On 30 May 2023, the Office of Financial Sanctions Implementation (OFSI) published a blog to clarify the scope of trust services sanctions. No doubt, the publication is a result of OFSI having been deluged with questions over the sanctions, in particular their application to "persons connected with Russia" (PCR). The blog refers to engagement with over 500 stakeholders - which gives an idea of the level of uncertainty surrounding the interpretation of these sanctions.
In the blog post, OFSI cover a number of areas:
- when trust services sanctions apply;
- where trust services sanctions apply;
- the key exceptions permitting the provision of trust services; and
- OFSI’s enforcement powers.
When trust services sanctions apply
OFSI have sought to clarify what is meant by PCR for the purpose of section 19A(2) of the Russia (Sanctions) (EU Exit) Regulations 2019. In a departure from the previously understood position, OFSI have stated that someone would “not normally” be a PCR if they “only occasionally travel to Russia while normally being resident or located in the UK”.
OFSI also note that the definition of a PCR does not include Russian nationals who are not ordinarily resident or located in Russia and that the “domicile” test only applies to persons who are not individuals.
Where trust services sanctions apply
The geographic scope of the prohibition is wide. To this end UK persons anywhere are prohibited from providing trust services to or for the benefit of PCRs and those specifically designated by the trust services sanctions. The same restrictions apply to anyone, UK persons or otherwise, who are in the UK.
The location of the trust (or other, similar, arrangement) is irrelevant, with the sanctions regime applying wherever the trust is located.
Where the provision of trust services would be prohibited, there are certain grounds under which one may seek a specific licence. OFSI flag the following as the two key exceptions:
- the provision of trust services to ensure that assets which are subject to an asset freeze remain frozen; and
- trust services provided pursuant to a registered pension scheme, to the extent that these services are not primarily provided to, or for the benefit of, a PCR or designated person.
OFSI’s enforcement powers
The post includes a reminder that OFSI can impose civil monetary penalties on a strict liability basis, meaning the previous requirement for OFSI to prove that a person had knowledge or reasonable cause to suspect they were in breach has gone. This ability is not limited to breach of trust services sanctions but provides a salutary reminder of the consequences of getting it wrong.
Whilst the majority of the blog repeats what is already known, the guidance on when trust services sanctions apply is helpful. Though, in our view, it doesn’t go far enough as it still leaves the question of when a person is considered to be a PCR too ill-defined.