Russian sanctions – what can you do to respond and prepare for more?
The UK announced sanctions against Russia in response to Russia’s recognition of the Donetsk People’s Republic (DNR) and Luhansk People’s Republic (LNR) as independent states and concerns about an imminent invasion. The OFSI notice details three high net worth individuals and five banks which have been added to the consolidated list (thought to be used by Putin’s inner circle). The UK government has declared that the Putin regime should expect more “severe” sanctions in the event of a full invasion of Ukraine. These measures may include further designations, restricting Russia and key Russian companies from raising funding in the UK financial markets and a ban on a range of high-tech exports to Russia.
Similar designations were issued by the US in the form of an Executive Order and the EU has agreed a package of new sanctions.
Responding to new sanctions
The OFSI notice details the steps firms must take:
Check whether you maintain any accounts or hold any funds or economic resources for the persons set out in the notice. If it is identified that funds or economic resources which are owned or controlled by these persons are held these must be frozen and reported to OFSI.
Ensure sanctions screening processes and systems are up to date to ensure the new entries are screened against. In its simplest form, run a couple of the designees through your sanctions screening tool to see if they are picked up.
Carefully consider the applicability of the US and EU sanctions to your business operations and ensure screening systems are updated appropriately. For example, by taking steps to add the DNR and LNR regions to sanctions screening filters.
Good governance is key to ensure actions and decisions taken are clearly documented and explained.
Preparing for more
The situation with Russia is changing rapidly and there will likely be short notice and significant changes still to come. It is difficult to assess the impact of sanctions which have not been announced and any possible counter sanctions, but by evaluating your current exposure you will be in a better position to respond to measures if, and when they are implemented. This is a lesson learned by many of us working in the industry when Russian sanctions were announced in 2014 - resulting in a scramble to identify and access the relevant information to understand the impact and risks.
Evaluate your exposure to Russia - we are aware that some supervisory bodies have requested this information from firms. Consideration should be given to the jurisdictions you operate in and their proximity to Russia (geographically and politically); your customers (and their beneficial owner and controllers), the industries they have exposure to (including their customers and supply chains); and the contractual arrangements you have in place with Russian counterparties (such as guarantees and other lending arrangements).
This may prompt a review of the quality of the customer data you hold to ensure it is complete and accurate – particularly the ownership and control information.
