In the last days the European Union has launched a historic sanctions package, with measures stricter than ever before. 

In today’s article we will focus on the financial sector, what are the financial restrictions put in place and how can you and your company comply with them and help the Union bring the most effect to this package and to the goal of destabilizing the Russian government and the resources that are funding this illegal war.

Restrictive measures

Diving into the actual package, in 2014 one Council Decision and one Council Regulation have defined the restrictive measures regime for Russia:

• Council Regulation (EU) No 833/2014 concerning restrictive measures in view of Russia’s actions destabilizing the situation in Ukraine
• Council Decision 2014/512/CFSP concerning restrictive measures in view of Russia’s actions destabilizing the situation in Ukraine

These two documents have been updated over 20 times in the last week, which can be difficult to keep up with. For a deep-dive into the amendments we recommend following the pages of the Official Journal of the European Union and EU Sanctions Map. For a quick analysis we have also collected these sanctions in one place for our clients’ use:

Sanctions on individuals

In the past 6 days over 400 individuals and entities have been added to the sanction list. This list now includes:

• Members of the State Duma (the lower house of the Federal Assembly of Russia) who have been elected to represent the illegally annexed Crimea and the City of Sevastopol;
• 336 Members of the State Duma, who voted in favor to recognize the separatist-claimed parts of eastern Ukraine as independent states, and have therefore supported and enabled the destabilization of Ukraine;
• High-ranking Members of the Government (Russian Minister of Defense, Chief of staff of the presidential executive office, among others)
• High-ranking military commanders (Commander of the Navy, of the Ground Forces, of the Aerospaces, among others)
• Individuals with high positions in the oil, banking and financial; 
• Journalists and media spreading propaganda;
• Oligarchs with close ties to Vladimir Putin;
• And last but not least, Vladimir Putin himself.

The sanctions include asset freeze, prohibition of making funds available to them, as well as travel bans.

In the Annexes of the restrictive measures you can see the list of names alongside the reason why these individuals have been included.

Example (in Decision 2022/337):

Name: Mikhail Maratovich Fridman
Position: Founder and one of the main shareholders of the Alfa Group(which includes Alfa Bank)
Reasoning: He has managed to cultivate strong ties to the administration of Vladimir Putin, and has been referred to as a top Russian financier and enabler of Putin’s inner circle. He managed to acquire state assets through government connections. […]

Mr Fridman and his business partner Petr Aven have been engaged in the Kremlin’s efforts to lift the Western sanctions issued to counter Russian aggressive policy against Ukraine. In 2018 Mr Fridman along with Mr Aven visited Washington DC on an unofficial mission to convey the Russian government’s message on US sanctions and on counter-sanctions by the Russian Federation.

Sanctions on legal entities

The same package also includes a significant number of Russian entities.

First, the Union has targeted the major banks in Russia that finance the Russian military apparatus and enable the War against Ukraine. (Alfa Bank; Bank Otkritie; Bank Rossiya; and Promsvyazbank, Novikombank, Sovcombank, Vnesheconombank (VEB), VTB Bank). 

Moreover, bans have been placed also on the transactions with the Russian Central Bank and its federal reserve.

Second, major Russian corporations have also been sanctioned, from the oil, gas and financial sector among others. (Gas Industry Insurance Company SOGAZ; Almaz-Antey; Kamaz; Novorossiysk Commercial Sea Port; Rostec (Russian Technologies State Corporation); Russian Railways; JSC PO Sevmash; Sovcomflot; and United Shipbuilding Corporation).

Moreover, the sanctions umbrella has been extended to any entity having over 50% public ownership or control or any other significant role in supporting the activities of Russia, its government or the Central Bank.

You, as a European entity dealing in the financial sector are prohibited from purchasing, selling or providing any investment services, assistance in financial instruments, insurance services, any kind of financial assistance to these sanctioned individuals and entities.

The restrictive measures regime now includes in total a number of 680 individuals and 53 entities.

Material sanctions

Several other damaging sanctions have been imposed on Russia, such as:

• Restrictions on exporting or providing dual-use goods and technology;
• Restrictions on exporting or providing certain goods and technology which might contribute to Russia’s technological enhancement of its defense and security sector;
• Prohibition on the sale, supply, transfer or export to Russia of specific goods and technologies for use in oil refining;
• Export ban covering goods and technology suited for use in aviation and the space industry;
• Prohibition on providing technical assistance and other related services as well as financing and financial assistance in relation to the goods and technology subject to this prohibition.

Relevant for the financial sector is that these sanctions also include the prohibition of providing any financing or financial assistance in relation to the goods and technology subject to the sanctions.

Also particularly relevant for financial institutions are the following prohibitions:

• • Prohibition to provide specialized financial messaging services, which are used to exchange financial data (SWIFT);
  • It shall be prohibited to sell, supply, transfer or export euro denominated banknotes to Russia or to any natural or legal person, entity or body in Russia, including the government and the Central Bank of Russia, or for use in Russia;
  • Prohibits the listing and provision of services in relation to shares of Russian state-owned entities on Union trading venues;
  • Provide significant limitations on the financial inflows from Russia to the Union by:
    • Prohibiting the acceptance of deposits exceeding certain values from Russian nationals or residents;
    • Prohibiting the holding of accounts of Russian clients by the Union central securities depositories

Given the alarming situation, the European Commission is on high-alert, meeting everyday which also means that the list of individuals, entities and material sanctions is increasing every day.

As a European financial institution, you need to make sure you do everything in your power to help this sanction package reach its full effectiveness, therefore you need to have a clear Sanction Compliance Framework.

This means daily monitoring of the new sanctions adopted, a clear process of monitoring and blocking the transactions in question, of freezing the sanctioned funds and of interrupting your business relationship when required.

You should also make sure the staff which is responsible with managing or executing these tasks are properly trained in order to fully understand the gravity and scale of the sanctions and the necessary steps they need to take.

We urge all Member States and financial institutions to do their best to implement this package. Our thoughts are with the people of Ukraine.

For more details into the legal documents check the Official Journal of the European Union:

1. https://eur-lex.europa.eu/oj/direct-access.html
2. https://www.sanctionsmap.eu/#/main