War in Ukraine: UK Announces Tough New Sanctions

WAR IN UKRAINE

UK ANNOUNCES TOUGH NEW SANCTIONS

Following the recent invasion of Ukraine by Russian forces, the UK Government has imposed a range of sanctions designed to target a vast swathe of economic and trade activity with the Russian Federation. It is hoped that these sanctions will discourage President Putin of Russia from continuing with his war on Ukraine and end Russia’s attempt to threaten the territorial integrity, sovereignty or independence of Ukraine. 

The situation is moving at pace and further sanctions are expected. 

The “first barrage” of economic sanctions was introduced on 22 February 2022 and targeted five Russian banks and three high net-worth Russian individuals. On 24 February 2022, further asset freezes were introduced against Russian individuals, banks and other enterprises. On 25 February 2022, the UK Government hit the top of Russia’s government by imposing an asset freeze on President Putin and Foreign Minister Lavrov.

The UK sanctions regime

The UK sanctions regime is underpinned by the Sanctions and Anti-Money Laundering Act 2018 (SAMLA 2018). This statute introduced a post-Brexit regime for sanctions and their enforcement.

The Act essentially imposes a range of sanctions that can be imposed, namely:

• Financial sanctions, which are designed to have an adverse financial impact on particular individuals or corporate entities;
• Trade sanctions, designed to disrupt trade activities involving certain individuals, prescribed countries etc.
• Immigration sanctions, which bar an individual from entering or remaining in the UK; 
• Aircraft and shipping sanctions, which restrict the movement of aircraft and ships. 

Territorially, SAMLA 2018 is enforceable against those within the UK and UK individuals abroad. The main agency dealing with sanctions is the Treasury’s Office for Financial Sanctions Implementation (OFSI). This office deals with financial sanctions enforcement issues, including issuing licences to permit an exception to the prohibitions and requirements made under SAMLA 2018. 

Failure to comply with financial sanctions legislation or to seek to circumvent its provisions is a criminal offence.

The New Sanctions

Asset freezes have been imposed on more than 100 new entities and individuals, including Rostec, a Russian state-owned defence conglomerate based in Moscow as well as all the 

major manufacturers that support Putin’s “war machine”. A full asset freeze has also been imposed on all Russian financial institutions, with an immediate asset freeze on VTB Bank.

UK individuals are now restricted from undertaking financial transactions involving the Central Bank of the Russian Federation, the Russian National Wealth Fund and the Ministry of Finance of the Russian Federation. 

Trade restrictions with Russia have been significantly strengthened. This includes a prohibition against the export of a range of high-end and critical technical equipment and components in sectors including electronics, telecommunications and aerospace.

Measures have also been imposed to prevent Russian companies from issuing transferable securities and money market instruments in the UK. Designated banks will be prevented from accessing Sterling and clearing payments through the UK. These banks will be unable to process any payments through the UK or have access to UK financial markets. There is a prohibition on the Russian state raising sovereign debt in the UK.

In the air, the Russian airline, Aeroflot, has been banned from entering UK airspace as have all other Russian commercial and private jets. On 9 March 2022, the UK Government announced measures to detain Russian aircraft in the UK. Aircraft owned, operated or chartered by any person connected with Russia, or designated individuals or entities may be subject to such detention. 

At sea, Russian ships are now banned from entering into UK ports.

Russian individuals are now subject to a £50,000 deposit limit on bank accounts in the UK. 

Measures are being brought forward in relation to Unexplained Wealth Orders in the Economic Crime Bill which includes measures to reform the register of overseas property ownership.

New sanctions have also been introduced against Belarus and organisations that have supported the Russian invasion.

New Designations

The UK Government has also used its new powers under the Russia (Sanctions) (EU Exit) (Amendment) Regulations 2022 (SI 2022/123), which strengthens existing Russian sanctions legislation by extending its sanctions designation criteria to target Russian businesses and individuals in a wide range of strategically significant sectors. The five individuals designated and subject to an immediate asset freeze are:

BORTNIKOV, Denis Alexandrovich

FRADKOV, Petr Mikhailovich

GEORGIEVA, Elena Alexandrovna

SHAMALOV, Kirill Nikolaevich

SLYUSAR, Yury Borisovich

On 25 February 2022, the UK Government hit at the very heart of the Russian regime and designated President Vladimir Putin and Foreign Minister Sergei Lavrov who are now subject to an immediate asset freeze. UK companies are now barred from providing goods, services or assets to them in the future.

The following six entities have also been designated and subject to an immediate asset freeze:

• JSC Research and Production Corporation, Uralvagonzavod
• Public Joint Stock Company “United Aircraft Corporation”
• Public Joint Stock Company “United Shipbuilding Corporation”
• State Corporation for the Promotion of the Development, Manufacture and Export of High Technology Products “Rostec”
• Tactical Missiles Corporation Joint Stock Company
• VTB Bank (public joint stock company)

EU Sanctions

The EU has been imposing sanctions on Russia including:

• A ban on transactions with the Russian Central Bank;
• A ban on the overflight of EU airspace and access to EU ports by Russian carriers of all kinds;
• Sanctions on a number of persons and entities;
• Freezing the assets of Putin and Lavrov.

Things to consider

It goes without saying that UK individuals and organisations should take care not to breach the sanctions regime recently imposed and any further sanctions to come. Organisations should consider:

• Doing careful due diligence screening against individuals or entities on sanctions lists;
• Checking whether any accounts are maintained or any funds or economic resources are held for sanctioned persons and entities;
• Freezing sanctioned accounts and other funds or economic resources and any funds that are owned or controlled by sanctioned persons and entities; also refraining from dealing with the funds or assets or making them available (directly or indirectly) to sanctioned persons (unless licences allowing this have been granted by OFSI).
• Reporting any findings to the regulator and co-operating with any investigations that the regulator may undertake;
• Doing a contracts’ clauses check on any relevant contracts to ensure that provisions concerning warranties, force majeure, termination and liability are robust with respect to sanctions;
• Updating policies, procedures and risk assessments to be prepared for sanctions breaches;
• Where possible, consider obtaining insurance (export credit, political risk and trade disruption) against sanctions risks;
• Training staff on sanctions issues.

Further Information

For official UK guidance on sanctions with Russia see https://www.gov.uk/government/publications/russia-sanctions-guidance.

For information on EU sanctions on Russia see https://www.consilium.europa.eu/en/policies/sanctions/restrictive-measures-ukraine-crisis.

For more information please contact Lucy Keane of 33 Bedford Row – l.keane@33bedfordrow.co.uk.

Information correct as at 9 March 2022.