UK financial sanctions guidance

The HM Treasury’s Office of Financial Sanctions Implementation (OFSI) has updated various guidances as regards (financial) sanctions, including the following:
1. the General guidance for financial sanctions under the Sanctions and Anti-Money Laundering Act 2018 which provides basic information on UK’s financial sanction framework and supports firms in their efforts to comply with current rules and regulations in that regard. It covers numerous issues, ranging from the purpose and scope of financial sanction measures, to the different types of financial sanctions restrictions (e.g. asset freezes or restrictions on the provision of certain financial services and products), to the reporting obligations of UK firms in connection with financial sanctions.
2. the OFSI enforcement and monetary penalties for breaches of financial sanctions guidance which seeks to help firms and individuals understand the OFSI’s approach to enforcing financial sanctions with the aim to foster compliance with such and to respond to breaches in a proportionate, adequate, and consistent manner. The guidance thereby covers various issues, ranging from an explanation of what financial sanctions, to a description of OFSI’s approach to the assessment of whether or not a breach has taken place or whether or not a breach should be punished, to the criteria OFSI takes into account in determining a penalty.
3. the Russia Guidance which describes in detail the financial and investment restrictions that are included in (amended) Statutory Instrument SI 2019/855, the „Russia (Sanctions) (EU Exit) Regulations 2019“, ranging from prohibitions to deal in certain securities, to restrictions as regards the provision of loans to Russian entities. The guidance also contains a list of frequently asked questions (FAQs) in this context.
##### The changes to the previous versions are briefly outlined below:
(1) the general guidance: this guidance has been updated to
– insert additional provisions for the new reporting obligations under the Russian sanctions regime which requires firms to notify OFSI as soon as possible, if they have reasons to believe to hold funds on behalf of designated persons (Section 5.1 on page 21);
– insert additional provisions for the new reporting obligations of designated persons with respect to the Russian sanctions regime (Section 5.11 on page 28); and
– insert new provisions to facilitate the issuance of licenses for purposes of divestment from investments in Russian entities or entities owned or controlled by them (Section 6.5 on page 33).
(2) the enforcement and monetary penalties for breaches of financial sanctions guidance: this guidance has been updated to
– insert provisions for monetary penalties for financial sanctions breaches under regulation 88C of „The Russia (Sanctions) (EU Exit) Regulations 2019“ (Preface on page 3); and
– make consequential changes throughout to reference regulation 88C of the regulations.
Other changes are editorial in nature and do not change the content of the guidance.
(3) the Russia guidance: this guidance has been updated to
– remove the limitation on restricted payments with respect to payments in sterling only (page 8); and
– insert new provisions as regards the aforementioned new reporting obligations (page 9).
Furthermore, OFSI has updated one and added three new FAQs which read as follows – as quoted:
FAQ 5 (updated): Should a UK credit or financial institution process payments that are received directly or indirectly from a bank designated for the purposes of regulation 17A, when both the remitting account holder and beneficiary account holder are not designated?
Answer: No. Regulation 17A(2) prohibits UK credit or financial institutions (referred to as banks within this response) from processing payments which have previously been processed by banks designated for the purposes of that regulation. In other words, the prohibition prevents UK banks from clearing and settling the payment. However, the legislation permits the first credit of funds into the UK bank’s account (in their name, excluding any accounts where funds are held on behalf or for the benefit of a customer) given that banks may not receive detailed payment information prior to initial receipt of funds for some transfers. An exception under regulation 59A(2) enables banks to move funds internally (excluding to customer accounts) for the purposes of complying with regulation 17A(2) without breaching this prohibition.
Regulation 17A(2) prohibits UK banks from the onward processing of payments which have previously come from, been routed via, or which are intended to be paid to banks designated under the regulation. This includes cases where the designated bank is involved in the transaction as the remitting bank, a correspondent or intermediary bank in the payment chain or the beneficiary bank. Similarly, it includes cases where the UK bank is involved as a correspondent, intermediary or beneficiary bank in the payment chain. Annex A shows two example scenarios where a payment may be stopped by the UK’s financial sanctions under regulation 17A. Regulation 17A(2) prohibitions also apply to banks owned or controlled by banks designated under the regulation. Some of OFSI’s general licences permit payments that would otherwise be prevented by Regulation 17A. If you are an account holder in such a transaction, please consult OFSI’s general licence page and contact your bank to clearly explain how the transaction meets the criteria for the relevant general licence. If there is a relevant licensing ground which applies to the transaction, OFSI may be able to issue a specific licence to enable a UK bank to process the payment. Licensing grounds applicable to these transactions, these are set out at Parts 1B and 1C of Schedule 5 of the Russia Regulations.
FAQ 53 (new): Who is considered a “prohibited person” under regulation 18A(1)?
Answer: A prohibited person means the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, the Ministry of Finance of the Russian Federation, a person owned or controlled directly or indirectly by these entities, or a person acting on behalf of or at the direction of these entities.
FAQ 54 (new): What assets must be reported under regulation 70A?
Answer: Designated persons must report any funds or economic resource if the value of those funds or economic resources exceeds the value of £10,000. If multiple funds or economic resources of the same type (for example, jewellery, art, bank accounts), taken together exceed £10,000, this must also be reported.
FAQ 55 (new): What is the process for reviews and appeals for civil monetary penalties imposed for a breach of regulation 70A?
Answer: The procedure for the right to review, right to appeal and the process for paying a monetary penalty is set out in Regulation 88D of The Russia (Sanctions) (EU Exit) Regulations 2019. Further information on the right of appeal can be found in Chapter 7 of OFSI’s enforcement and monetary penalty guidance. Further information on paying a monetary penalty can be found in Chapter 8 of OFSI’s enforcement guidance. Further information on the process of review can be found in sections 6.2 to 6.14 of OFSI’s enforcement and monetary penalty guidance. Both representations and requests for review must be made in writing (unless oral representations have been agreed) to:
Email: OFSl@HMTreasury.gov.uk
Hard Copies:
Office of Financial Sanctions Implementation
HM Treasury
1 Horse Guards Road
London
SW1A 2HQ