In Financier Worldwide Article, Associate Menelaos Karampetsos Examines UK and EU Sanctions on Russia

Associate Menelaos Karampetsos authored an article for the May 2023 issue of Financier Worldwide Magazine entitled “U.K. and EU sanctions on Russia: the end of the beginning.”

The article, which appeared as part of the magazine’s special report on financial services, noted that while the war in Ukraine resulted in the proliferation of U.K. and EU sanctions on Russia in 2022, new restrictions significantly slowed in the first quarter of 2023.

The U.K. and the EU targeted the same sectors of the Russian economy and entities that assist Russia’s defense capabilities. However, the two regimes diverged at certain points, causing issues for firms that operate in both the U.K. and the EU.

The EU, for example, banned professional services from being offered to legal entities established in Russia while in the U.K., any ban on professional services applied (in addition to companies established in Russia) to individuals located or ordinarily resident in Russia.

“The EU, through its new special envoy, intends to work with third countries to ensure that loopholes in its sanctions regime are closed and that operators do not circumvent its prohibitions,” Karampetsos wrote. “In that regard, the special envoy confirmed that work is already underway with the United Arab Emirates and more countries, such as Turkey, are expected to follow.”

One of the main focal points for sanctions enforcement in the U.K. and the EU includes confiscation of assets. Any assets that are the product of sanctions breaches, such as money received to facilitate a sanctioned person’s evasion of financial restrictions, could be confiscated under the Proceeds of Crime Act in the U.K.

In the EU, a proposed directive on asset recovery and confiscation aims to allow national authorities to identify, freeze, confiscate and manage tainted assets. However, any confiscation of assets would be linked to the overall harmonization efforts across member states. Individual countries have also been vocal about the establishment of a central agency in the EU, but suggestions have yet to progress.

“The coming months will be critical for firms as both the U.K. and the EU move toward greater sanctions enforcement,” Karampetsos wrote. “For financial services firms, it is important to continually assess compliance to ensure that internal policies account for the sometimes divergent approaches between the U.K. and the EU, as a transaction or a counterparty could ostensibly be captured by both regimes. The impact of enforcement action can be significant reputationally, as it will affect third parties’ willingness to transact in the future – even if enforcement action has been resolved favorably.”