A recap of the UK’s March guidance on financial and investment restrictions on Russia
In March 2023, the UK’s Office of Financial Sanctions Implementation (OFSI) published specific guidance covering the financial and investment restrictions in Russia (Sanctions) (EU Exit) Regulations 2019 (the Russia Regulations). Six months later, we revisit key aspects of the guidance and its impact.
As regards the UK Overseas Territories, despite OFSI having no formal authority, its guidance remains highly persuasive to the interpretation of locally enforced sanctions measures.
Designated persons: The names of individuals or entities subjected to sanctions do not appear in the Russia Regulations but are listed on the gov.uk website. This allows for immediate publication following a designation, minimising the opportunity for asset flight.
Financial and investment restrictions: OFSI's guidance focusses on financial and investment restrictions. These restrictions include asset freezes, access to capital markets, loans and credit arrangements, dealing in reserves for certain Russian state-owned financial institutions, investments in Russia, investments in non-government-controlled Ukrainian territory, and trust services. Specific exceptions and the possibility to apply for licences from OFSI are outlined for each restriction.
Other types of sanctions: In addition to financial sanctions, the Russia Regulations cover transport, immigration, and trade sanctions related to Russia. Other UK government departments, including the Department for International Trade, Home Office, and the Foreign Commonwealth and Development Office, provide guidance in these areas.
Penalties and offences: To enforce these regulations, penalties and offences are established. Detailed information on these penalties can be found in the corresponding report under the Sanctions and Anti-Money Laundering Act 2018 and the supporting Russia Regulations as well as on the UK’s official government website, gov.uk.
Asset freezes: The Russia Regulations detail financial prohibitions for designated persons, including asset freezes and restrictions on providing funds or economic resources to them. Exceptions and the possibility of obtaining licences are outlined.
Transferable securities and money-market instruments: Prohibitions are in place for dealing with certain securities and instruments issued by specific Russian banks. These prohibitions have varying maturity dates and apply to different institutions.
Loan and credit arrangements: The Russia Regulations impose restrictions on granting loans or credit arrangements to entities connected with Russia. Different categories of loans are defined, each with its own set of restrictions and exceptions.
Correspondent banking relationships: UK credit or financial institutions are prohibited from establishing or continuing correspondent banking relationships with designated persons or certain Russian entities.
Foreign exchange reserve and asset management: Prohibitions are in place regarding financial services for foreign exchange reserve and asset management for specific Russian entities.
Investments in relation to Crimea: The Russia Regulations prohibit various activities related to Crimea, including extending participation in land ownership and acquiring ownership interests in entities with a presence in Crimea.
Trust services: The Regulations restrict providing trust services to or for the benefit of persons connected with Russia or designated persons.
It should be noted that the guidance does not cover restrictions on the provision of legal advisory services, as this trade sanction regime was introduced after publication in March. However, it is expected that future versions of this OFSI guidance will deal with all of the latest developments in the Russia Regulations.
Exceptions and licensing
There are exceptions and licencing options available for certain activities within these restrictions. OFSI issues licences in specific circumstances to allow otherwise prohibited activities to take place.
Understanding and complying with the Russia Regulations is crucial for individuals and organisations engaged in financial transactions, investments and business dealings involving Russia, but also those dealing internationally considering the historical strategic importance of Russia-origin investment. Staying informed about the developments and guidance from OFSI including its Frequently Asked Questions will assist operators to navigate these regulations more effectively.
The Russia specific guidance for the financial and investment restrictions in the Russia Regulations can be found here.
Our ongoing blog post on the various packages of UK sanctions on Russia can be found here.