What you need to know about sanctions on Russia
The new sanctions are aimed at encouraging Russia to cease actions destabilising, undermining or threatening the territorial integrity, sovereignty or independence of Ukraine.
All firms regulated by the Solicitors Regulation Authority (SRA) must have appropriate policies in place to make sure they comply with sanctions legislation.
This includes carrying out regular and appropriate checks of sanctions lists.
What you need to do
The guidance sets out:
- the criminal offences under the regime
- how to carry out a risk assessment
- obligations to check clients against sanctions lists
- how to apply for a licence to act for a client on a sanctions list
- your reporting obligations
SRA guidance on the importance of complying with sanctions
The SRA has published new guidance covering:
- financial sanctions
- anti-money laundering
- strategic litigation against public participation (SLAPPs)
- continuing to act for clients
The guidance highlights that the SRA are "commencing a process of spot checks on firms to assess compliance with the financial sanctions regime".
It's important that all firms ensure that they immediately review their policies, controls, procedures and sanctions compliance.
SARs glossary code for sanctioned Russian entities
The UK Financial Intelligence Unit has introduced a new suspicious activity report (SAR) glossary code, XXSNEXX, to use where you suspect activity is:
- consistent with money laundering, and
- linked to entities sanctioned by the UK, EU, US and other overseas jurisdictions as a result of the Russian invasion of Ukraine
The Economic Crime (Transparency and Enforcement) Act has removed the knowledge test from breach offences.
A breach offence will be committed regardless of whether a person had a reasonable basis of suspicion that they were dealing with a frozen asset. This is a shift to the US Office of Foreign Assets Control model of enforcement.
You must report frozen assets and suspected breaches to the Office of Financial Sanctions Implementation using the compliance reporting form.
Non-voluntary breach disclosures will result in larger monetary penalties.
Indicators of sanctions evasion risk
- Russian clients communicating changes to the beneficial ownership of their private investment companies (PICs) to non-Russian or dual national family members
- Requests to transfer assets between Russian national/dual-national family members
- Use of trust arrangements, with circumstances of transfers calling into question whether the original owner retains indirect control or otherwise could retain a benefit from the assets transferred
- Assets transferred have usually been shares in companies, both UK and overseas, including both minority and controlling stakes in these businesses
- Payments from venture capital and private equity vehicles, many located in offshore jurisdictions or the far east
- Clients seeking to move all their assets to other financial institutions and closing their accounts in London
- Clients domiciled in Russia asking whether they can make transfers to their London account
- Attempts to purchase sanctioned Russian securities, which have drastically fallen in price
- Increased volume of transaction monitoring alerts resulting from Russian and Ukrainian clients making and receiving larger transfers than is typical
- Payments received by UK businesses, often in innovative areas, also with some elements of ownership by Russia nationals
- Payments via a fintech with Russian investor nexus
- Research on private equity/venture capital vehicles and some people with significant control/officers of UK businesses showing individuals connected to Russian industry previously subject to sectoral sanctions and on occasion politically exposed persons (PEPs)
- Russian high net worth individuals who are already on international sanctions lists (but not UK list) and/or who anticipate that they may become a sanctions target, transferring assets to family members and/or close associates such as employees
- Change in address and names for Russian entities one day prior to invasion
- Change of ultimate beneficial owners from Russian to other nationalities
- Circumvention attempts through open account trade-based money laundering (TBML) typology – for example, increase in third-party open account payments
Foreign, Commonwealth and Development Office (FCDO) resources
- Watch a recording of a government briefing on UK sanctions in relation to Russia
- Check the statutory guidance on the Russia (Sanctions) (EU Exit) Regulations 2019
- Sign up for OFSI e-alerts
- Read the notices to exporters
- Read the notices to importers
We’re gravely concerned with the news from Ukraine and are continuing to support our members in the region.
I. Stephanie Boyce, president of the Law Society, said: “We stand in solidarity with the Ukrainian people, the Ukrainian National Bar Association and the Ukrainian Bar Association.
"We also stand with the Russian people who oppose their government’s illegal invasion of Ukraine, and lawyers who are defending the rule of law in the region.
“We condemn the actions of the Russian Federation, which are in contravention of international law. There is no doubt that these actions are a direct threat to the rule of law.”