In an earlier update we outlined in summary the application of the first round of EU sanctions on Ukraine, relevant to former President Viktor Yanukovich and his close allies. Here we provide an update on the fast moving pace of events surrounding new sanctions imposed since that time and as relevant to the jurisdictions we advise on.
Sanctions on individuals in Crimea and the Russian Federation
Almost immediately following the referendum organised by the Supreme Council of the Autonomous Republic of Crimea and held on 16 March, the Council of the European Union issued Council Decision 2014/145/CFSP (CFSP 145) condemning the referendum as illegal under the Ukrainian Constitution and imposing a further round of sanctions on certain politicians and officials judged to have contributed to undermining the territorial integrity of Ukraine.
Unlike its predecessor, which focussed clearly on the former President Yanukovich and his close allies, the listed individuals in CFSP 145 come from a more diverse range of backgrounds. They are: Sergey Aksyonov, Vladimir Konstantinov, Rustam Temirgaliev, Deniz Berezovskiy, Aleksei Chaliy, Pyotr Zima, Yuriy Zherebtsov, Sergey Tsekov, Viktor Ozerov, Vladimir Dzhabarov, Andrei Klishas, Nikolai Ryzhkov, Evgeni Bushmin, Aleksandr Totoonov, Oleg Panteleev, Sergei Mironov, Sergei Zheleznyak, Leonid Slutski, Aleksandr Vitko, Anatoliy Sidorov, Aleksandr Galkin.
Subsequently, on Friday, 21 March the European Union issued further sanctions against more Russian and Crimean politicians and officials by supplementing CFSP 145 and Regulation 269 (under new Council Decision 2014/151/CFSP and Council Regulation (EU) No 284/2014 both of 21 March 2014).
The new names are: Sergey Glazyev, Dmitry Kiselyov, Valery Kulikov, Mikhail Malyshev, Valentina Matviyenko, Valery Medvedev, Elena Mizulina, Sergei Naryshkin, Alexander Nosatov, Dmitry Rogozin, Vladislav Surkov and Igor Turchenyuk.
The position in Cyprus
The sanctions contained in CFSP 145 have been further implemented by the Council in the form of Council Regulation (EU) No 269/2014 (Regulation 269). Regulation 269 provides for the following restrictions:
All funds and economic resources belonging to, owned, held or controlled by any of the listed individuals is frozen: Article 2(1).
No funds or economic resources may be made available directly or indirectly, to or for the benefit of the listed individuals: Article 2(2).
Regulation 269 has direct applicability in areas of the Republic of Cyprus under its de facto control. Criminal liability under Cypriot law for breach of Regulation 269 is provided for under the Cyprus Criminal Code Law.
The position in the BVI and the Cayman Islands
The BVI and the Cayman Islands are Overseas Territories of the United Kingdom. They are not part of the European Union and as such Regulation 269 has no automatic direct application. Legislation from the United Kingdom Privy Council to extend the effect of Regulation 269 to its Overseas Territories is expected imminently. Such legislation is expected to mirror the provisions of The Ukraine (European Union Financial Sanctions) (No. 2) Regulations 2014 which reiterate and expand on the sanctions in Regulation 269 as a matter of UK law.
Financial institutions based in the BVI and Cayman Islands are also reminded that they are subject to obligations to take note of international sanctions including Regulation 269 and, in some instances, to report affected transactions and dealings to the local authorities in compliance with anti-money laundering and terrorist financing legislation.
Further sanctions ahead?
The position with respect to further sanctions from the European Union remains highly fluid and politicised. In the US, sanctions have been extended in parallel to very high-ranking politicians and businessmen close to the President of the Russian Federation. Firms would be well reminded that the US dollar is the official currency of the BVI and the Caymanian dollar is pegged to the US dollar, meaning that US sanctions, in addition to EU/UK sanctions, remain highly relevant as well.