As part of your customer due diligence activities, you should also consider whether a potential client may be subject to any financial sanctions.
The Office of Financial Sanctions Implementation (OFSI) publishes a list of all those subject to financial sanctions imposed by the UK. This provides information to help you decide whether you are dealing with someone who is subject to sanctions. The OFSI helps to ensure that financial sanctions are properly understood, implemented and enforced in the United Kingdom
Financial Sanctions: Russia and your responsibilities
Following the UK Government imposing sanctions on Russia, you all have a vital role to play in ensuring all measures and restrictions are complied with. All regulators are working together to ensure firms and individuals understand their obligations so, if you work in a firm regulated by another regulator, do also check their own guidance.
Asset freezes
Details of all individuals and entities subject to an asset freeze (designated persons) can be found on OFSI’s consolidated list. OFSI has a separate list of Russian entities named in relation to financial and investment restrictions. You can also find a list of designated persons in Russia on OFSI’s Russia regime page.
Whenever changes are made to the consolidated list, OFSI will update its subscribers through its e-mail alerts. The list can change quickly, so it is important to keep up to date with these changes.
Russia sanctions regulations
The Russia (Sanctions) (EU Exit) Regulations 2019 came fully into force on 31 December 2020, replacing the Ukraine (European Union Financial Sanctions) Regulations 2014. This regime is aimed at encouraging Russia to cease actions destabilising Ukraine or undermining or threatening the territorial integrity, sovereignty or independence of Ukraine.
The following should be reviewed alongside the Russia regulations –
Sanctions (EU Exit) (Miscellaneous Amendments) (No. 2) Regulations 2020 and the Sanctions (EU Exit) (Miscellaneous Amendments) (No. 4) Regulations 2020
Russia sanctions regulations
- Several amendment regulations to the regime were laid in February and March 2022.
- These are listed on OFSI’s Russia regime page and should be read alongside the above regulations.
Russia sectoral measures
The recent amendment regulations have extended some of the investment and financial restrictions on Russian companies and introduced some new measures. These include:
- Measures to prevent Russian banks from clearing payments in sterling
- Measures that prohibit transactions with the Central Bank of the Russian Federation, Russian Ministry of Finance and Russian National Wealth Fund
- Extending the prohibitions on securities and money-market instruments
- Extending the prohibitions on issuing loans and credit
- Trade and aviation sanctions measures
OFSI has updated its Russia regime specific guidance to give more details about the financial measures listed above. Statutory guidance has also been published that covers wider trade and aviation measures as well as the financial measures.
Licensing
It is possible to apply for a licence to undertake certain activities that would otherwise be prohibited. OFSI’s Russia guidance and the schedule of the amendment regulations detail what grounds are available to apply for different licences. The available grounds vary depending on which activity you are undertaking.
It would be possible to provide legal services to a designated person without a licence, as they should have access to justice. However, you can only be paid for any legal services if you have a licence.
Please note: If any firm was to seek a licence, we would expect them to notify CILEx Regulation before doing so.
Reporting to OFSI
You are legally obliged to report to OFSI if, as a relevant firm you know or suspect that a breach of financial sanctions has occurred, that a person is a designated person, or you hold frozen assets and that knowledge or suspicion came to you while conducting your business. You must contact OFSI at the earliest opportunity using the reporting form on gov.uk.
- Breaching the financial sanctions requirements can result in criminal prosecution or a fine by OFSI.
- You have responsibilities under this regime to safeguard the UK and protect the reputation of the legal services industry.
- Your firm must have appropriate policies in place to ensure you comply with sanctions legislation, including carrying out regular and appropriate checks of sanctions lists, and we expect to see this evidenced.
- If your firm is using an electronic verification system for customer due diligence and sanctions checks, check they are refreshing sanctions lists with sufficient frequency.
Our Code of Conduct requires all firms and individuals that we regulate to keep up to comply with the law and regulations relating to their work. Therefore, we would take disciplinary action should we see evidence of serious non-compliance.
Additional resources
