UK’s sanctions on Russia and the impact on GRC professionals

In response to the situation in Ukraine, the UK announced increased sanctions applicable to Russia on 24 February 2022. The Prime Minister who announced these described by them as “the largest and most severe package of economic sanctions that Russia has ever seen”. These are available on the Foreign, Commonwealth & Development Office website.

This month’s insight provides a brief commentary on the UK’s developments in light of this and the possible impact on firms and the work for GRC professionals. 

A summary of these economic sanctions include :

  • Asset freezes against all Russian financial institutions and designated individuals
  • Restriction of Russia’s access to the UK’s capital and financial markets
  • Restriction of trade with the regions of Donetsk and Luhansk
  • Prohibiting Russian banks from accessing Sterling and clearance payments through the UK. Banks subject to these measures will not be able to process any payments through the UK or access to UK financial markets
  • Preventing Russian companies from borrowing from UK markets
  • A £50,000 limit on the amount that Russian nationals may deposit in UK bank accounts
  • Aeroflot to be banned from UK airspace (already implemented)
  • New trade restrictions and stringent export controls
  • The banning of the export of all dual-use items to Russia including high-end and critical technological equipment and components in sectors including electronics, telecommunications and aerospace.
  • Enhanced measures targeting corrupt Russian individuals in the UK
  • An increase in the use of Unexplained Wealth Orders – which permit the confiscation of funds and assets if a legitimate origin cannot be explained
  • Reforms of UK company legislation and a register of overseas property ownership
  • A ‘Kleptocracy Cell’ is to be established by the UK’s National Crime Agency to target sanctions evasion and corrupt Russian assets hidden in the UK.

The FCA has stated that it expects firms to have established systems and controls to counter financial crime risk, including compliance with financial sanctions obligations. Where the FCA identifies failings in this regard, they can impose restrictions and or take enforcement action. Additionally, the Office of Financial Sanctions Implementation (“OFSI”) has the power to levy monetary penalties for breaches.

In light of these developments, firms must closely review the UK Sanctions List to comply with the new measures and screen against the OFSI list of asset freeze targets for financial sanctions obligations. Any suspected breach of economic sanctions, either directly or indirectly, must be reported to the OFSI at the earliest opportunity and notify the FCA.

For GRC professionals, the work done in light of this will primarily involve revisiting your firm’s financial crime and sanctions programme, which might include any of the following:

  • A risk assessment on the firm’s activities, investors or investments in the affected regions and reflecting this in the risk framework policy
  • A risk assessment on any vendors, fund administrators, service providers, distributors or outsourced parties whose business activities may be impacted
  • Review of Sanctions Policy and staff training Sanctions training

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