Fintech meet up
Out-Law Guide | 11 Sep 2018 | 4:13 pm | 7 min. read
This guide was last updated in September 2018
EU sanctions apply to all EU businesses and persons operating anywhere in the world and to any overseas business or person when in or doing business within the EU. This means that an EU citizen working outside of the EU may commit a sanctions related offence, for example, by brokering a deal to supply particular oil and gas equipment to a Russian entity or for use in Russia in breach of the EU Russian sanctions.
The prohibitions in the EU Russian sanctions can be categorised as follows:
- any entity or person in Russia or for use in Russia if those items are or may be intended entirely or in part for military use or for a military end user, such as the Russian military;
- any "Annex IV" entity currently, JSC Sirius, OJSC Stankoinstrument, OAO JSC Chemcomposite, JSC Kalashnikov, JSC Tula Arms Plant, NPK Technologii Maschinostrojenija, OAO Wysokototschnye Kompleksi, OAO Almaz Antey and OAO NPO Bazalt. General services in connection with such dual use goods and technology to such entities is also prohibited.
Transferrable securities, money market instruments, loans or credit
- SBERBANK, VTB BANK, GAZPROMBANK, VNESHECONOMBANK (VEB) and ROSSELKHOZBANK (Annex III entities);
- OPK OBORONPROM, UNITED AIRCRAFT CORPORATION and URALVAGONZAVOD (Annex V entities); and
- ROSNEFT, TRANSNEFT and GAZPROM NEFT (Annex VI entities).
There is a prohibition on directly or indirectly accepting funds, goods or services from, or making them available to, targets of financial sanctions designated as such in relation to the threat to the territorial integrity and sovereignty of, or stability or security in, Ukraine or in relation to the misappropriation of Ukrainian state funds and those responsible for human rights violations in Ukraine. The Russian specific financial sanctions targets are listed in the UK's Consolidated List of Financial Sanctions Targets. Supplies and dealings with entities owned or controlled by financial sanctions targets are also prohibited.
The prohibitions relating to sales and supplies apply regardless of whether or not the relevant items originate in the EU, which means that sales, transfers and supplies from non-EU countries by EU persons are also prohibited.
Actions by relevant entities or persons shall not give rise to liability of any kind on their part if they did not know and had no reasonable cause to suspect that their actions would infringe the EU Russian sanctions.
EU member states are to introduce penalty regimes for breaching the EU Russian sanctions that are "effective, proportional and dissuasive". In the UK it is a criminal offence to breach the EU Russian sanctions punishable by periods of imprisonment, unlimited fines or both. It is also an offence to knowingly participate in activities that are designed to circumvent the sanctions.
In addition to the EU sanctions specific to Russia, EU sanctions are also in place in respect of Crimea and Sevastopol. These prohibitions are wide ranging and relate to certain investments, exports, imports, trade and related financing, financial assistance, brokering and technical assistance.
Entities, godies and individuals have also been designated as financial sanctions targets in respect of the annexation of Crimea and Sevastopol and the destabilisation of Eastern-Ukraine. Entities in Crimea or Sevastopol whose ownership has been transferred contrary to Ukrainian law, and entities, bodies or individuals For the most part US sanctions apply to US entities and bodies incorporated under the laws of the US; to both US citizens and permanent resident aliens anywhere in the world and to any non-US individual, entity or body whilst in, or carrying out business in, the US. They also apply to dealings with US origin goods, technology (including certain foreign made products incorporating US-origin goods or technology) and involving the US financial system. that have benefited from such a transfer have also been designated as financial sanctions targets. The financial sanctions targets are also listed in the UK's Consolidated List of Financial Sanctions Targets.
The US has issued wide ranging financial and trade sanctions since 2014 in respect of Russia in connection with actions which undermine the sovereignty of Ukraine. More recently, in August 2018, the US issued a further raft of measures against Russia following the chemical attack in Salisbury, England, referred to as the 'Skripal poisoning' on the grounds that the "the government of the Russian Federation has used chemical weapons in violation of international law or lethal chemical weapons against its own nationals”. Further, the US has imposed a total embargo on trade and services with the Crimea Region.
For the most part US sanctions apply to US entities and bodies incorporated under the laws of the US; to both US citizens and permanent resident aliens anywhere in the world and to any non-US individual, entity or body whilst in, or carrying out business in, the US. They also apply to dealings with US origin goods, technology, including certain foreign made products incorporating US-origin goods or technology, and involving the US financial system.
However, US sanctions may be relevant to EU businesses and persons with no links to the US through contractual undertakings; it is common for banks, insurers and US based businesses to contractually require compliance with US sanctions in general.
Further EU businesses and persons may be subject to enforcement action by the US for dealings with entities, bodies or individuals listed on its Specially Designated Nationals and Blocked Persons List, known as the SDN list, which includes certain entities, bodies and individuals in or connected to Russia, and with any entity owned more than 50% by such entities, bodies or individuals.
The US has also imposed secondary sanctions in respect of Russia which means that non-US parties - including EU businesses and persons - can be subject to enforcement action from the US if they engage in, for example activities that undermine cybersecurity, a transaction with any entity, body or individual that is part of, or operates for or on behalf of, the defence or intelligence sectors of the Russian government or deal in any way with significant investments and supplies related to the energy sector or that contribute to privatisation of Russian state-owned assets.
Enforcement action can also be taken for causing or conspiring to cause any violation of US Russian sanctions and / or facilitating significant transactions for or on behalf of any entity, body or individual subject to US Russian sanctions.
The political situation relating to Russia is fluid. On 5 September 2018 UK prime minister Theresa May said that she would "push for new EU sanctions regimes against those responsible for cyber-attacks and gross human rights violations - and for new listings under the existing regime against Russia." The following day the UK, US, France, Germany and Canada published a joint statement which said that those countries had full confidence in the UK’s assessment that the 'Skripal poisoning' was carried out by two officers from the "Russian military intelligence service, also known as the GRU, and that this operation was almost certainly approved at a senior government level."
Fintech meet up