06/06/22

GLOBAL REGULATION: EU adopts sixth round of sanctions against Russia.

As published on step.org/industry-news, Monday 6 June, 2022.

The Council of Ministers of the European Union has imposed a sixth round of sanctions on Russia, adopted as EU Regulation 2022/879, targeting a further 65 individuals and 18 entities, including politicians, broadcasters, leading businesspersons and family members of already-sanctioned individuals.

The newly designated individuals include military leaders alleged to be responsible for war crimes in Ukraine. Former gymnast Alina Kabaeva, now a member of the State Duma and allegedly a close associate of Vladimir Putin, is also included in the list. Russia's largest bank has also been expelled from the SWIFT interbank messaging system. EU asset freezes and travel bans now apply to a total of 1,158 Russian individuals and 98 entities and EU citizens and companies are forbidden from making funds available to them.

As previously announced, the EU will also prohibit the provision of accounting, auditing, bookkeeping, tax consulting, public relations and consultancy services to Russian entities. The prohibition does not extend to companies based in an EU Member State and owned or controlled by Russian nationals and residents. Moreover, legal services are not included in the list of prohibitions, although legal advice could be caught if it can qualify as tax consulting or business and management consulting. Representation in legal proceedings is specifically exempt from the prohibition. The UK has separately announced it will not ban the provision of legal services to Russians, citing fundamental rights to legal representation.

However, the deadline for trust service providers to stop working with Russian trusts has now been extended from 10 May until 5 July 2022. The new regulation also allows each Member State's competent authorities to grant a further extension to 5 September 2022 for transactions required to terminate the trusts with a Russian connection that were in existence on 9 April 2022. Further extensions beyond 5 September can be granted for trust transactions in general, provided that the trust service providers do not accept further funds from the Russian settlors and do not distribute or otherwise provide any benefits from the trust assets to the Russian beneficiaries.

A general exemption has also been granted for charities and for trusts that administer funds for minors or vulnerable adults, pensions, insurance policies and employee shares schemes. According to STEP’s updated position paper on the sanctions, the new directive also ‘appears to allow the alternative option of terminating the trust and distributing all the assets to the beneficiaries up to 5 July 2022’.

Monaco, Liechtenstein and Switzerland are expected to update their own national sanctions to match the provisions of the new EU regulation, the position paper notes.