Prohibition on provision of accountancy services to Russia

A summary of new regulations impacting on accountants

On 4 May, Foreign Secretary Liz Truss announced a ban on services exports to Russia, cutting them off from doing business with UK sectors that are critical to the Russian economy. These restrictions were in addition to legislation contained within the Economic Crime (Transparency and Enforcement) Act 2022, which received Royal Assent in March 2022.

Legislation

Statutory instrument SI 2022/850  came into force on 21 July; Regulation 13 inserted Chapter 6B banning the provision of accountancy services and management consultancy services to Russian companies (54C).

Accounting services is defined (in 54B) as:

  1. accounting review services, which are services involving the review by a person of annual and interim financial statements and other accounting information, but excluding auditing services
  2.  compilation of financial statements services, which are services involving the compilation by a person of financial statements from information provided by a client, including preparation services of business tax returns when provided together with the preparation of financial statements for a single fee, but excluding such preparation services of business tax returns when provided as a separate service
  3. other accounting services such as attestations, valuations, preparation services of pro forma statements
  4.  bookkeeping services, which are services consisting of classifying and recording business transactions in terms of money or some unit of measurement in the books of account, but excluding bookkeeping services related to tax returns
  5.  business and management consulting services means advisory, guidance and operational assistance services provided for business policy and strategy and the overall planning, structuring and control of an organisation, which includes (but is not limited to) management auditing; market management; human resources; production management and project management consulting.

Prohibition

The amendments contained in SI 2022 /850 provide (among others) that:

A person must not directly or indirectly provide, to a person connected with Russia:

a)    accounting services

b)    business and management consulting services

c)     public relations services.

Breach of sanctions

A person who contravenes any of these prohibitions would be committing a criminal offence. However, new Regulation 54C provides that it is a defence for a person to show that they did not know and had no reasonable cause to suspect that the person to whom the services were provided was ‘a person connected with Russia’.

Exceptions

Certain exceptions and licences are still allowed. New regulation 60DA states:

(1) The prohibitions in regulation 54C (professional and business services) are not contravened by any act done by a person (P):

(a) in satisfaction of an obligation:

(i) in respect of the provision of professional and business services by P to a person connected with Russia where those services are provided in relation to the discharge or compliance with UK statutory or regulatory obligations, such obligations not arising under contract

(ii) arising under a contract concluded before 20 July 2022, or an ancillary contract necessary for the satisfaction of such a contract, provided that—

(aa) the act is carried out before the end of the period of one month beginning with the day on which this regulation comes into force;

(bb) P has notified the Secretary of State no later than the day 10 working days before the day on which the act is carried out;

(b) that is necessary for the official purposes of a diplomatic mission or consular post in Russia, or of an international organisation enjoying immunities in accordance with international law.

More information

Read further guidance on implementation of the prohibitions and compliance with the sanctions relating to Russia.

Detailed guidance on the general requirements in relation to money laundering can be found on ACCA’s AML hub.