Sanctions and Russia: answering your questions

Anarba Groub

The Practice Advice Service is a confidential telephone-based helpline for solicitors.

Our team of solicitors answer questions on a wide variety of subjects, including anti-money laundering, costs, conveyancing, client care and complaints handling.

The service operates Monday to Friday from 9am to 5pm. Call us on 020 7320 5675.

My firm has updated its practice-wide risk assessment in relation to financial sanctions. I’m reviewing my files and updating the client matter risk assessments. What should I do if I find a retainer that involves a sanctioned individual?

If you uncover a client matter that may involve a sanctioned individual or entity, you’ll need to consider whether the client, beneficial owner, third-party funder or intended recipient of funds is on the UK sanctions list.

Consider whether the retainer involves the following prohibited conduct:

  • dealing with the funds or economic resources of a person or entity on the list
  • making funds or economic resources available directly or indirectly, for the benefit of a person or entity on the list
  • making financial services (including providing advice on corporate acquisitions, restructuring and strategy) available to any person for the significant benefit of a person or entity on the list

If the answer to any of the above is yes, then you’ll have to suspend work on the retainer and consider the specific legislation under which the individual or entity is sanctioned.

If you decide to continue with the retainer, you’ll have to apply to the Office of Financial Sanctions Implementation (OFSI) for a licence.

You should also consider whether a terrorist financing report to the National Crime Agency (NCA) is required.

Check HM Treasury’s guidance on getting a licence to undertake transactions with or on behalf of persons or entities subject to financial restrictions.

Do UK sanctions only apply to work that falls within scope of the AML regulations?

No: the UK has many different international trade sanctions against individuals and groups.

These sanctions are written into law, and compliance with them is mandatory, albeit outside the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.

OFSI maintains a consolidated list of asset-freeze financial restrictions in force in the UK.

Practices can access this list, register for updates and obtain further information on financial restrictions.

The US Office of Foreign Assets Control maintains sanctions lists, and there are regimes that are not included in the UK list but may apply to your practice.

Check HM Treasury’s guidance on getting a licence to undertake transactions with or on behalf of persons or entities subject to financial restrictions.

My client account received client funds from a Russian-owned business that’s now been designated for sanctions. Should I hold onto the funds pending further enquiries or am I permitted to pay the client?

If your client is not a designated person and the funds arrived in your client account before the payer was sanctioned, the funds are the property of your client and there is no impediment to paying them.

If in the meantime your client also becomes designated, you’ll need a licence from OFSI to handle the funds.

Remember that you’re required to make a report to OFSI if, because of information that has come to you in the course of your practice, you know or have reasonable cause to suspect that someone:

  • has committed an offence under the financial sanctions and asset-freezing regimes or
  • is a designated person listed in OFSI’s consolidated list of financial sanctions targets

You must also consider whether you have a suspicion of money laundering or terrorist financing that requires a report to the NCA.

In a fast-changing situation like this, you’ll need to check the latest sanctions information daily.

How do I contact OFSI and keep up to date with changes to the sanctions list?

You can call OFSI on 020 7270 5454 or email [email protected]

OFSI is receiving a very large number of enquiries.

To avoid unnecessary delays, it may be best to contact OFSI by email rather than by telephone in the first instance.

You can keep up to date with changes to the sanctions list by subscribing to the OFSI website.

We’ve received instructions from a sanctioned individual, who is a Russian national, to advise on an employment matter. I know that it’s a personal decision for my firm whether we accept instructions but if we do, will we be able to accept monies from the individual in respect of legal fees?

You can act for a sanctioned individual in an employment matter.

However, the law restricts you from:

  • receiving payment from or making funds available to persons on the sanctions list
  • dealing with their economic resources
  • making even legitimate payments to those persons

In the circumstances, you’ll need to apply to OFSI for a specific licence for the payment of your reasonable legal fees.

For more information on sanctions, see our guide to the UK sanctions regime and HM Treasury’s guidance on getting a licence to undertake transactions with or on behalf of persons or entities subject to financial restrictions.

I am a money laundering compliance officer in the process of reviewing our firm’s sanctions training. Does OFSI provide any guidance on receiving payment for legal services and disbursements?

You may find it useful to refer to section 6 of OFSI’s general guidance on UK financial sanctions (PDF).

This outlines that OFSI can only authorise payment of reasonable legal fees and disbursements in relation to legal services provided to a designated person (which may include an individual or entity).

OFSI strongly encourages firms to apply for a licence before providing substantive legal services to have clarity as to the fees and disbursements that will be recoverable whilst the designated person remains on the sanctions list.

We’ve refused instructions to act in a litigation matter as we suspect a party is a designated person. As we did not provide any legal services, are we still obligated to make a report to OFSI?

Yes, even if you decide not to act you are required to make a report to OFSI if, because of information that has come to you in the course of your practice, you know or have reasonable cause to suspect that someone:

If you fail to notify OFSI, you’re committing a criminal offence.

However, the obligation only applies in respect of information received by relevant businesses on or after 8 August 2017.

See Schedule 1 of the 2011 Regulations, introduced by the European Union Financial Sanctions (Amendment of Information Provisions) Regulations 2017.

https://www.lawsociety.org.uk/topics/anti-money-laundering/sanctions-and-russia-answering-your-questions

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