Essential guidance if you have clients who operate in Russia
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.
The new measures will mean Russia’s businesses can no longer benefit from the UK’s world class accountancy, management consultancy and PR services, which account for 10% of Russian imports in these sectors.
The government’s website has various publications and legislation that relate to Russia sanctions. The sanctions regime is continually changing and we expect further details on the sanctions this month.
In order to achieve the stated purposes, the Regulations impose a number of prohibitions and requirements. To enforce these, the Regulations establish penalties and offences, which are set out in detail in the corresponding report under section 18 of the Sanctions Act in relation to criminal offences.
The prohibitions and requirements imposed by the Regulations apply within the territory of the United Kingdom (UK) (including Northern Ireland) and in relation to the conduct of all UK persons wherever they are in the world. UK persons includes British nationals, as well as all bodies incorporated or constituted under the law of any part of the UK. Accordingly, the prohibitions and requirements imposed by the Regulations apply to all companies established in any part of the UK, and they also apply to branches of UK companies operating overseas.
The sanctions include a variety of measures including freezing assets of the named individuals and organisations, travel bans and the prevention of trade (except under government licence) of the named persons, organisations and assets owned by those persons. Any company or entity owned by the sanctioned individuals or organisations is subject to trading embargoes. No further transactions can be undertaken with these entities or persons unless a specific licence permits it.
Russian companies will be prevented from issuing transferable securities and money market instruments in the UK and be unable to raise debt in the UK; most financial transactions and insurance transactions are now restricted. There are various trade restrictions including the prohibition on the export of high-end and critical technical equipment in the electronic, telecommunications and aerospace sectors. There are also bans on ‘dual-use’ items (goods that can be used in the civil and the defence industry).
The sanctions and definitions are very wide-ranging and include entities in which the Russian government has only a minority interest. It will include not only Russian companies but non-Russian companies that fall under the sanctioned persons’ or entities’ ownership or control.
UK persons will be prohibited from dealing with funds or assets owned or controlled by the sanctioned persons or entities and prohibited from making funds or economic resources available to these persons (and any entities owned or controlled by these persons).
Failure to comply with financial sanctions legislation or to seek to circumvent its provisions is a criminal offence.
OFSI maintains two lists of those subject to financial sanctions:
1. The consolidated list
This is a list of all asset freeze targets listed under UK autonomous financial sanctions legislation and UN sanctions (‘the Consolidated List’). The individuals and entities listed are known as ‘designated persons’. OFSI publishes the Consolidated List to help businesses and individuals comply with financial sanctions.
OFSI aims to update the Consolidated List within one working day for all new UN and UK listings coming into force in the UK, and within three working days for all other amendments.
2. List of entities subject to capital market restrictions
OFSI maintains a separate list of entities subject to specific capital market restrictions. These entities are not contained on the Consolidated List.
For more information on the restrictions that apply to these entities please see the Ukraine (Sovereignty and Territorial Integrity) regime page on GOV.UK.
ACCA technical factsheet: Russia sanctions: OFSI reporting obligations for accountants
ACCA's AML hub