In April 2022, the Isle of Man adopted the UK Russia (Sanctions)(EU Exit)(Amendment)(No.7) Regulations 2022.
The Isle of Man Russia Sanctions (Application) Regulations 2020 include the following provisions:
· An extension of the finance, trade and shipping sanctions previously imposed in Donetsk and Luhansk
· Freezing of funds and economic resources of certain persons, entities or bodies involved in destabilising Ukraine or undermining or threatening the territorial integrity, sovereignty or independence of Ukraine or obtaining a benefit from or supporting the Government of Russia
· The introduction of collective sanctions against specified group members
· An extension of the shipping sanctions that are already in existence in respect of Crimea prohibiting British cruise ships from entering ports in the non-government-controlled areas of Donetsk and Luhansk
· Prohibition of maintenance on aircraft or ships belonging to sanctioned Russian oligarchs or their businesses
Complying with the Russia sanctions
It is a criminal offence to fail to comply with financial and trade sanctions or to attempt to circumvent the legislation. Businesses, to include finance companies, need to take steps to ensure compliance.
The first step is to report any sanctioned entities to the Financial Intelligence Unit (FIU) as well as any breaches of sanctions. This requires organisations to check their client lists against the UK government’s consolidated list of targets.
It is expected that finance firms will have worked their way through ownership structures of enterprises to identify the individuals who are the ultimate beneficiaries.
Ian Spence, head of anti-money-laundering and combating the financing of terrorism (AML CFT) at the Isle of Man Financial Services Authority said: “Sanctions create a trigger point” for checks to be done. He is hopeful that they had “focused the mind” of any companies that were “becoming a bit lax or becoming relaxed over controls”.
Businesses are prohibited from receiving funds or making payments to individuals or entities named on the UK government’s list. They must also take care to avoid any action which sees them knowingly and intentionally participate in activities that would directly or indirectly circumvent financial restrictions or enable or facilitate the commission of any sanctions offence.
Firms will also need to consider whether individuals are named on sanctions lists in other countries with which the firm has business. Names should be checked against sanctions lists before business is carried out and before new clients are taken on.
Where a client is named on a sanctions list, their account and assets must be frozen and businesses cannot deal with them or make funds available from them, unless licensed by the Office of Financial Sanctions Implementation (OFSI).
Any findings must be reported to the OFSI together with any information that would facilitate compliance with the regulations. Information must be provided to the OFSI as required.
Sanctions are being continually updated, so it is vital to keep checking developments.
Money laundering requirements
Businesses must also continue be diligent in the area of money laundering. This includes being clear in the following areas:
· Carrying out risk assessments of your business, clients and dealings
· Having robust anti-money laundering policies in place
· Identifying clients and business owners and those behind organisations
· Identifying the source of funds
· Training staff to recognise risk and to know and understand the regulations
· Putting a money laundering officer in place who will be responsible for alerting the authorities in suspicious circumstances
Contact our Isle of Man commercial lawyers
If you are concerned about compliance with sanctions or you need to freeze assets and report an individual and you would like legal advice to safeguard your position, we would be happy to help. To speak to one of our expert Isle of Man commercial advocates, ring us on 01624 665522 or email us: firstname.lastname@example.org.
Peter Cannell is a Global Law Expert in Corporate Law.
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