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New UK sanctions legislation comes into force

Posted on 2 March 2022

New UK sanctions regulations have now come into force in response to Russia's invasion of Ukraine. The new legislation was laid before Parliament on 28 February 2022 and came into force on 1 March 2022.

This brief overview looks at the new measures, the Russia (Sanctions) (EU Exit) (Amendment) (No. 2) Regulations 2022 (the “Regulations”).

Asset Freeze

The Regulations impose financial sanctions through a targeted asset freeze on designated persons and prohibitions on making funds or economic resources available to such designated persons. The UK Sanctions List has been updated regularly in recent days, including:

  • VEB, Bank Otkritie and Sovcombank are subject to an asset freeze as of 28 February 2022;
  • Sberbank has been designated under the new correspondent banking restrictions described below – it is not, however, subject to a full asset freeze; and
  • Six Belarusian individuals and entities have been added to the UK’s asset freeze list on 1 March 2022 – four Belarusian military officials and two entities in the Belarusian defence sector, JSC 558 Aircraft Repair Plant and JSC Integral.

It is important for individuals and businesses to carry out regular checks to ensure that no payments are being made to any designated persons.

Financial and Investment Restrictions

It is now prohibited to directly or indirectly deal with a transferable security or money-market instrument if it has a maturity exceeding 30 days and was issued on or after 1 March 2022 by:

  • An entity incorporated or constituted in the UK and owned by Sberbank, VTB, Gazprombank, Vnesheconombank, Rosselkhozbank, OPK Oboronprom, United Aircraft Corporation, Uralvagonzavod, Rosneft, Transneft, and Gazprom Neft;
  • a “person connected with Russia” (subject to certain exceptions) or an entity owned by or acting on behalf/at the direction of a “person connected with Russia”; and
  • the Government of Russia (i.e. restriction on all dealing in new Russian sovereign debt).

The Regulations define a "person connected with Russia" as meaning a person who is ordinarily resident, located, incorporated or domiciled in Russia.

Loans and Credit Arrangements

The Regulations also prohibit a person from knowingly, or with reasonable cause to suspect, granting or entering into any arrangement to grant a new loan or credit, with a maturity exceeding 30 days to:

  • An entity incorporated or constituted in the UK and owned by Sberbank, VTB, Gazprombank, Vnesheconombank, Rosselkhozbank, OPK Oboronprom, United Aircraft Corporation, Uralvagonzavod, Rosneft, Transneft, and Gazprom Neft;
  • An entity “connected with Russia” or owned or acting on behalf/at the direction of a person “connected with Russia”; or
  • The Government of Russia.

The Regulations also prohibit UK credit or financial institutions from establishing or continuing a correspondent banking relationship, and from processing sterling payments to, from or via a designated person or a credit or financial institution owned or controlled by them.

Export Controls

An additional piece of legislation – the Russia (Sanctions) (EU Exit) (Amendment) (No. 3) Regulations 2022 – contains further measures to restrict the export of certain goods and services such as:

  • military goods and technology;
  • electronics, computers, and telecommunications equipment;
  • sensors and lasers;
  • marine-related items; and
  • aerospace and propulsion-related items.

Companies should therefore review their supply chains to ensure compliance with the new restrictions.

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