DCI reminder on Russian sanctions

The Department of Commerce and Investment is urging its licencees to ensure they abide by the Public Notice issued by the Financial Reporting Authority (FRA) in relation to Russian Sanctions following the invasion of Ukraine by Russia.

Following the UK government’s issue of new restrictive economic measures in response to the invasion of Ukraine by Russia, the impact has been felt in the Cayman Islands. Regulations made in the UK extend to its Overseas Territories and therefore to Cayman.

The regulations provide for the 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.

HM Treasury Office of Financial Sanctions Implementation has issued several notices regarding Russia over the last week, which can be accessed via the FRA and the Cayman Islands Monetary Authority (CIMA) websites.

To date, several banks, individuals, and entities have had their assets frozen, including: VTB, Russia’s second-largest bank, worth £154bn; Rostec, Russia’s defence giant, responsible for $13bn of arms exports per year; Kirill Shamalov, the ex-son-in-law of the Russian President Vladimir Putin and Russia’s youngest billionaire; Tactical Missiles Corporation Joint Stock Company, Russian state-owned defence company and one of the most prominent manufacturers of missiles in Russia; Uralvagonzavod, a Russian-state owned company that produces military equipment, particularly tanks, for the Russian armed forces; as well as Vladimir Putin (President of the Russian Federation), and Sergei Lavrov (Russian Foreign Minister).

DCI licencees should check whether they maintain any accounts or hold any funds or economic resources for such persons and, if so, freeze such accounts, and other funds or economic resources and any funds which are owned or controlled by such persons. Licencees must refrain from dealing with the funds or assets or making them available (directly or indirectly) to such persons unless licensed by the Governor, and report any findings to the FRA at financialsanctions@gov.ky, together with any additional information that would facilitate compliance with the regulation.

Licencees must provide any information concerning the frozen assets of designated persons to the FRA at financialsanctions@gov.ky by completing and submitting a Compliance Reporting Form (CRF) available from http://fra.gov.ky/contents/page/1.

Information reported to FRA may be passed on to other regulatory authorities or law enforcement. Failure to comply with financial sanctions legislation or to seek to circumvent its provisions is a criminal offence, so it is important licencees fully understand the assets under the ownership and control of their clients and carry out appropriate customer due diligence which includes regular screening (including onboarding and on incoming/outgoing transactions) against the list of individuals and entities designated under this regime.

As this is a fluid situation, people should seek legal advice where necessary and be mindful of the current trade prohibitions in relation to Russia, including those that apply to military-related goods and technology; provision of technical assistance; energy-related goods and services, services related to the relevant infrastructure sector and tourism in Crimea etc.

Offences can include: making funds or economic resources available to a designated person (except where an exemption applies or under a licence issued by the Governor); dealing with funds or economic resources that must be frozen (except where an exemption applies or under a licence issued by the Governor); failing to comply with reporting obligations; activities that circumvent an asset freeze; breaches of licencing conditions.

Breaches of financial sanctions are considered to be a serious criminal offence and, as a result, carry a maximum of seven years imprisonment on conviction on indictment, or to a fine or both, or on summary conviction, to imprisonment for a term not exceeding six months or to a fine not exceeding £5,000 or its equivalent or to both.

The DCI says it is the responsibility of each licensee to ensure they understand the obligations and that the required action is taken, if necessary, and encourage people to contact the department at info@dci.gov.ky if they have any questions.