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Sanctions Tracker: New UK Sanctions Legislation, Sanctions Enforcement Updates And More – Export Controls & Trade & Investment Sanctions


This update contains a round-up of recent EU and UK Russia
sanctions developments. In particular, we look at a raft of new UK
sanctions legislation, as well as other developments in both
jurisdictions.

UK

New sanctions legislation

The UK has published three sets of amending regulations in
relation to its Russia sanctions legislation:

  1. the Russia (Sanctions) (EU Exit) (Amendment) (No.
    11) Regulations 2022
    (the “No. 11 Regulations”),
    which came into force on 15 July;

  2. the Russia (Sanctions) (EU Exit) (Amendment) (No.
    12) Regulations 2022
    (the “No. 12 Regulations”),
    which came into force on 19 July; and

  3. the Russia (Sanctions) (EU Exit) (Amendment) (No.
    13) Regulations 2022
    (the “No. 13 Regulations”),
    which came into force on 18 July,

(together the “Amending Regulations”).

The Amending Regulations all make various amendments to the
Russia (Sanctions) (EU Exit) Regulations 2019 (the “Russia
Regulations”). We summarise those amendments in the following
paragraphs.

No.11 Regulations: Minor and technical changes

The No.11 Regulations revoke and replace the most recent UK
Russia legislation: the Russia (Sanctions) (EU Exit) (Amendment)
(No.10) Regulations 2022 (the “No.10 Regulations”)
(discussed in our previous blogpost). The original explanatory note to
the No.11 Regulations stated that this was to rectify errors in the
No.10 Regulations, including because the No.10 Regulations imposed
restrictions which were not permitted under the Sanctions and Money
Laundering Act 2018 (although this has subsequently been amended).
The No.11 Regulations therefore largely restate the No. 10
Regulations, with the following key changes:

  • The No.11 Regulations make certain amendments to the
    restrictions relating to maritime goods and technology introduced
    by the No. 10 Regulations. In particular, they remove some (but not
    all) of the restrictions relating to the export etc. of maritime
    technology.

  • The No. 10 Regulations introduced restrictions on the provision
    of interception and monitoring services to or for the benefit of
    the Government of Russia. Those provisions have been amended by the
    No. 11 Regulations to remove the restriction on directly or
    indirectly supplying or delivering such services from a third
    country (although the restriction on providing such services
    otherwise remains).

  • As a result of the minor amendments made, there have also been
    certain changes to the numbering of the Russia Regulations.

No.12 Regulations: New investment restrictions

More substantively, the No. 12 Regulations introduce new
restrictions on investment into Russia (via new Regulation 18B of
the Russia Regulations).

The following activities are prohibited:

  • directly acquiring any ownership interest in land located in
    Russia;

  • indirectly acquiring any such ownership interest for the
    purpose of making funds or economic resources available: (i)
    directly or indirectly to a person connected with Russia, or (ii)
    for the benefit of a person connected with Russia (the
    “Relevant Purpose”);

  • directly acquiring any ownership interest in or control over a
    person connected with Russia or indirectly doing the same for the
    Relevant Purpose;

  • directly or indirectly acquiring any ownership interest in or
    control over a “relevant entity” for the Relevant
    Purpose;

  • directly or indirectly establishing any joint venture with a
    person connected with Russia;

  • opening a representative office or establishing a branch or
    subsidiary located in Russia; or

  • providing investment services directly related to any of the
    above activities.

For the purposes of the Russia Regulations, a person (other than
an individual) is connected with Russia if they are incorporated or
domiciled in, or constituted under the law of, Russia. A
“relevant entity” is a person, other than an individual,
which has a place of business located in Russia but is not a person
connected with Russia.

Importantly, in respect of the acquisition of securities, the
tests are (as described above) different for the acquisition of
shares in (a) persons connected with Russia as opposed to (b)
relevant entities, and in respect of direct as opposed to indirect
acquisitions. In all cases other than a direct acquisition of
shares in a person connected with Russia, the Relevant Purpose test
applies. The intention is presumably to enable transactions in the
shares of non-Russian companies which continue to have some
presence in Russia – provided that this will not lead to
onward investment into Russia.

The new restrictions in the No.12 Regulations are subject to
certain exemptions and licensing grounds including a prior
contracts exemption allowing the satisfaction of obligations coming
into force prior to the No.12 Regulations provided they are
notified to HM Treasury with at least five working days’
notice. A further important exemption (in new Regulation 60ZZA)
addresses dealing with certain “relevant securities”
issued by a person connected with Russia or relevant entity. These
are defined to include certain securities (even in a person
connected with Russia) admitted to trading on a regulated market or
multilateral trading facility prior to the coming into force of the
No.12 Regulations.

The Office of Financial Sanctions Implementation
(“OFSI”) has also issued a “wind-down” general
licence (GL INT/2022/2002560) permitting activity which
would otherwise be prohibited by Regulation 18B until 26 July
2022.

No.13 Regulations: amended designation criteria

The No. 13 Regulations amend the designation criteria in the
Russia Regulations, in particular to give the UK the power to
designate various persons associated with the Russian government,
military and security services, and to enable the UK to designate
immediate family members (as defined) of designated persons.

Reporting obligations of cryptoasset service providers

Finally, on 19 July, the UK also published the Sanctions (EU Exit) (Miscellaneous Amendments) (No.
2) Regulations 2022
which amend a series of UK sanctions
regimes (including Russia) to add cryptoasset exchange providers
and custodian wallet providers to the list of “relevant
firms” subject to reporting requirements in relation to
breaches of financial sanctions and information about designated
persons/frozen assets (guidance on which is available here).

This amendment is not unique to the Russia Regulations, and has
been made in respect of all current UK sanctions regimes via the
above legislation and the Sanctions (EU Exit) (Miscellaneous
Amendments) Regulations 2022. The expanded definition will come
into force on 30 August 2022 and OFSI is hosting a webinar for
affected firms next month.

Red alert on financial sanctions evasion

On 12 July 2022 the National Crime Agency (the “NCA”),
National Economic Crime Centre, Joint Money Laundering Intelligence
Taskforce and OFSI issued a joint red alert in relation to financial sanctions
evasion typologies (the “Red
Alert
“).

A more detailed briefing on the Red Alert will follow but, in
summary, it notes that the NCA and other bodies have identified
that designated persons are using a range of techniques to evade
sanctions impacting on their personal and commercial holdings.
While this behaviour has generally occurred prior to the imposition
of sanctions, it is reportedly also happening shortly afterwards.
The Red Alert sets out various methods by which this sanctions
evasion is taking place, details of the government response to this
threat, and a range of indicators of potential sanctions
evasion.

Russia sanctions guidance

On 19 July, OFSI published a revised version of its Russia sanctions guidance. This has been
amended to refer to the new investment restrictions mentioned
above, and to update the previous FAQ section.

The new FAQs include further guidance on (among other
things):

  • ownership and control by designated persons;

  • opening and maintenance of bank accounts for Russian nationals
    residing in the UK;

  • transactions involving shares in a designated person;

  • payment cards issued by sanctions Russian financial
    institutions; and

  • the restrictions on dealing with certain transferable
    securities.

Humanitarian activity general licence

On 7 July, OFSI issued General Licence INT/2022/1947936 (the
“Humanitarian GL”) in respect of humanitarian activity.
This allows the performance of activities by a “Relevant
Person” (defined below) to ensure the timely delivery of
humanitarian assistance activity in relation to the conflict in
Ukraine, and other activities supporting basic human needs in the
region, provided that those activities do not use funds or economic
resources that are owned held or controlled by a designated person.
The list of Relevant Persons in the Humanitarian GL includes (among
others) the UN, the Red Cross, Médecins sans
Frontières and organisation receiving funding from the UK
government for the purposes of providing humanitarian assistance.
The Humanitarian GL also contains permissions for UK financial
institutions to carry out activity effecting the delivery of
humanitarian assistance. The Humanitarian GL does not have an
expiry date.

In a related blog, OFSI notes that it has worked to
minimise any unintended consequences of sanctions on the delivery
of humanitarian support but that, as the number of designations has
increased, the government recognises the increasing possibility
that parts of the humanitarian supply chain may be affected, and
the knock-on effect that this will have on licence applications.
Companies currently experiencing delays in obtaining licences for
non-humanitarian purposes may therefore take some comfort from the
new Humanitarian GL in the hope that it may increase OFSI’s
capacity to review and respond to other licensing requests.

New sanctions announced but not yet
implemented

On 26 June, the Prime Minister announced that “new exports of Russian
gold will no longer be allowed to enter the UK”. No
legislation has yet been introduced in relation to these sanctions,
although the press release states as follows: “the gold
import ban, which will come into force shortly, will apply to newly
mined or refined gold. It does not impact Russian-origin gold
previously exported from Russia. There are no plans to extend
restrictions to Russian gold purchased legitimately before the
import ban was put in place”.

On 29 June, in connection with announcing additional
designations (see below), the Foreign Commonwealth &
Development Office (the “FCDO”) announced that: “the UK government is
also acting alongside international allies to introduce new
measures that will prevent Russia from accessing UK trusts
services”.
At the time of writing, no legislation had
been introduced in relation to these proposed restrictions.

Amendments to asset freeze list

There have been various amendments to the UK’s asset freeze
list since our last update. In particular, 13 individuals and
entities were added to the list on 29 June (see OFSI’s notice and related FCDO press release), and a further two individuals
were added on 5 July (see OFSI’s notice).

Additional sanctions on Belarus

On 5 July, the Republic of Belarus (Sanctions) (EU Exit)
(Amendment) Regulations 2022
were published, expanding the
existing UK sanctions against Belarus. As summarised in the
FCDO’s press release, the new measures include
restrictions relating to:

  • export of oil refining goods;

  • export of advanced technology components;

  • export of luxury goods; and

  • imports of Belarusian iron and steel.

The press release also announces the addition of further
Belarusian companies to the existing restrictions on issuing debt
and securities.

OFSI issued two general licences relating to these amendments:
(i) INT/2022/1976332 which allowed the dealing
with certain securities, and making of certain loans, until 12 July
2022; and (ii) INT/2022/1976232 which allows for the
wind-down of derivatives, repos and reverse repos entered into with
the National Bank of Belarus and certain other parties until 4
August 2022.

EU

Proposal for “maintenance and alignment”
sanctions package

On 15 July, the European Commission announced that it had adopted a joint proposal
for a new package of measures to maintain and strengthen the
effectiveness of the EU’s existing six Russia sanctions
package. The proposal is described as clarifying a number of
provisions to strengthen legal certainty for operators and
enforcement by Member States and further aligning the EU’s
sanctions with those of allies and partners. The package is
described as including the following elements:

  • a new import ban on Russian gold;

  • reinforcing the dual use and advanced technology export
    controls;

  • strengthening reporting requirements in relation to asset
    freezes;

  • reiterating that EU sanctions do not target trade in
    agricultural products between third countries and Russia;

  • clarifying the exact scope of some financial and economic
    sanctions; and

  • extending the current EU sanctions for six months until the
    next review at the end of January 2023.

The package will be discussed by Member States in Council in
view of its adoption.

EU sanctions enforcement

Our previous briefing commented on the Commission
proposal to add the violation of EU sanctions to the list of
“EU Crimes”. The proposal was agreed with the Council and then
submitted to the European Parliament for
consent on 30 June, which Parliament provided on 7 July. It has been reported that
Germany needs to pass domestic legislation before it can vote in
favour of the proposal, meaning that final adoption of the relevant
Decision by the Council will not take place until the autumn.

EU FAQs

The EU has continued to update its FAQ page relating to the
Russian sanctions, including through additions to the FAQs on business services, trusts services, and the transit of goods from Russia.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.



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