaction taking place.

READ: OFSI Russia sanctions: guidance.

DETAILED GUIDANCE FOR MEMBERS WITHIN THE UNITED KINGDOM

Sanctions Evasion Typologies

In conjunction with OFSI, the JMLIT+ Sanctions Facilitators Cell, law enforcement, private industry and regulators, the National Crime Agency (NCA) have issued a 'Red Alert' on financial sanctions evasion typologies by Russian elites and enablers.

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.

Republic of Ireland

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:
    • Bank Otkritie
    • Novikombank
    • Promsvyazbank
    • Bank Rossiya
    • Sovcombank
    • VNESHECONOMBANK (VEB)
    • VTB BANK
  • 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
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Updated 15 March 2022
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Updated 16 March 2022
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Updated 8 April 2022
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Updated 7 June 2022
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Updated 21 July 2022
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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:

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.

DETAILED GUIDANCE FOR MEMBERS WITHIN THE REPUBLIC OF IRELAND

AIA Supervisory Expectations

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.

FURTHER SANCTIONS AND AML GUIDANCE