United Kingdom

Page last updated November 2024.

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CCAB Publication

Members will find  pertinent information in the CCAB guidance of 2 March 2022, where CCAB issued a joint statement to the profession following ongoing developments in Ukraine.  This guidance concentrates on our UK based members’ obligations in relation to sanctions, ethical considerations and obligations under AML legislation.

UK Ban on provision of accounting services.

Following the UK's withdrawal from the European Union, the Russia (Sanctions) (EU Exit) Regulations 2019 (2019 Regulations) replaced the EU sanctions regimes in relation to Russia.

The Russia (Sanctions) (EU Exit) (Amendment) (No. 14) Regulations 2022 (“No.14/22 Regulations”) amends the 2019 Regulations and among other matters bring into force the UK's  legislative ban on providing accounting services to Russia as of 21 July 2022. Please click here for the explanatory memorandum to the No.14/22 Regulations. The No.14/2022 Regulations amend the 2019 Regulations and provide for a ban on certain professional and business services. Under newly enacted section 54C a person must not directly or indirectly provide “accounting services” to a person connected with Russia.

“accounting services” is defined in new section 54B and means:

1. accounting review services, which are services involving the review by a person of annual and interim financial statements and other accounting information, but excluding auditing services;
2. compilation of financial statements services, which are services involving the compilation by a person of financial statements from information provided by a client, including preparation services of business tax returns when provided together with the preparation of financial statements for a single fee, but excluding such preparation services of business tax returns when provided as a separate service;
3. other accounting services such as attestations, valuations, preparation services of pro forma statements;
4. bookkeeping services, which are services consisting of classifying and recording business transactions in terms of money or some unit of measurement in the books of account, but excluding bookkeeping services related to tax returns;

The definition scopes out certain services, auditing services is excluded from the prohibition under “accounting review services”, preparation services of business tax returns when provided as a separate service is excluded and so are bookkeeping services related to tax returns. 

Regulation 21(2) of the 2019 Regulations sets out what a person connected with Russia means. A person is to be regarded as “connected with” Russia if the person is—

(a) an individual who is, or an association or combination of individuals who are, ordinarily resident in Russia,

(b) an individual who is, or an association or combination of individuals who are, located in Russia,

(c) a person, other than an individual, which is incorporated or constituted under the law of Russia, or

(d) a person, other than an individual, which is domiciled in Russia.

The Russia (Sanctions) (EU Exit) (Amendment) (No. 17) Regulations 2022 (the No. 17 Regulations) were passed in the UK bringing into effect further prohibitions from 16 December 2022 including a ban on auditing services which was announced in September 2022.“Auditing services “is defined and means services consisting of examination of the accounting records and other supporting evidence of an organisation for the purpose of expressing an opinion as to (a) whether financial statements of the organisation present fairly its position as at a given date, and (b) the results of its operations for the period ending on that date, in accordance with generally accepted accounting principles.

The 2019 Regulations (as amended) also contain certain exceptions from the prohibitions imposed  in relation to accounting and auditing services.

Please click here for a news item which gives further information on the ban and some further useful links.

Please refer to our "Europe & International" sub page for a chart comparing the UK and EU/Irish ban on providing accounting services to Russia.

The UK Government Guidance “Complying with professional and business services sanctions related to Russia” (updated October 2024 and see further below also ) explains that the prohibitions on accounting and auditing services are separate but complementary sanctions. After consultation with regulators and businesses, the UK chose to distinguish auditing and accounting services because of the differences in their regulatory practices and legal obligations in the UK. These services sanctions are also different in respect of which licensing grounds are applicable to them. With the caveat that individual firms must take their own legal advice as to whether their activity falls within scope of the sanctions, the guidance  also offers pointers on some common audit scenarios.

UK Government guidance (Statutory guidance Russia sanctions: guidance) (see end of  para 1.6) states that though the accounting and auditing services definitions are based on CPC codes, they are defined in Schedule 3J [inserted by  the No.17 Regulations ] for clarity, given the differences in exceptions and licensing which apply to these two sectors. The definition of accounting services is based on the Provisional Central Product Classification (CPC) Codes 1991 and includes CPC 86212 Accounting Review Services, CPC 86213 Compilation of Financial Statements services, CPC 86219 Other Accounting Services and CPC 86220 Bookkeeping Services, except tax returns. The definition of auditing services is also based on the Provisional CPC Code 1991, CPC 86211 Financial Auditing Services. 

Finally under this heading, readers should note a news item from Professional Standards Dept. of the Institute of August 23, 2023 where they alluded to awareness of the risk and obligations in relation to sanctioned goods as an important first step for those working in the accountancy profession so that they do not become party to the trade sanctions circumvention. The news item was issued in the context of the summary AML Alert  Russia sanctions – Trade sanctions circumvention which was produced by the Accountancy AML Supervisors’ Group (AASG) from an extract from the UK Department of Business and Trade notice NTE 2023/08: Russia sanctions – Trade sanctions circumvention published 22 May 2023  . 

Insolvency Practitioners

National Crime Agency Alerts

The UK National Crime Agency issues alerts from time to time .Readers may find information of interest on the following alerts which relate to sanctions.

National Crime Agency Amber Alert: Financial Sanctions Evasion, Money Laundering & Cultural Property Trafficking Through the Art Storage Sector-Jan 2024 

The National Crime Agency issued an Amber Alert  in January 2024 which highlights the sanctions evasion and money laundering risks presented to UK industries linked to the art storage sector, and to serve as a reminder on due diligence checks and reporting obligations. This Alert focuses on UK artwork storage facilities, the UK specialist service providers that are linked to the art storage sector and the clients that utilise these art storage facilities.

National Crime Agency AML Red Alert: Exporting High Risk Items-December 2023

The National Crime Agency issued a Red Alert warning in December 2023 to UK businesses on the common techniques suspected to be in use to evade sanctions on the export of high-risk goods, which Russia is using on the battlefield in Ukraine. These high-risk goods refers to Western items critical to Russian weapons systems and its military development. The Red Alert lists the common risk indicators in this area that the regulated sector should be aware of.

UK National Crime Agency Red Alert: Gold based Financial and Trade Sanctions Circumvention- November 2023

The National Crime Agency issued a Red Alert in November 2023 providing information on the common techniques sanctioned individuals and entities, and their enablers, are suspected to be using to evade sanctions relating to gold.

Financial Sanctions Evasion Typologies by Russian Elites and Enablers-July 2022

The National Crime Agency (NCA) and Office of Financial Sanctions Implementation (OFSI) issued a Red Alert in July 2022 providing information on the common techniques designated persons (DPs) and their UK enablers are suspected to be using to evade financial sanctions .It lists some indicators of methods being used to evade sanctions and provides some industry recommendations.

Click to read a useful article from professional firm Steptoe & Johnson LLP on the UK “Red Alert”. Please also click here for an  article from Herbert Smith Freehill which looks at the red alert in more detail.

Competent authorities

What government departments are responsible for implementing and administering sanctions in the UK and some general information in relation to them.

There are a number of responsible departments and bodies in relation to sanctions.

In Sept 2024 the UK government announced the launch the Office of Trade Sanctions Implementation (OTSI), within the Department for Business and Trade. Click here also for further information. To equip the office with new civil enforcement powers, on 12 September 2024, the UK government passed the Trade, Aircraft and Shipping Sanctions (Civil Enforcement) Regulations 2024. Click for the explanatory memorandum. OTSI’s enforcement powers came into effect from 10 October 2024. They apply to all UK persons including businesses wherever they are in the world and any person including businesses in the UK or the UK territorial sea. The regulations introduce new civil enforcement powers, including the power to impose monetary penalties, for breaches of aircraft, shipping and certain trade sanctions. The regulations also give the Secretary of State the option to publish reports where a breach of sanctions regulations has occurred. Click for statutory guidance on the Trade, aircraft and shipping sanctions, civil enforcement.

HM Treasury (Office of Financial Sanctions Implementation) OFSI is responsible for implementing financial sanctions. Please click here for the OFSI blog page “Russia: What has changed and what do I need to do?” The UK Government  has issued Russia Guidance for the financial and investment restrictions in Russia (Sanctions) (EU Exit) Regulations 2019 which you can read here.Click here for OFSI  e alerts on sanctions.

In May 2024 OFSI launched a UK Financial Sanctions FAQs webpage. A large range of questions and answers are listed including featured FAQs such as “Are UK entities’ subsidiaries located outside the UK expected to comply with UK sanctions? “.The FAQs are updated on an ongoing basis.

OFSI  has issued general guidance for financial sanctions under the Sanctions and Anti-Money Laundering Act 2018 and you can read a copy of the guidance here.
  
OFSI issued Guidance on enforcement and monetary penalties for breaches of financial sanctions .It reflect changes introduced by the Economic Crime (Transparency and Enforcement) Act 2022 . OFSI   also published an accompanying blog. (see paragraph above also).

Commonwealth and Development Office (FCDO) is responsible for UK international sanctions policy. The Dept for International Trade carries out  trade sanctions .The Dept for Transport carries out  transport sanctions and the Home Office applies travel bans .

In February 2022 the UK National Crime Agency (NCA) established the Combating Kleptocracy Cell, set up to investigate, among other things, criminal sanctions evasion and high-end money laundering. Please click to read more details on its establishment and what it does in SARs in Action Issue 15-March 2022.In August 2024 the NCA secured its first forfeiture of sanctioned funds under the Proceeds of Crime Act 2002.Click to read an article of August 2024 from WilmerHale UK  entitled “Asset freezing and asset seizing under the UK sanctions regime”.

Representatives including from the UK Foreign, Commonwealth and Development Office (FCDO), HM Treasury (HMT), Department for International Trade (DIT), Department for Transport (DfT), Business Enterprise Industry and Skills (BEIS) and other UK government departments spoke on 17 March 2022 at a webinar entitled : UK Sanctions relating to Russia: Briefing by UK Government. The webinar was held to help attendees understand recent changes to UK sanctions relating to Russia and for their organisations to be updated and understand how to comply with recent changes. The webinar covered the following topics: sanctions legislation overview, new sanctions measures: financial, trade and transport, individual and entity designations and humanitarian issues. A recording of the webinar can be accessed here.
 
Readers may find of interest  the House of Commons Treasury Committee  inquiry into Russia: effective economic sanctions which was announced on 3 March 2022. A treasury report on that inquiry is available here. Further information including written evidence and correspondence can be accessed by clicking here. See for example one letter from HMRC which provides an overview of HMRC’s responsibilities regarding trade sanctions.

On the wider policy side ,the UK Government published its first sanctions strategy on 22 February 2024. The strategy addresses how it uses sanctions as a foreign and security policy tool. It sets out the continued investment, partnerships and structures that support UK government sanctions and the cross-government architecture built to deliver sanctions. It outlines the partnerships developed with the private sector, NGOs, and international partners, and the steps being taking to strengthen sanctions implementation and enforcement.

Legislative provisions

On the legislative side in the UK, the UK Sanctions and Anti-Money Laundering Act 2018 (SAMLA) provides it with a new domestic legislative framework to give powers to impose sanctions after the European Communities Act 1972 was repealed. Among other things it makes provision enabling sanctions to be imposed by the UK where appropriate for the purposes of compliance with United Nations obligations or other international obligations. It also provides for exceptions and licences.

The Russia (Sanctions) (EU Exit) Regulations 2019 (2019 Regulations) were made under SAMLA. Following the UK's withdrawal from the European Union, the 2019 Regulations replace the EU sanctions regimes in relation to Russia. They are aimed at encouraging Russia to cease actions destabilising Ukraine or undermining or threatening the territorial integrity, sovereignty or independence of Ukraine. Under the 2019 Regulations persons who are involved in destabilising Ukraine or undermining or threatening the territorial integrity, sovereignty or independence of Ukraine can be designated and excluded from the UK and made subject to financial sanctions. The 2019 Regulations also impose certain restrictions on trade and restrictions on the provision of services related to that trade and  also impose financial and investment restrictions.

The Russia (Sanctions) (EU Exit) (Amendment) Regulations 2022 were also issued under SAMLA. These Regulations amend the designation criteria in regulation 6 of the 2019 Regulations to specify additional activities for which a person may be designated. It also identifies sectors of “strategic significance” to the Russian Government, including the chemical, defence, energy, extractives, electronics, ICT and financial services sectors. Under the new measures, the UK is now able to target the strategic interests of the Russian state more broadly.

Further regulations have been issued in respect of further sanctions packages issued by the UK. Below is a listing of the regulations made to date in relation to Russian sanctions:

UK Statutory Instrument 123/2022  The Russia (Sanctions) (EU exit) (Amendment) Regulations 2022

UK Statutory Instrument 194/2022  The Russia (Sanctions) (EU Exit) (Amendment) (No. 2) Regulations 2022

UK Statutory Instrument 195/2022 The Russia (Sanctions) (EU Exit) (Amendment) (No. 3) Regulations 2022

UK Statutory Instrument 203 /2022 The Russia (Sanctions) (EU Exit) (Amendment) (No. 4) Regulations 2022

UK Statutory Instrument 205 /2022 The Russia (Sanctions) (EU Exit) (Amendment) (No. 5) Regulations 2022

UK Statutory Instrument 241 /2022 The Russia (Sanctions) (EU Exit) (Amendment) (No. 6) Regulations 2022

UK Statutory Instrument 395 /2022 The Russia (Sanctions) (EU Exit) (Amendment) (No. 7) Regulations 2022

UK Statutory Instrument 452 /2022 The Russia (Sanctions) (EU Exit) (Amendment) (No. 8) Regulations 2022

UK Statutory Instrument 477 /2022 The Russia (Sanctions) (EU Exit) (Amendment) (No.9) Regulations 2022

UK Statutory Instrument 689 /2022 The Russia (Sanctions) (EU Exit) (Amendment) (No. 10) Regulations 2022

UK Statutory Instrument 792 /2022 The Russia (Sanctions) (EU Exit) (Amendment) (No. 11) Regulations 2022

UK Statutory Instrument 801 /2022 The Russia (Sanctions) (EU Exit) (Amendment) (No. 12) Regulations 2022

UK Statutory Instrument 814/2022 The Russia (Sanctions) (EU Exit) (Amendment) (No. 13) Regulations 2022.

UK Statutory Instrument 850/2022 The Russia (Sanctions) (EU Exit) (Amendment) (No. 14) Regulations 2022.

UK Statutory Instrument 1110/2022 The Russia (Sanctions) (EU Exit) (Amendment) (No. 15) Regulations 2022

UK Statutory Instrument 1122/2022 The Russia (Sanctions) (EU Exit) (Amendment) (No. 16) Regulations 2022

UK Statutory Instrument 1331/2022 The Russia (Sanctions) (EU Exit) (Amendment) (No. 17) Regulations 2022

UK Statutory Instrument 440/2023 The Russia (Sanctions) (EU Exit) (Amendment) Regulations 2023

UK Statutory Instrument 665/2023 The Russia (Sanctions) (EU Exit) (Amendment) (No. 2) Regulations 2023

UK Statutory Instrument 713/2023 The Russia (Sanctions) (EU Exit) (Amendment) (No. 3) Regulations 2023

UK Statutory Instrument 1364/2023 The Russia (Sanctions) (EU Exit) (Amendment) (No. 4) Regulations 2023

UK Statutory Instrument 1367/2023 The Russia (Sanctions) (EU Exit) (Amendment) (No. 5) Regulations 2023

UK Statutory Instrument 218/2024 The Russia (Sanctions) (EU Exit) (Amendment) Regulations 2024

UK Statutory Instrument 643/2024 The Sanctions (EU Exit) (Miscellaneous Amendments and Revocations) Regulations 2024

UK Statutory Instrument 695/2024 The Russia (Sanctions) (EU Exit) (Amendment) (No. 2) Regulations 2024 (revoked)

UK Statutory Instrument 834/2024 The Russia (Sanctions) (EU Exit) (Amendment) (No. 3) Regulations 2024

UK Statutory Instrument 900/2024 The Russia (Sanctions) (EU Exit) (Amendment) (No. 4) Regulations 2024

Please click the links here  and here and here to go to Herbert Smith Freehill's sanction tracker pages where you can read analysis of some of the regulations in more detail.

In March 2022 the UK Parliament fast tracked  the Economic Crime (Transparency and Enforcement) Act 2022 (“2022 Act”). Among others are provisions for sanctions in Part 3.It contains amendments to the imposition of monetary penalties under the Policing and Crime Act 2017 ("PCA").Under the PCA, HM Treasury has power to impose monetary penalties for financial sanctions breaches. From 15 June 2022 a monetary penalty can be imposed where a person breached a prohibition or failed to comply with an obligation imposed by financial sanctions legislation. The 2022 Act removed the requirement for OFSI to demonstrate that a person had knowledge or reasonable cause to suspect they were in breach of a financial sanction in order to issue a monetary penalty. This is only in the case of civil not criminal liability. Further, OFSI will still be required to determine whether on the balance of probabilities, a breach or failure to comply with an obligation under sanctions legislation has occurred.

Please click here for a link to an article on the subject which also contains some further links.

Part 3 also contains amendments to the UK's sanctions framework under SAMLA.

One of the provisions gives the UK Government new powers to act in the public interest and designate individuals and entities under an urgent procedure, while evidence is gathered to sanction them under the UK’s own standard procedures. This  has allowed the UK to immediately designate individuals and entities that have already been sanctioned by the EU, US and other allies. 

Please see here for an interesting research briefing from the House of Commons Library  entitled “Sanctions against Russia “which deals with topics such as “What has prompted fresh sanctions against Russia?” and “What sanctions has the UK imposed?”. It also provides narrative around the various regulations adopted by the UK government (listed above ) and examines sanctions regimes against Russia in various other jurisdictions such as the United States and Australia. 

Please  refer to this page which provides a guide  to the current consolidated list of asset freeze targets, and a list of persons named in relation to financial and investment restrictions under the Russia regulations .

Financial sanctions-reporting obligations

UK financial sanctions legislation sets out specific reporting obligations which requires certain individuals and entities (‘relevant firms’) to report to OFSI (where it came to their  knowledge while carrying out their business). If:

they know or have reasonable cause to suspect that an individual, entity or ship is a designated person; and
If that designated person is a customer, and they hold frozen assets for them: their nature and amount or quantity; or
they know or have reasonable cause to suspect that a person has committed an offence under financial sanctions regulations.

In August 2022 amendments were made which expand financial sanctions reporting obligations to cryptoasset exchanges and custodian wallet providers. Click here for an article by Steptoe & Johnson LLP on the "new UK Sanctions Legislation Expands Mandatory Financial Sanctions Reporting Obligations to Include Crypto Providers" and please also click here for  a webinar new reporting obligations for Cryptoasset businesses that need to comply with UK sanctions.

Financial regulatory authorities

UK financial regulatory authorities issued a joint statement on sanctions and the cryptoasset sector on 11 March 2022 reiterating that all UK financial services firms, including the cryptoasset sector, are expected to play their part in ensuring that sanctions are complied with. You can read details of the joint statement on the Financial Conduct Authority (FCA) website.

In February 2022 the UK Financial Conduct Authority (FCA)  issued guidance, available on its webpages ,on challenges in terms of disposing of Russian assets. See also the FCA sanctions page here.

In Sept 2023 the FCA issued a publication on firms’ response to increased sanctions due to Russia’s invasion of Ukraine. In the publication the FCA set out key findings from its assessments of sanctions systems and controls and includes examples of good practice and areas for improvement. While the publication is in respect of financial services firms, the findings in relation to good practices and areas that need improvement may be of interest in any efforts to making improvements to the approach to identifying and assessing the sanctions risks that firms are exposed to.

These pages are provided as resources and information only and nothing in these pages purports to provide professional advice or definitive legal interpretation(s) or opinion(s) on the applicable legislation or legal or other matters referred to in the pages. If the reader is in doubt on any matter in this complex area further legal or other advice must be obtained. While every reasonable care has been taken by the Institute in the preparation of these pages, we do not guarantee the accuracy or veracity of any resource, guidance, information or opinion, or the appropriateness, suitability or applicability of any practice or procedure contained therein. The Institute is not responsible for any errors or omissions or for the results obtained from the use of the resources or information contained in these pages.

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