A Summary of New UK Sanctions Enforcement Powers and Further Ukraine-related UK Sanctions on Russia and Belarus

Since March 14, 2022, the United Kingdom has continued to introduce and announce new sanctions measures in response to Russia’s invasion of Ukraine.  The new UK measures include sanctions enforcement powers under the Economic Crime (Transparency and Enforcement) Act 2022, the designation of hundreds of individuals and entities under the UK’s Russia and Belarus sanctions regimes, the introduction of new general licences, the introduction and announcement of new sanctions measures, and the revision of various guidance documents. For more information on how these developments could impact your organization, contact the author of this post, Alexandra Melia, in Steptoe’s Economic Sanctions team in London. For an update on new US sanctions on Russia, see this Steptoe blog post. Additional resources can be found on Steptoe’s “Sanctions against Russia: Implications for Business and International Trade” page. New Sanctions Enforcement Powers On March 15, 2022, the Economic Crime (Transparency and Enforcement) Act 2022 received Royal Assent, following an expedited passage through the UK parliament.  Introduced following Russia’s invasion of Ukraine, the new legislation amends the Policing and Crime Act 2017 and the Sanctions and Anti-Money Laundering Act 2018 by:

• introducing the “urgent procedure,” which enables the UK government to designate individuals and entities already designated by the UK’s allies. Designations under the procedure will lapse after 56 days (starting on the day after designation) unless the relevant minister certifies, within that period, that the UK legal test for designation is met or that the designated person continues to be designated by an ally of the UK and the designation is in the public interest.  The 56 day period can only be renewed once, and will then lapse unless the UK legal test for designation is met by the end of the extension period;
• enabling HM Treasury’s Office of Financial Sanctions Implementation (OFSI) to impose monetary penalties on a “strict liability” basis by removing the requirement that people must have known or suspected that they breached UK financial sanctions to impose such a penalty; and
• allowing OFSI to publish notices on cases where it thinks a person has breached UK financial sanctions but it has not imposed a monetary penalty for whatever reason.

New Designations of Individuals and Entities On March 15, 2022, OFSI made two rounds of designations under The Russia (Sanctions) (EU Exit) Regulations 2019, as amended (Russia Regulations), initially designating 350 individuals and entities and, later the same day, designating a further 14 individuals and entities.  OFSI made use of the new powers conferred by the “urgent procedure” to make a number of designations, including:

• Dmitry Mazepin (Chairman of Uralchem);
• Dmitry Medvedev (Former President of Russia);
• Andrey Melnichenko (Founder of Eurochem);
• Sergei Shoigu (Russian Defence Minister);
• Viktor Vekselberg (Owner of Renova Group);
• Gas Industry Insurance company Sogaz;
• Geopolitica;
• Internet Research Agency;
• New Eastern Outlook;
• Oriental Review;
• JSC Zelenodolsk Shipyard; and
• Rosneft Aero.

OFSI also used the standard procedure to designated additional individuals, including:

• Petr Aven (President of Alfa-Bank);
• Mikhail Fridman (Founder and Chairman of the Supervisory Board of Alfa Group); and
• German Khan (Co-Founder of LetterOne Group);

On March 24, 2022, OFSI added a further 59 entries to the Russia and six entries to the Belarus financial sanctions regimes.  OFSI’s designation notices can be accessed here and here.  Among those designated were 33 individuals, including:

• Oleg Tinkov (founder of Tinkoff Bank);
• Herman Gref (CEO of Sberbank);
• Oleg E Aksyutin (Deputy Chairman of the Management Board at Gazprom PJSC);
• Didier Casimiro (First Vice President of Rosneft); and
• Zeljko Runje (Deputy Chairman of the Management Board and First Vice President for Oil, Gas, and Offshore Business Development of Rosneft).

32 entities also were designated, including:

• Banks (Alfa-Bank, Gazprombank, Russian Agricultural Bank, SMP Bank, and Ural Bank for Reconstruction and Development);
• Mining companies (Alrosa);
• Transportation companies (Russian Railways and Sovcomflot);
• Drone manufacturers (Kronshtadt); and
• the Wagner Group.

The designated persons are now subject to a UK asset freeze and, in the case of designated individuals, a UK travel ban. New General Licences On March 17, 2022, the Department for International Trade published a general trade licence for vessels, which regulates the provision of technical assistance, financial services/funds, and brokering services in relation to so-called restricted goods and technology (as defined under the Russia Regulations).  Any person seeking to rely on the licence is required to register online via SPIRE, the UK’s online export licensing system, within 30 days of their first use of the licence. OFSI also has issued a number of new general licences since March 15, 2022, including:

• INT/2022/1381276, which allows a period for winding down any derivatives, repurchase, and reverse repurchase transactions involving the Central Bank of the Russian Federation, National Wealth Fund of the Russian Federation, and Ministry of Finance of the Russian Federation until May 2, 2022.  The general licence also permits the provision of financial services for the purposes of winding down any such transactions entered into prior to March 1, 2022 with any of the foregoing entities;
• INT/2022/1424276, which permits the wind down of any transactions, including the closing out of positions, involving Alfa Bank JSC, GazpromBank, Rosselkhozbank, SMP Bank, Ural Bank for Reconstruction and Development, and their subsidiaries.  The general licence will expire on April 23, 2022;
• INT/2022/1424277, which permits the wind down of any transactions, including the closing out of positions, with Bank Dabrabyt Joint Stock Company or its subsidiaries.  The general licence will expire on April 23, 2022;
• INT/2022/1438977, which permits the continuation of business operations involving GEFCO (a Joint Venture owned by Russian Railways and Stellantis) or entities owned or controlled by GEFCO (Subsidiaries), including payments to or from (1) GEFCO or its Subsidiaries under any obligations/contracts or (2) any third party necessary to the continuation of any obligations/contracts.  Relevant financial institutions also are permitted to process the foregoing categories of payments.  Subsidiaries also may make payments for their basic needs, reasonable fees/service charges arising from the routine holding and maintenance of their frozen funds/economic resources.  The general licence will expire on May 23, 2022; and
• INT/2022/14369378, which permits the wind down of any transactions involving Sovcomflot or an entity owned or controlled by Sovcomflot, including the closing out of any positions.  The general licence will expire on May 15, 2022.

New Sanctions Measures Introduced and Announced On March 30, 2022, the UK government laid a new amendment to the Russia Regulations before parliament using the “made affirmative” procedure.  The Russia (Sanctions) (EU Exit) (Amendment) (No. 7) Regulations 2022, which are now in effect, introduce the following new sanctions measures:

• a prohibition on the maintenance of aircraft or ships belonging to UK designated persons; and
• an extension of the finance, trade and shipping sanctions imposed previously on Crimea to non-government controlled territory in Donetsk and Luhansk.

On March 15, 2022, the UK government also issued a press release stating its intention to impose a ban on exports of high-end luxury goods to Russia.  Further details on the export ban are expected to be announced in due course.  The UK government also announced the imposition of new import tariffs on hundreds of key products.  These products will face an additional tariff increase of 35 percent over and above any existing tariff rate under the terms of the move. Revision to UK Sanctions Guidance On March 22, 2022, OFSI updated its general guidance on financial sanctions by adding a paragraph to Chapter 4 on ownership and control.  The new paragraph 4.14 clarifies OFSI's position on aggregation when calculating ownership of an entity by UK designated persons and states that OFSI would not simply aggregate different designated persons’ holdings in a company to determine whether it was “owned” unless, for example, the shares or rights were subject to a joint arrangement between the UK designated parties or one party controls the rights of another. Consequently, if each of the UK designated person's holdings falls below the 50 percent threshold in respect of share ownership and there is no evidence of a joint arrangement or that the shares are held jointly, the company would not be directly or indirectly owned by a designated person. This is a different approach than the one taken under the “50 Percent Rule” of the US Treasury Department’s Office of Foreign Assets Control (OFAC), which aggregates ownership interests of designated persons such as Specially Designated Nationals (SDNs). On March 25, 2022, the statutory guidance on the UK’s Russia sanctions regime also was updated.  In particular, the guidance has been revised to clarify that the prohibition on providing financial services for the purposes of foreign exchange reserve and asset management also applies to transactions involving gold.

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