New round of UK anti-Russian sanctions to be implemented in Guernsey: changes for trustees and directors

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New round of UK anti-Russian sanctions to be implemented in Guernsey: changes for trustees and directors

As the war in Ukraine has reached its third anniversary, the United Kingdom has passed a new batch of Russian sanctions (see https://www.legislation.gov.uk/uksi/2024/1157/made)

which are at further impeding the Russian state’s ability to wage war.  These comprise 107 new sanctions, which target Russian military supply chains and revenues derived by the Russian government.  In this insight article, we briefly highlight certain aspects of the new sanctions as well as clarifications made focussing on those which are particularly relevant to the financial services industry in Guernsey.

The UK sanctions regulations are currently implemented in the Bailiwick of Guernsey in terms of the Sanctions (Implementation of UK Regimes) (Bailiwick of Guernsey) (Brexit) Regulations, 2020, which are themselves subordinate legislation made pursuant to the terms of the Sanctions (Bailiwick of Guernsey) Law, 2018.   In effect, the Guernsey sanctions regime vis-à-vis Russian sanctions mirrors that of the UK, with a few relatively minor differences where aspects of the UK Regulations have been disapplied in Guernsey.

Brief summary of the nature of the additional sanctions and clarifications

The Guernsey Financial Intelligence Unit (FIU) has announced the effect of the new round of UK sanctions in Guernsey.  The FIU indicated in its announcement (The FIU Notice) that the new sanctions have the following effect (with our brief commentary on each):

• Clarification that the prohibitions on the making available of funds or economic resources to any person for the benefit of a designated person extend to legal persons owned or controlled by that designated person;

This is a significant point of clarification which trustees as well as directors of companies will need to bear in mind when evaluating the sanctions compliance risk of any particular scenario or course of conduct.

• Clarification that, for the purposes of the licensing of financial sanctions prohibitions and relevant exceptions for financial sanctions, a designated person includes a person who is owned or controlled by them;  

This is a related clarification to the one above, both clarifications emanating from the same principle.

• The introduction of a new exemption (for non-UN designated persons) to allow payments that a designated person is required to make to certain authorities such as the Guernsey Registry or the Guernsey Financial Services Commission;

This is a helpful clarification that such administrative and regulatory payments will be allowed out of otherwise frozen assets, under the Guernsey sanctions regime.

• The extension of the scope of licensing purposes (for non-UN designated persons), to enable the Policy & Resources Committee to license a wider class of case related to the implementation of judicial decisions and to introduce a bespoke purpose to enable licensing for certain insolvency positions;

This is a welcome extension of scope, as it has proved difficult to deal with the insolvency of frozen structures under the Guernsey sanctions regime prior to this extension of the scope of licensing grounds.

• With effect from 15 May 2025, the application of reporting obligations to art dealers and letting agents (see the OFSI guidance in the next section – there will also be targeted outreach to these sectors by the Policy & Resources Committee before the obligations come into force);

This is a notable extension of the scope of reporting obligations, presumably motivated by a pattern of circumvention or other illicit behaviour noted by OFSI in the context of art or property transactions.

• Clarification that the prohibition on the provision of trust services under the Russia regulations applies to acting as a nominee shareholder where that involves a trust or similar arrangement.

This is a helpful clarification the use of nominee shareholder arrangement where such shareholder holds the shares in trust does falls within the scope of Regulation 18 and other provisions relating to trusts in the Guernsey sanctions regime.

Amendments have also been made, in line with these new sanctions measures, to the Guernsey legislation which give effect to director disqualification sanctions measures that have been recently introduced in the UK sanctions regime.  At the time of the FIU notice these measures had not been used against anyone in the UK to list them as a director disqualified as a result of a sanctions breach/ issue, but if and when this occurs the effect will be mirrored in Guernsey, resulting in disqualification as a director of Guernsey companies.

Guernsey sanctions regime will not implement certain aspects of the new UK sanctions

The FIU has also pointed out in its circular that while the UK regulations introduce a requirement for annual reporting on funds or economic resources that businesses know or have reasonable cause to suspect they hold for a designated person, this requirement has been expressly disapplied in the Bailiwick by an amendment to the Sanctions (Implementation of UK Regimes) (Bailiwick of Guernsey) (Brexit) Regulations, 2020 (the 2020 regulations).  This is a significant point of difference as between the UK and Guernsey sanctions regimes, which should be noted.

In addition, the FIU has noted that the UK regulations introduce a reporting obligation for insolvency practitioners and for high value dealing (i.e. trading in goods that involves cash transactions of €10,000 or more). Corresponding reporting obligations already exist under the Bailiwick legal framework, except that the definition of high value dealing is subject to a threshold of £7,500. The Bailiwick framework has therefore been amended to raise the threshold to €10,000, in order to align with the UK position. This has been done by amending the definition of relevant institution in the Terrorist Asset Freezing (Bailiwick of Guernsey) Law, 2011, which has been incorporated by reference into the Sanctions (Bailiwick of Guernsey) Law, 2018 (the Sanctions Law).

Abt has extensive experience dealing with all aspects of the Guernsey sanctions regime, including advising upon the impact of the Guernsey Sanctions Regulations on trustees and directors of companies in various respects, advice on sanctions compliance, and applying for appropriate sanctions licences from the Policy & Resources Committee.   Should you require any advice on any aspect relating to sanctions in Guernsey, please contact Advocates Clare Tee, Jeremy Le Tissier or Senior Associate Nick Taitz.