Out-Law News 2 min. read
15 Feb 2022, 12:00 pm
UK legislation has been updated to allow financial sanctions to be targeted at a greater number of businesses and individuals at short notice in response to the developing situation in Russia and Ukraine.
The changes do not introduce any new sanctions but rather concern the criteria under which individuals and entities can be designated as subject to UK financial sanctions. The updated regulations, among other things, specifically list sectors considered to be of strategic significance to the Russian government within which businesses could be targeted for sanctions.
Sanctions expert Stacy Keen of Pinsent Masons said: “The UK Russian sanctions regime has been updated so that a wider category of individuals and entities can be designated as financial sanctions targets if the secretary of state considers that doing so will encourage Russia to cease actions destabilising Ukraine or undermining or threatening the territorial integrity, sovereignty or independence of Ukraine.”
The new designation criteria allow for businesses ‘obtaining a benefit from or supporting the government of Russia’ to be designated as financial sanctions targets. The regulations expand on what is meant by that.
The term could be applied to Russian state-affiliated companies, including not only all entities that are owned or controlled by the government of Russia but entities in which Russia holds a direct or indirect minority interest. It also covers entities carrying on business of economic significance to the government of Russia or carrying on business in a sector of strategic significance to the government of Russia, as well as certain individuals or persons that own, control or hold directorships or trustee positions or equivalent in the entities otherwise captured by the new designation criteria.
To designate an individual or entity as subject to UK financial sanctions, the secretary of state must have reasonable grounds that the individual or entity meets the relevant criteria.
Keen said: “The new designation criteria permits a broad range of businesses to be designated as financial sanctions targets. In relation to Russia’s strategically important businesses, the regulations specify that this applies to those operating in the chemicals, construction, defence, electronics, energy, extractives, financial services, transport and information, communications and digital technologies sectors.”
“The cast of entities and individuals that can be caught by the financial sanctions prohibitions is wider still when you consider that they also apply to businesses owned or controlled by financial sanctions targets, even if they are not themselves targeted. There is no carve out in the UK regime for UK businesses that are owned or controlled by Russian businesses or individuals that are, or may be in the future, designated as UK financial sanctions targets,” she said.
“UK nationals and incorporated businesses, and those in the territory of the UK, are prohibited from dealing with the funds and, accepting funds or economic resources from, or making them available to, those caught by financial sanctions,” Keen said.
The changes to the designation criteria were trailed last month by UK foreign secretary Liz Truss late last month when she promised that the UK would broaden its sanctions regime against Russia given the growing tensions in Russia and Ukraine.
Pinsent Masons has advised businesses to engage in preparatory contingency planning given the evolving situation in Russia and Ukraine and the major implications for their operations if new UK, EU and US sanctions are introduced.
04 Feb 2022