Late on 01 March, the UK introduced additional legislation to implement shipping sanctions, as well as further financial sanctions on Russia (in addition to two other pieces of legislation that were announced earlier in the day). These prohibit the provision of financial services to the Russian Central Bank and place restrictions on Russian ships in UK waters.
Financial restrictions on the Russian Central Bank
- The UK Government announced on 28 February that it intended to take steps to target the Russian Central Bank ("CBR"), including "restrictions to prohibit UK persons from undertaking financial transactions involving the [CBR]". Early on 01 March 2022, the UK published legislation1 prohibiting, from that date, dealing with transferable securities and money market instruments issued by or on behalf of,2 and the provision of loans or credit to,3 the Government of Russia (which includes the CBR). The Government has now released additional legislation that further excludes the CBR from the UK money markets:4
- There is now a prohibition on providing financial services to the CBR (as well as the National Wealth Fund of the Russian Federation, the Russian Ministry of Finance, and any person owned or control by them or any person acting on behalf of or at the direction of any of the aforementioned entities)5 where the financial services are for the purpose of foreign exchange reserve and asset management; and the person knows or has reasonable cause to suspect that the financial services are being provided to such an entity;
- "Financial Services" is defined in S.61 of the Sanctions and Anti-Money Laundering Act 2018 ("SAMLA") as "any service of a financial nature" and includes a long, but non-exhaustive, list of examples;
- "Foreign Exchange reserve and asset management" is defined by reference to activities relating to the assets or reserves of the CBR and other named government entities, and includes money market instruments, foreign exchange, derivative products, exchange rate and interest rate instruments, transferable securities, other negotiable instruments and financial assets, and special drawing rights;
- HM Treasury has, in recent days, issued a flurry of General Licences authorising the wind down of positions concerning certain persons that it has designated. To date, no such licence has been issued in relation to this new legislation concerning the CBR and it is not clear from the Russia Regulations, and particularly the definition of financial services in SAMLA, whether the ‘provision’ of such services would extend to their termination also; and
- The Russia Regulations do, however, provide for a number of licencing grounds in relation to the prohibition on providing financial services. In addition to grounds relating to humanitarian assistance, financial regulation, and extraordinary situations, two licencing grounds are clearly aimed at countering the possible negative impact of these sanctions on the UK’s financial markets:
- Financial stability – to enable anything to be done by a person that is necessary or expedient to protect or enhance the stability of the financial system of the UK. This ground requires prior consultation with the Bank of England; and
- Safety and soundness of a firm – to enable anything to be done by a person that is necessary or expedient to promote the safety and soundness of a firm that is supervised by the Bank of England, the PRA, or the FCA. This ground also requires prior consultation but this time with the relevant supervising authority or authorities.
The UK has also published legislation containing restrictions on Russian shipping within UK waters. The new provisions:6
- Prohibit Russian ships, and other ships specified by the Secretary of State, from entering ports in the UK. An exception is provided where access or entry is needed by the ship in case of emergency;
- Provide the Secretary of State with a power to control the movement of Russian ships, ships owned, controlled, chartered or operated by a designated person/entity or a person/entity "connected with Russia", or other specified ships by requiring them to leave or enter specified ports, proceed to a specified place or remain where they are;
- Confer powers on the Secretary of State and harbour authorities to detain Russian ships or specified ships at ports or anchorages;
- Prohibit the registration of ships on the UK Ship Register where they are owned, controlled, chartered or operated by a designated person or persons connected with Russia, or where they are a specified ship; and
- Provides for ships to be designated for the purpose of these sanctions.
Updated Guidance on Russia Sanctions
- On 1 March 2022, OFSI also published updated guidance on Russia sanctions.7 This provides guidance on the prohibitions and requirement imposed by the Russia Regulations, including the various amendments to that legislation that have been published in recent days. It also provides guidance on best practice for complying with the prohibitions and requirements; the enforcement of them; and circumstances where they do not apply.
1 See here which amends The Russia (Sanctions) (EU Exit) Regulations 2019 (together with its amendments, the "Russia Regulations").
2 Regulation 16(4E) and (4F).
3 Regulation 17(1) and (2).
4 See here.
5 Regulation 18(A).
6 See here which amends the Russia Regulations.
7 See here.
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