On 31 December 2020, Russia (Sanctions) (EU) Exit Regulations 2019 (the 2019 Russia-UK Regulations) came into force. The 2019 Russia-UK Regulations were extended to the British Virgin Islands, the Cayman Islands, and Anguilla (together, the UKOTs) by Russia (Sanctions) (Overseas Territories) Order 2020 (the UKOT-Russia Order).
Bermuda was not included in the UKOTs to which the 2019 Russia-UK Regulations were extended. However, in practice, Bermuda typically implements its own independent sanctions regime, which broadly follows the UK model.
The reporting requirements
Under the 2019 Russia-UK Regulations, a “relevant firm” must inform the Governor as soon as practicable if it knows, or has reasonable cause to suspect, that a person is a designated person or has committed an offence under any provision of Part 3 (Finance) or regulation 67 (Finance: licensing offences) and the information or other matter on which the knowledge or cause for suspicion is based came to it in the course of carrying on its business.
Where a relevant firm informs the Governor, it must state:
- The information or other matter on which the knowledge or suspicion is based
- Any information it holds about the person by which the person can be identified
The relevant firm must also state the nature and amount of any funds or economic resources held by it for the customer at the time when it first had knowledge or suspicion.
A relevant institution must inform the Governor, without delay, if that institution credits a frozen account or transfers funds from a frozen account.
A relevant firm or relevant institution that fails to comply with these requirements commits an offence.
Who is a relevant firm?
The following would be considered relevant firms for the purposes of the 2019 Russia-UK Regulations:
- A relevant institution
- An undertaking that by way of business:
- Operates a currency exchange office
- Transmits money (or any representations of monetary value) by any means
- Cashes cheques that are made payable to customers
- A firm or sole practitioner that provides to other persons by way of business:
- Accountancy services
- Advice about tax affairs
- Auditing services
- Legal or notarial services
- Trust or company services
- A firm or sole practitioner that carries out, or whose employees, carry out estate agency work
- The holder of a licence to operate a casino in the Territory
- A person engaged in the business of making, supplying or selling (including selling by auction) or exchanging:
- Articles made from gold, silver, platinum or palladium
- Precious stones or pearls
What are the offences for failing to report?
A person commits a criminal offence by failing to report or provide information in connection with Part 3 of the 2019 Russia-UK Regulations.
A person who breaches the reporting requirement is liable on conviction to imprisonment for a term not exceeding six months, or to a fine not exceeding £5,000 or its equivalent in the currency of the Territory, or both.
How does the reporting need to take place?
- In the BVI – the reporting can take place by way of a letter addressed to the Governor and email to: email@example.com
- In the Cayman Islands – the reporting can take place by way of the prescribed form ie the Compliance Reporting Form, and submitted to the Cayman Islands Financial Reporting Authority, as the authority with delegated responsibility for the implementation of financial sanctions measures by the Governor (a link to the reporting form can be found here). The email can be sent to: firstname.lastname@example.org
- In Anguilla – the reporting can take place by way of a letter addressed to the Governor and emailed to the Financial Intelligence Unit: email@example.com
- In Bermuda – the reporting can take place by way of a prescribed form ie the Compliance Reporting Form, and submitted to the Financial Sanctions Implementation Unit (FSIU), a unit of the Ministry of Legal Affairs Headquarters, as the authority with delegated responsibility for the implementation of financial sanctions measures by the Governor (a link to the reporting form can be found here). The email can be sent to: firstname.lastname@example.org
The need for sanctions licensing
After the reporting has been completed, there may be instances when a relevant firm may need to apply for a sanctions licence. These applications are made to the various competent authorities referred to above or in the absence of a delegated authority to the Governor of the respective UKOT.
Should a relevant firm need help with applying for the necessary sanctions licence in any of the UKOTs covered by this note, please do feel free to contact any of the authors of this blog.
Importantly, where a person’s conduct in a relevant country would contravene a prohibition in the 2019 Russia-UK Regulations, the relevant prohibition would not be contravened if the conduct was authorised by a licence or other authorisation which is issued:
- Under the law of the relevant country
- For the purpose of dis-applying a prohibition in that jurisdiction which corresponds to the relevant prohibition
For these purposes, “relevant country” includes any UKOTs other than the Territory where the licence was granted. This is helpful in that it avoids the need for duplicitous licensing procedures in the UKOTs in the event of overlaps.