What businesses need to know about new sanctions on Ukraine and Russia
Following the invasion of Ukraine by Russia, a series of new sanctions have been announced by the US, UK and EU, alongside other nations. This is a rapidly evolving situation with facts changing on an hourly basis. Sanctions compliance is vital for any business. From client due diligence to payment processing, sanctioned individuals will be working harder to move their money out of sanctioned jurisdictions. Businesses must be alert to this.
Payoneer fined for sanctions violation
In July 2021, Payoneer was fined $1.4 million by the US sanctions authority, the Office of Foreign Assets Control (OFAC) for over 2,200 violations of multiple sanctions regimes.
In the settlement agreed to by Payoneer, they admitted to processing payments for parties located in Crimea, Iran, Sudan and Syria, all countries subject to US sanctions. They also processed 19 payments on behalf of individuals sanctioned by the US.
This meant sanctioned individuals were able to engage in over $800,000 worth of transactions. The fine comes at a tricky time for Payoneer, who began trading on the Nasdaq exchange the month before, with a valuation of $3.3 billion.
New US sanctions on Ukraine and Russia
As of Monday 21 February, US President Joe Biden is to prohibit “new investment, trade, and financing by US persons to, from, or in” the two breakaway regions recognised by President Putin.
The order will “also provide authority to impose sanctions on any person determined to operate in those areas of Ukraine,” White House spokesperson Jen Psaki said in a statement. This is in response to the decision by Moscow to recognise two breakaway republics in the Donbas (Eastern) region of Ukraine. This is in addition to the ongoing sanctions against Crimea since the Russian annexation.
New UK sanctions on Ukraine and Russia
The UK government announced the first package of sanctions on Russian individuals and entities on Tuesday. Sanctions were imposed on five Russian banks and three high net-worth individuals which are noted below, alongside what businesses must do to ensure compliance.
New EU sanctions on Ukraine and Russia
The EU is considering a range of sanctions that would include:
- Target those who were involved in the illegal decision, including 351 members of the Russian Duma who backed the decision and 11 who proposed it
- Banks that are financing Russian military and other operations in those territories
- Target the ability of the Russian state and government to access the EU’s capital and financial markets and services, to limit the financing of escalatory and aggressive policies
- Target trade from the two breakaway regions to and from the EU, to ensure that those responsible clearly feel the economic consequences of their illegal and aggressive actions
However this requires agreement of all the EU’s 27 members, and Hungary has indicated it has concerns, while Italy, Austria and Germany have concerns about energy supplies.
The impact of new sanctions on business
Any supply chain running through Ukraine should be immediately assessed to understand if the troubled areas of eastern Ukraine are included in the supply chain. This would presumably include any contractors working in those areas. US sanctions compliance generally bans any use of the dollar or the US banking system. However with the EU and the UK working together with the US, there is unlikely to be any way to continue operations as normal in sanctioned areas of Ukraine or with sanctioned Russian entities.
This means that new individuals have been added to the UK’s consolidated list and are subject to an immediate asset freeze.
- Gennadiy Nikolayevich TIMCHENKO (Group ID: 14181)
- Boris Romanovich ROTENBERG (Group ID: 14182)
- Igor Arkadyevich ROTENBERG (Group ID: 14183) • BANK ROSSIYA (Group ID: 14177)
- BLACK SEA BANK FOR DEVELOPMENT AND RECONSTRUCTION (Group ID: 14178)
- JOINT STOCK COMPANY GENBANK (Group ID: 14179)
- IS BANK (Group ID: 14180)
- PUBLIC JOINT STOCK COMPANY PROMSVYAZBANK (Group ID: 14184)
To comply with these sanctions, you must:
- Check whether you maintain any accounts or hold any funds or economic resources
- Freeze such accounts, and other funds or economic resources and any funds which are owned or controlled
- Refrain from dealing with the funds or assets or making them available (directly or indirectly) to such persons unless licensed by the Office of Financial Sanctions Implementation (OFSI)
- Report any findings to OFSI, together with any additional information that would facilitate compliance with the Regulations
- Provide any information concerning the frozen assets of designated persons that OFSI may request.
What to do now
- Review your supply chain to understand any involvement with Ukraine
- Review any contractors, freelancers or other staff based in Ukraine
- Update any country-based risk assessment to include the new sanctioned regions of Ukraine
- Conduct increased monitoring and potentially enhanced due diligence of new or existing customers in Ukraine or Russia to identify involvement with the sanctioned regions
- Ensure higher risk individuals (Russians or Ukrainians) are screened against updated sanctions lists
- Consider additional sanctions compliance training or a refresher course for front line or higher risk staff
Our sanctions training solution
We’ve made sure all UK-referenced legislation is up to date, as well as the locations of the specific lists that all businesses must refer to when conducting sanctions due diligence. Sanctions: Know Your Transaction gives users real-life experience of using sanctions lists through a series of interactive scenarios and real-life case studies and prepares them using the sanctions lists in their day-to-day jobs.
The course drops users into a set of immersive scenarios to test their knowledge, understanding and ability to comply with new the sanctions law.
Free demo
Sanctions Knowledge Check
Test your staff’s knowledge in five minutes. The sanctions knowledge check covers UK sanctions laws and uses scenarios to help users understand the best course of action to take in different situations. Users will be given instant feedback while completing the knowledge check.
Sanctions policy template
In August new European regulations came into force that have dramatically expanded the number of businesses who must follow UK sanctions rules. Having an up-to-date sanctions policy in place will mitigate the risk of breaching national and international sanctions regulations. The template can easily be edited to suit your organisation, industry and staff.
