The latest round of financial sanctions introduced on 16 December 2022, against Russia, prohibits the provision of trust services to anyone connected with Russia or any designated person, unless the services were already being provided before the regulations came into effect.
The Russia Regulations 2022 dropped the export ban on Russian access to transactional legal advisory services previously promised by the governed following the EU’s adoption of similar prohibitions. This has now been remedied by the new amendment.
Trust services are now defined as trust creation, provision of offices, management of a trust and acting as trustee of a trust or arranging for another person to act, following the new regulations.
An individual is considered connected with Russia if they live or are located in Russia.
Corporate bodies are connected with Russia if they are domiciled in Russia or if they are incorporated or constituted under Russian law.
The regulations have some important differences from the EU’s sanctions, which focus on the nationality or residence of a trust’s settlor or beneficiary. A private individual wo is a Russian national but is resident elsewhere will not automatically be considered connected with Russia for these purposes, according to the UK rules.
Russian nationals or citizens who are no longer resident or located in Russia will therefore not be caught by the UK rules, although the grandfathering is now allowable in the case of the designated person prohibitions, where pre-existing trust arrangement will be caught.
Catherine de Maid TEP, Partner at law firm Burges Salmon explained that “Where a Russian national visits Russia for any period of time, there is some uncertainty about whether or after how long they would be considered to be located in Russia and therefore connected with Russia”. She also noted that the UK sanctions will not apply to trust services provided under an existing relationship immediately prior to the regulations coming into force on 16 December 2022.
Catherine de Maid added that there remains doubt as to whether providing new or additional trust services in relation to an existing trust structure would fall under the “ongoing arrangement” grandfathering clause and be protected in the same way, or whether new work would be considered a separate instruction.
Contravening the regulations and intentionally participating in activities that are intended to circumvent the prohibitions directly or indirectly, will constitute an offence.
Special licenses to act in “extraordinary situations” may be sought from the Office of Financial Sanctions Implementation or for cases involving humanitarian assistance activity, medical goods or services, food, safety and soundness of a firm, diplomatic services, financial regulation, financial stability, or unauthorized unit trusts.
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