The UK’s Office of Financial Sanctions Implementation (OFSI) has released updated guidance known as the “Russia Sanctions Guidance,” detailing the application of the Russia (Sanctions) (EU Exit) Regulations 2019 (UK Russia Regulations). This guidance includes a new Frequently Asked Questions (FAQ) section that addresses situations in which a UK financial institution indirectly receives funds from or via a designated bank.
In response to one of the FAQs, OFSI clarifies that if a UK financial institution receives funds indirectly from a designated bank, and both the sender and receiver of the funds are non-designated account-holders, the asset freeze prohibitions do not apply. Consequently, the UK financial institution does not need to freeze the funds it has received. OFSI acknowledges that this interpretation is based on the current legal standpoint, and the government intends to amend the UK Russia Regulations to prevent UK financial institutions from processing payments originating from or passing through designated banks. The guidance provides visual representations of two payment chains to illustrate situations where an asset freeze is not currently required.
This updated guidance represents a departure from OFSI’s previous stance, which had indicated that transfers received from or via a designated bank should be frozen by UK financial institutions. This change aligns with the government’s intention to revise the regulations.
In parallel with the guidance update, OFSI has also issued a new General Licence related to Correspondent Banking Payments (INT/2023/3566356). This licence allows credit or financial institutions to return a “Relevant Payment” to a non-designated bank in the payment chain that originally sent the payment, subject to specific conditions. A “Relevant Payment” is defined as a payment meeting several criteria, including not involving designated persons (DPs) as the original account holder or intended recipient of the payment.
It’s important to note that this General Licence aims to provide clarity and does not imply that UK financial sanctions apply to the described actions. This General Licence went into effect on September 29, 2023, and will expire on December 1, 2023.
A copy of the General Licence is available here, and OFSI’s publication notice is available here.
By FCCT Editorial Team
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