UK sanctions Russia — What you need to know about the financial impacts | Goodwin

The UK first announced a new set of sanctions measures targeting Russia following the invasion of Ukraine on February 24, 2022, and the government has since continued to announce new sanctions and restrictions on against a number of Russian individuals and entities. We outline below the effect of the financial sanctions that have been implemented or announced to date.

FREEZING OF ASSETS

The sanctions apply to conduct committed in the UK and to conduct by UK nationals and legal persons outside the UK. Businesses will be affected if they are in possession of or control or deal with funds or economic resources owned, held or controlled by a designated person or entity, or any entity controlled directly or indirectly by a designated person or entity. Companies should immediately stop doing business with this person/entity, freeze all assets and funds held for them, and notify the Office of Financial Sanctions Implementation (OFSI) as soon as possible. Companies may not make funds or economic resources available to or for the benefit of any designated person or entity, directly or indirectly, and may not “manage” such funds or economic resources. “Dealing with” is defined very broadly. Failure to comply with sanctions is a criminal offence.

DESIGNATED PERSONS AND ENTITIES

The Russia (Sanctions) (Leaving the EU) Regulations 2019, as amended and restated, allow persons and entities who are or who have been involved in “obtaining a benefit from or supporting of the Russian government” to be “designated”. This includes the following:

  1. Entities affiliated with the Russian government (which include companies in which the Russian government has a majority or minority stake, or which have received funding from certain Russian government entities);
  2. Companies of economic importance to the Russian government;
  3. Companies in a sector of strategic importance for the Russian government; and
  4. Companies or other persons who own or control, or act as a director, trustee or equivalent of an entity affiliated with the Russian government.

The list of strategic sectors is wide and includes chemicals, construction, defence, electronics, energy, extractive industries, financial services, information communications and digital technologies and transport. The fact that a company operates in one of the above sectors in Russia does not necessarily mean that it will be designated, but the UK government may update or supplement the designations at any time. The currently designated individuals and entities are listed here.

WHAT ELSE IS PROHIBITED?

  • The sanctions prohibit providing financial services to any of the following for foreign exchange reserve and asset management purposes:

    1. The Central Bank of the Russian Federation;

    2. The National Wealth Fund of the Russian Federation;

    3. The Ministry of Finance of the Russian Federation; and

    4. A person owned or controlled directly or indirectly or a person acting on behalf of or under the direction of any of the above.

  • It is prohibited to deal in transferable securities and money market instruments issued by certain listed entities and any UK incorporated subsidiaries of such entities, as well as those issued after 1 March 2022 by persons connected with Russia (including including Russian residents, entities incorporated in Russia and entities owned or acting on behalf of or under the direction of such persons).
  • The sanctions contain measures to prevent the Russian state and major Russian private companies from raising funds in UK financial markets, and prohibit the granting of new loans or credits to certain listed entities and persons linked to Russia.
  • The sanctions have the effect of freezing the assets of several large Russian banks and excluding these banks from the financial system, in particular by preventing them from accessing the pound sterling and clearing payments via the United Kingdom (currently, VTB Bank , Bank Rossiya, Black Sea Bank for Development and reconstructions, IS Bank, Genbank, Promsvyazbank, VEB, Bank Otkritie and Sovcombank).
  • The UK government has said it will introduce the Economic Crimes (Transparency and Enforcement) Bill, which will require more transparency over the ownership of businesses and property in the UK. Read our latest Invoice Customer Alert for more information.

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