Advisory Note: The UK Sanctions Regime

First published 25th February 2022.

Last updated 19th December 2022

The Situation 

Due to the invasion of Ukraine the UK Government has imposed new sanctions on Russia and Belarus-linked individuals and organisations. The CLC reminds the practices and individuals we regulate of the vital need to be aware of these new requirements and adhering to them.

The situation is fast moving, and further sanctions may well follow, so you will also need to ensure you monitor developments closely. Information about the UK sanctions regimes is regularly updated and published online by the Government. This includes both individuals and entities in a regularly updated UK Sanctions List.

There are two other key points to note. Firstly, while the current focus is on Russia and Belarus, the sanctions regime has a global reach and can apply to several nationalities and organisations.

Secondly, this is not an issue that will go away soon. If anything, it will be growing in importance due to recent events. Sanctions, along with economic crime,  AML and cyber risks were already areas of increasing focus, and there will naturally be more of a spotlight on these issues from government, regulators, and the media, along with the public.  

There is also a risk that further measures may be taken by the Russian regime or its proxies in response to this new sanctions’ regime (e.g. cyber-attacks on critical infrastructure or groups of firms).

The Sanctions

The financial sanctions regime aims to reduce the risks (to businesses, consumers and the country) from carrying out business for, or in any way acting for individuals, entities or other defined bodies on the sanctions list. You are reminded that if a particular individual or organisation is named (and subject to an asset freeze), then you may not deal with their funds or make resources available to that person/organisation.

Extension of sanctions from 16th December 2022

A further set of sanctions relating to Russia have come into force.

Potentially the most relevant  issue for the conveyancing sector is the new ban on the provision of trust services. There is also a further change (relating to the property sector more widely) which bans the provision of architectural services to Russia.

NB Sanctions amendments and exemptions are frequently being updated. Practices are encouraged to check the very latest guidance, contact the Office of Financial Sanctions (OFSI), and consider obtaining further legal advice if they do have any cases relating to Russia, or other sanctioned states/entities.

Further details can be found at:

Russia sanctions: guidance – GOV.UK (www.gov.uk)

https://www.legislation.gov.uk/uksi/2022/1331/made

Your Responsibilities  

You have responsibilities under the sanctions regime to safeguard the UK, and to maintain and protect the reputation of the wider legal sector. Failing to follow the financial sanctions requirements could result in criminal prosecution or a large public fine. You should ensure that you have the right processes, systems and controls in place now – and in future – to comply with any sanctions developments to avoid the risks above. You are also strongly encouraged to review and update your process on AML and cyber protection.

These steps have to include:

Clear Checks

A review of the financial sanctions list (see below) before continuing, or undertaking, any transactions for clients. Or offering any advice or services.

Proper Processes

An update of how (and how often) you access the list. It is also a suitable time to remind yourself and staff on AML obligations and cyber protection. This should include updated training if necessary. (This point is always important, but especially so in the current situation).

Flagging Risks 

You are reminded that you are also under a legal obligation to report suspicions to the Office of Financial Sanctions Implementation (OFSI) if you believe a client (or a proxy for them) may be a designated person under the financial sanctions’ regime. They have an updated list that can be searched here.

Need for an OFSI licence if you act for or collect fees from a sanctioned individual

If firms act for a client(s) who/which appears on the consolidated sanctions, they will need (before accepting or billing the client) to apply for separate and distinct licence from the OFSI before doing so.

You should contact OFSI as early as possible, and should ask their advice about whether you also need to notify the FCA and the UK Financial Intelligence Unit (UKFIU), based at the National Crime Agency (NCA).

Further advice on reporting issues to OFSI is also available here.

Further Information 

• Following  the Prime Minister’s statement to the House of Commons on 22/2, the government announced further changes to measures on 24/2.
• Further guidance on this is available on the Foreign, Commonwealth & Development Office website.
• Some exemptions may be possible under OFSI, who will decide if fees for some work is permissible. These may also well change rapidly.  More Guidance on these and other issues is also available on the Government’s website,
• The FCA’s general sanction advice is covered in  FCG 7 of their Financial Crime Guide. It includes examples of good and poor practice in firm’s risk registers, governance and screening in relation to financial sanctions.
• You can also sign up to OFSI’s update on sanctions here.
• Further guidance on AML can be found on our website. Alongside advice on cyber risks and protection.