Are the UK’s Russian financial sanctions working?

12 months following the publication of its report ‘Defeating Putin: the development, implementation and impact of economic sanctions on Russia’, the UK’s Treasury Committee is seeking evidence on the UK’s approach to sanctions against Russia.

The deadline for submissions is 28 March 2024, and contributors are encouraged to submit evidence on a number of issues, including overall effectiveness, strategies to mitigate unintended consequences and the effectiveness of OFSI as a regulator, including guidance issued, the licensing regime and international cooperation.

There will be many that will have a great deal to say on all areas covered. For sanctions practitioners, the question that is perhaps the most thought provoking is “whether assets frozen as part of the UK’s financial sanctions on Russia should be confiscated, and whether there are legal precedents for such a move?“. This point has been the subject of much debate, and with the concept of ‘confiscation’ carrying a particular (statutory) meaning in the minds of those of us advising on financial crime matters, the evidence submitted and any resulting reports are certain to make for interesting reading. Watch this space.

You can access the call for evidence here.

Shipshape? OFSI issues ‘refresh’ of maritime guidance

In a recent blog post, OFSI issues ‘refreshed’ guidance on the effect of financial sanctions in the maritime sector, including “new tactics used by illicit actors to evade UK financial sanctions”, emphasising the need for entities from a broad range of sectors – including financial services – to consider the same.

The guidance itself highlights a number of evasion tactics, including:

a. ‘false flag operations’, where a vessel seeks to deceive by misrepresenting the flag under which it operates;

b. ‘ship to ship transfers, involving the transfer of cargo from one vessel to another while at sea; and

c. the use of false or fraudulent documentation.

OFSI’s blog post indicates a renewed focus on sanctions in the maritime sector, which will include a “series of guidance and engagement to support those in the maritime sector”.

You can access the blog here, and the guidance here.

UK issues general licence for ‘Permitted Payments’ to Companies House

The UK has today issued a General Licence, intended to permit UK Designated Persons to make certain payments to Companies House.

Specifically, the new General Licence permits Designated Persons (and those owned/controlled) as well as financial institutions and payments providers on their behalf, to make payments required upon filing a confirmation statement and any penalties for late filing of the same.

UK Trade Sanctions – Licences for “divestment from Russia”

Regulation 65 of the Russia (Sanctions) (EU Exit) Regulations 2019 (“the Regulations”) allows the granting of licences in order to authorise acts which would otherwise be in breach of the various trade related restrictions contained within the Regulations.

Responsibility for trade sanctions licensing in the UK sits with the Department for Business and Trade (DBT). Guidance states that the DBT will consider “each application on a case-by-case basis“. However, the same guidance also states that there are specific activities and scenarios which are likely (without guarantee) to be considered as consistent with the aims of the UK’s sanctions regime.

These activities now include – in respect of a range of trade prohibitions – where it can be shown that the underlying and otherwise prohibited actions are “necessary for the purposes of divestment from Russia” as long as there are no reasonable grounds to believe that the goods might be for a military end-user or have a military end-use and – additionally – that the relevant goods are located in Russia and have been since they became subject to the relevant prohibition.

This updated guidance may assist to businesses with longstanding commercial connections with Russian, in finding a route to exiting the Russian market.