Russian Sanctions – Immediate Steps for Businesses to Consider

The war in Ukraine and humanitarian crisis that is unfolding has prompted the world to look towards sanctions as a means of responding to the brutality of the invading Russian military. The rate at which such sanctions are being imposed together with the scale of what they are targeting is unprecedented. As condemnation of Russia’s action becomes even stronger the pressure to apply tougher sanctions increases, including imposing sanctions against those often termed as oligarchs who have links to President Putin.

The scale of the Russian sanctions and those yet to be enabled pose a significant logistical challenge for many financial services businesses.

Currently the sanction regime both in Jersey and in the UK are targeted towards.

• trade sanctions, including arms embargoes and other trade restrictions
• financial sanctions, including asset freezes
• immigration sanctions, known as travel bans
• aircraft and shipping sanctions, including de-registering or controlling the movement of aircraft and ships.

EVERY board member of a regulated financial services business should familiarise themselves with the  guidance issued by the Jersey Financial Services Commission (“JFSC”) explaining the sanction regime in operation in Jersey and offering practical advice on the following matters;

• Implementing policies and procedures regarding sanctions
• Providing staff training in sanctions matters
• Risk assessing sanctions vulnerabilities
• How to screen customers to prevent sanctions breaches
• How to make customer screening more effective
• Systems for investigating a match
• Action required on discovering a confirmed or potential target match
• Reporting obligations
• Obtaining a licence
• United States Sanctions
• Examples of information to be reported to the Ministry of External Relations

Financial Sanctions Practical Guidance

Boards should consider quickly undertaking a gap analysis against the above requirements in relation to Russian sanctions and documenting what action they intend to take to plug any gaps.

Further information on the subject of sanctions can be accessed via this link.

It is important to remember that although Government of Jersey does not compile its own list of designated persons, Jersey’s sanction legislation implements all UK sanctions regimes made under the Sanctions and Anti-Money Laundering Act 2018 (this includes UN sanctions). All UN and UK asset-freeze designations are effective in Jersey.

As Jersey assesses the impact of Russian sanctions the JFSC has requested businesses to assess their risk exposure to Russian sanctions and provide them with details. If faced with a large exposure contact with the JFSC in addition to fulfilling your reporting obligations to the Minister for External Affairs is key.

When conducting screening it is essential not to lose sight of the fact that financial sanctions also apply to legal entities that are owned or controlled, directly or indirectly, by a designated person. Those entities may not be designated in their own right, so their name may not appear on the relevant sanctions list. However, those entities are similarly the subject of the financial sanctions.

There are some important key steps that each board should consider undertaking.

In the immediate term, nominate an individual within the business to monitor the sanctions being imposed and ensure that such information is screened against your client base. Free up this individuals time from their other duties. The volume of sanctions being introduced is unprecedented and will require the individual to remain focused on the task for weeks possibly months ahead.

• Raise awareness of staff – ensure key staff are aware of the types of sanctions being imposed and who has been nominate as the go to person within the business. Generally, elevate the importance of sanctions within the business.
• Require the nominated person to provide regular update reports to the board via the Head of Compliance.
• Ensure that your policies and procedures are up to date, fit for purpose and capable of dealing with the unprecedented scale of the Russian sanctions.
• Check your own screening and the requirements of intermediaries.
• Maintain detailed records of the action you are taking including updating your risk assessment.

If faced with a client subject to sanctions, ensure that you fulfil your reporting obligations promptly and comprehensively and freeze assets pending engagement with the authorities.

By Barry Faudemer and Simon Thomas