Sanctions Briefing: Update on sanctions against Russia and Belarus
General information about sanctions in Norway, the EU, US and UK
Sanctions are economic measures restricting trade and involvement with specific countries, individuals, entities, or industry sectors. Sanctions are used by governments to express political standpoints or attempt to influence decisions.
Economic restrictions can generally be divided into the following main categories:
- Travel restrictions restrict entry into or transit through the country for natural persons listed.
- Asset freezes block a person’s properties and funds by prohibiting and preventing to move, transfer, use, access, withdraw, or deal in the assets in any way. An asset freeze also involves restrictions on dealing with persons on the asset freeze lists.[1] [2]
- Sectorial sanctions prohibit purchasing or selling specific goods or technologies, providing specific services, or conducting business related to specific sectors.
- Financial measures may include restrictions on investments in certain markets or financial instruments, real estate, entities and financing of entities in certain countries or areas, or prohibition of dealing in debt and provision of financing, loans, equity or financial services to listed individuals and entities.
- Import bans restrict import of goods or technologies originating in the listed country or region and often also the financing or insurance related to such imports.
- Export control restricts the export of specific goods or technologies, often within specific sectors, to certain countries or areas.
The newly imposed sanctions in light of the war in Ukraine are extensive and authorities around the world make use of a wide array of measures. Governments have, in some instances, explicitly declared economic “war” on Russia and it seems likely that these measures will be escalated until peace in Ukraine has been restored. It is important that this unique context is an integral part of the assessment and management of sanctions risks.
A breach of applicable sanctions laws and regulations may typically result in criminal and/or civil liability for both companies and the individuals involved. The current situation does however not only pose legal, compliance and reputational risks, but also challenges to the operations of internationally connected businesses whether small or big. All businesses need to make sure that they have a systematic approach to identifying and handling the new risk landscape. BAHR regularly advises its clients on risk management and compliance matters and we have included a number of specific action points suitable for most operations below. A high-level overview of the recently imposed measures by the EU, UK and US can be found below.
How to address the new sanctions risk landscape
The sanctions risk landscape has changed drastically and businesses will need to be able to manage the increased legal, compliance, operational and reputational risks in the time to come to ensure their “licence to operate” outside of Russia and Belarus is not compromised. In addition to ensuring that immediate steps are taken to address the time-sensitive, immediate issues below, companies will also need to ensure that their organisation allows the systematic identification, assessment and mitigation of the increased and dynamic day-to-day risks related to inter alia sanctions regimes.
Immediate measures
- Assess the need for and options to minimise losses related to business operations connected to Russia, Belarus and relevant regions in the Ukraine that require immediate action.
- Ensure that no payments, orders or deliveries are made to/from regions/countries, with parties or within sectors potentially subject to sanctions or restrictions as applicable of today or expected going forward.
- Ensure that no new contracts are concluded that could have a connection to regions/countries, sectors, or parties potentially subject to sanctions or restrictions as applicable of today or expected going forward.
- Assess whether Russian banks are involved in the business of the company. Consider the options to address potential risks in relation to sanctions and additional measures that may be implemented going forward.
- Clear allocation of responsibility for continuously tracking developments and sanctions laws and regulations to personnel with relevant seniority and expertise.
- Establish a point of contact for employees that have questions or identified risks related to the war in Ukraine. Communicate clearly and ask your employees to get in touch if any questions arise.
- Act early to disengage from business in and with Russia and Belarus at risk of likely escalated sanctions and related measures in the future – engage with applicable governmental authorities to have protocol for disengagement approved if there is uncertainty as to how disengagement shall be effected.
Systematic mapping of sanctions risk and implementing adequate measures
- Map sanctions risks: Identify business operations in Russia, Belarus and the relevant regions in Ukraine, or with parties such as customers, suppliers, distributors, or other business partners, with a connection to any of the above countries. When doing so, make sure that available information is made use of systematically and effectively. In addition to basic information on counterparties, this should also include address information, location data, bank and payment details, beneficial ownership information, information on persons involved in a contractual relationship, etc. Consider how this information can be gathered most effectively both by using systems and involving relevant employees.
- Update and map the following information for business partners from Russia/Belarus and any entities that may be owned by entities or individuals in Russia/Belarus:
- overview of all shareholders of the entity and current ownership percentage;
- identify ultimate beneficial owners of the entity, including details such name, citizenship and date of birth; and
- determine whether someone may have control of the entity by other means than ownership, for instance through shareholders’ agreements or consolidation of ownership with associated persons.
- Screen counterparties in relevant sanctions list published by public authorities. Make use of screening tools (if available) and ensure regular and risk-based re-screening of counterparties.
- Assess contractual relationships that are subject to sanctions or restrictions or might pose an increased risk and that were not addressed immediately. Carefully consider contractual rights and obligations in light of the increased risks related to current and future sanctions and reputational considerations. Evaluate how losses can be minimized and whether any remedies are available that may offer some protection, such as insurance coverage, investment treaties[3] or similar.
- Be aware of links to sanctioned parties further up or down the value chain: Importers should take due care to ascertain the origin of the goods they declare since goods may be imported from neighbouring countries of Ukraine, in particular Russia and Belarus. This may specially be the case for coal and steel products.[4] Exporters should implement measures to ensure that goods and technology may not be forwarded/distributed in breach of applicable sanctions laws and regulations.
- Be careful in relation to sanctioned parties attempts to circumvent restrictions. Identify key risks and modus operandi for circumvention in relation to operations and implement measures to target this specifically.
And last but not least, prioritize. Make sure that time-sensitive and high-risk matters are handled in a timely manner by personnel with adequate seniority and competence, and that efforts and sanctions assessments are documented appropriately.
How can BAHR support you?
An effective compliance programme is key for being able to navigate the increasingly complex sanctions and trade restrictions. At BAHR, we regularly assist our clients with establishing, assessing and further developing their compliance programmes, and handling day-to-day compliance challenges. We regularly advise clients on trade sanctions and export control in Norway and the EU, and cooperate with local counsel in other jurisdictions, notably the United States, where need arises. We can also assist you with assessing sanctions risks in relation to specific contracts and engagements.
Feel free to contact us for assistance or an informal conversation on this topic.
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[1] Federal Register: Blocking Property With Respect To Specified Harmful Foreign Activities of the Government of the Russian Federation
[2] EUR-Lex – 32014R0269 – EN – EUR-Lex (europa.eu)
[3] Bilateral Investment Treaty between Russia and Norway, in effect since 21 May 1998.