UK sanctions against Russia two years on – how have things changed?

In this video, Nick Price and Kristian Assirati (Partner and Associate Director in Osborne Clarke's Sanctions team) discuss how UK sanctions against Russia have developed since the invasion of Ukraine. In particular, they offer a recap on the scope of the new regulations and the Office of Financial Sanctions Implementation (OFSI)'s approach to date, and consider the impact on UK companies from sanctions and the common questions that have arisen.

Enforcement

There has been very little enforcement activity to date, despite the introduction of the strict liability test in June 2022, with one OFSI decision so far against a UK company for the breach of Russian financial sanctions and the lessons that can be learnt from that case. The recent new requirements for designated persons (for example, to disclose all their financial resources in the UK within 10 weeks) may indicate a change of approach.

The creation of a new body to enforce trade sanctions has the potential to lead to greater enforcement. Whether there has been less enforcement because of the UK's licensing system is doubtful, because of the significant delays (which are now lessening) and low level of approvals that companies have experienced when applying for licences. The low level of approvals is in part due to the narrow criteria for granting licences, and a comparison with the anti-money laundering regime could indicate that a different approach might help.

Impact of uncertainty

There is still uncertainty for businesses around the issue of "control" by a designated person, with recent case law and OFSI guidance on the issue. The impact of sanctions on contracts as well as their effect on supply chains, restructuring and exits, and shareholder disputes is also an issue which arises frequently.

To overcome these issues, companies need strong systems and controls in place, as well as anticipating unforeseen hurdles that can arise.