Sanctions and Embargoes
Ensuring full compliance with laws relating to sanctions and embargoes can be complex and onerous, especially if doing business in politically unstable parts of the world. Following recent events in the Ukraine, this is an issue many businesses are now having to get to grips with for the first time. The right legal advice can be essential to unblocking trade barriers, avoiding legal penalties and keeping your goods moving.
Andrew Skinner is an experienced regulatory trade lawyer (Solicitor) and has worked as an in-house lawyer for a leading global technology company, as well as in private practice. He is also a professionally qualified engineer and registered with the UK’s Engineering Council as a Chartered Engineer (CEng).
Whether you need advice on potential trade restrictions, are looking for a second opinion on sanctions and embargoes, or require urgent assistance with making a determination as to whether or not your trade deal is subject to sanctions or embargoes, then Andrew can provide fast, effective legal guidance.
His experience includes advising £100million+ turnover businesses and major international defence contractors, supporting other legal professionals dealing with international trade issues and working with regulatory authorities globally.
For a free initial 15-minute consultation to find out how Andrew can help you with trade sanctions and embargoes, please call +44 (0) 1423 734019 or make an enquiry. All enquiries will be responded to promptly.
Our sanctions and embargoes services
We regularly support commercial clients with embargoes and sanctions advice on issues including:
- Screening of customers and supplies in order to determine whether or not they are designated persons or owned or controlled by a designated person.
- Providing written advice on specific issues relating to trade and financial sanctions.
- Export licencing issues connected with goods destined for embargoed destinations.
- The management of trade disputes with UK regulatory authorities.
- Support for regulatory investigations and prosecutions.
- General contractual issues and clauses relating to sanctions and embargoes, as well as other regulatory trade issues.
This is only a brief overview of the issues related to regulatory trade that we are able to assist with, so please contact us to discuss how we can assist your business.
Andrew advises clients on a range of trade compliance issues in various sectors, including electronics, aerospace & defence, cosmetics, IT, automotive, nuclear engineering and industrial engineering. He delivers timely, pragmatic advice in a way that recognises the commercial demands faced by clients.
Typical clients range from business owners who may be unfamiliar with export controls and international trade barriers to compliance and legal teams at major international businesses who require a second opinion or specific expertise on more niche matters outside of their experience.
Over the years, Andrew has helped clients to resolve a number of challenges, including:
- Advising a manufacturing company on the screening of clients in high-risk destinations.
- Advising a software company on a complex issue relating to US export controls and financial sanctions, resulting in the company declining a commercial contract.
- Advising a manufacturing company on the rules of ownership and control under the UK’s sanctions regime.
- Advising a distribution company on their sanctions reporting obligations under a US general licence.
- Partnering a US law firm to advise subsidiaries of US companies on the implications of EU export controls and sanctions laws to international transactions.
Common questions about sanctions and embargoes
What are sanctions and embargoes?
Embargoes and sanctions are used to further Common Foreign and Security Policy objectives, as well as to maintain international peace, strengthen national security, prevent terrorism, satisfy foreign policy objectives and uphold respect for human rights, democracy and the rule of law.
The most commonly applied measures are:
- Embargoes on exporting or supplying arms and associated technical assistance, training and financing;
- Bans on exporting equipment that might be used for internal repression;
- Financial sanctions on individuals in government, government bodies and associated companies, or terrorist groups and individuals associated with those groups;
- Travel bans on named individuals;
- Bans on imports of raw materials or goods from the sanctions target;
- Other measures may be applied according to individual circumstances.
Who imposes UK sanctions and embargoes?
A number of government departments play a role in the sanction’s regime:
- The Foreign, Commonwealth & Development Office has overall responsibility for the UK’s policy on sanctions and embargoes;
- HM Treasury, Office for Financial Sanctions Implementation (OFSI) is the authority responsible for implementing the UK’s financial sanctions;
- The Export Control Joint Unit (ECJU) is part of the Department for International Trade (DIT). The ECJU implements trade sanctions and embargoes;
- The Department for Transport implements transport sanctions, including controlling movements of ships and aircraft in UK waters and UK airspace;
- The Home Office implements travel bans.
What is the UK legal framework for sanctions and embargoes?
The UK’s legal framework for sanctions is made up of a primary legislation (Act’s), through which a wide range of secondary legislation (Regulations and Orders) is enacted.
The main sanctions ‘Acts’ are as follows:
- Sanctions and Anti-Money Laundering Act 2018 (SAMLA);
- Counter Terrorism Act 2008 (CTA 2008);
- The Anti-Terrorism, Crime and Security Act 2001 (ATCSA 2001);
- Export Control Act 2002.
The Sanctions and Anti-Money Laundering Act 2018 (the Sanctions Act) has enabled the UK to transition previous EU regimes into UK law, and establish UK autonomous regimes. These apply in the whole of the UK, including in Northern Ireland. The UK’s Sanctions and Money Laundering Act 2018 (SAMLA) provides the main legal basis for the UK to impose, update and lift a range of thematic (relating to a particular issue) and geographic (relating to a particular country or region) sanctions.
Other UK Acts enable the creation of secondary legislation (Regulations and Orders), through which additional embargoes and sanctions are enacted. For example, certain trade sanctions and embargoes are applied through the Export Control Order 2008.
What types of sanctions exist under the UK’s sanctions regime?
The types of measures that may be imposed by regulations made under SAMLA 2018 are as follows:
- Trade sanctions and embargoes and other trade restrictions;
- Financial sanctions, including asset freezes;
- Immigration sanctions, known as travel bans;
- Aircraft and shipping sanctions, including de-registering or controlling the movement of aircraft and ships.
What are financial sanctions?
Financial sanctions are measures designed to have an adverse financial effect on persons (individuals or corporate entities) that are designated or connected with a prescribed country, in a number of different ways. These can include freezing their funds or economic resources, and/or preventing the following:
- Funds or economic resources from being made available to designated persons (or for their benefit) or received from them (directly or indirectly);
- Financial services from being provided to or procured from them (or for their benefit) (directly or indirectly);
- Financial services from being provided, where the services relate to financial products (generally, or of a prescribed description) issued by them (directly or indirectly), and/or;
- Persons from owning, controlling or having a prescribed interest in them.
Who must comply with UK financial sanctions?
UK financial sanctions apply to all persons within the territory and territorial sea of the UK and to all UK persons, wherever they are in the world. This means that all individuals and legal entities who are within or undertake activities within the UK’s territory must comply with UK financial sanctions, as well as all UK nationals and legal entities established under UK law, including their branches, irrespective of where their activities take place.
What is OFSI’s consolidated list?
OFSI publishes two lists of persons (including entities) subject to financial sanctions. The ‘Consolidated List of Asset Freeze Targets’ is a list of all asset freeze targets listed under UK autonomous financial sanctions legislation and UN sanctions. Persons listed are known as “designated persons”. OFSI publishes a separate list of entities subject to specific capital market restrictions. These entities are not contained on the Consolidated List.
What are the sanctions rules around ownership or control?
If a person (including an entity) is designated as a financial sanctions target, then their name will appear in the UK Consolidated List. If an entity is owned or controlled directly or indirectly, by a designated person, then those entities may not be listed in their own right, and they may not appear on the UK Consolidated List, however, those entities are also subject to financial sanctions.
An entity is owned or controlled directly or indirectly by another person if the person holds (directly or indirectly) more than 50% of the shares or voting rights in an entity, or if the person has the right to appoint or remove a majority of the board of directors of the entity (directly or indirectly), or if the person is able to ensure the affairs of the entity are carried out in accordance with that person’s wishes. If any of the above test is met, and the person who owns or controls the entity is a designated person, then financial sanctions will also apply to that entity in its entirety (meaning that its assets should also be frozen), even where that entity is not expressly listed.
‘Funds’, ‘economic resources’, ‘freeze’, ‘financial services’ and ‘financial products’ are all very broadly defined in SAMLA 2018 itself, while ministers are empowered to make provision in sanctions regulations about the meanings of ‘owned’, ‘held’, ‘controlled’ or ‘made available’, when a person ‘owns’ or ‘controls’ another (corporate) person, and how to determine whether a person is ‘connected with’ a country.
Financial sanctions also include measures that impose prohibitions or requirements for the purposes of preventing persons from entering into, or continuing to be a party to, arrangements (broadly defined) for commercial purposes (generally, or of a prescribed description) with them.
Where can I find sanctions relating to specific regimes?
Financial sanctions which relate to a specific country or terrorist group are known as ‘regimes’. A list of regulations relating to regimes can be found here.
Do sanctions apply to trade with Russia?
- The UK government has implemented a comprehensive range of sanctions against Russia following recent military action in Ukraine. The Russia (Sanctions) (EU Exit) Regulations 2019 came fully into force on 31 December 2020, and contain a range of sanctions including trade and financial sanctions. In particular, these sanctions impose trade prohibitions relating to military goods and military technology (as specified in Schedule 2 to the Export Control Order 2008)
- Anything which falls within Chapter 93 of the Goods Classification Table [footnote 3], other than military goods
- Defence and security goods and defence and security technology (as specified in Schedule 3C to the Regulations)
- Dual-use goods and technology (as specified in Annex I to Council Regulation 428/2009 as retained by the European Union (Withdrawal) Act 2018 (‘the Dual-Use Regulation’))
- Special materials and related equipment and materials processing (as specified in Parts 1A and 1B of Schedule 2A to the Regulations)
- Critical-industry goods and technology (as specified in Schedule 2A to the Regulations)
- Quantum computing and advanced materials goods and technology (as specified in Schedule 2E to the Regulations)
- Aviation and space goods and technology (as specified in Schedule 2C to the Regulations)
- Jet fuel and fuel additives (as specified in Part 8 of Schedule 2A to the Regulations)
- Maritime goods and maritime technology (defined by reference to Chapter 4 (Navigation Equipment) and Chapter 5 (Radio-Communication Equipment) of Annex 1 of Merchant Shipping Notice 1874(a))
- Infrastructure-related goods (as specified in Part 3 of Schedule 3 to the Regulations)
- Energy-related goods (as specified in Part 2 of Schedule 3 to the Regulations) and energy-related services
- Oil refining goods and technology (as specified in Schedule 2D to the Regulations)
- Luxury goods (as specified in Schedule 3A to the Regulations)
- G7 dependency and further goods (as specified in Schedule 3E to the Regulations)
- Goods originating in non-government controlled Ukrainian territory
- Iron and steel products (as specified in Schedule 3B to the Regulations) and associated ancillary services
- Oil and oil products (as specified in Schedule 3F to the Regulations)
- Coal and coal products (as specified in Schedule 3H to the Regulations)
- Gold and products related to gold (as specified in Schedule 3G to the Regulations)
- Banknotes denominated in sterling and any official currency of the European Union
- Goods which generate significant revenues for Russia (as specified in Schedule 3D to the Regulations)
- Provision of technical assistance, armed personnel, financial services or funds, or associated brokering services where such provision enables or facilitates the conduct of certain military activities
- Services relating to a relevant infrastructure sector in non-government controlled Ukrainian territory
- Services relating to tourism in non-government controlled Ukrainian territory
- Internet services
professional and business services (as specified in Chapter 6B of the Regulations)
What are trade sanctions?
Trade sanctions are measures designed to disrupt various trade activities involving designated persons, prescribed countries and/or ‘specified ships’, including in connection with goods, technology, land, military activities, and/or services (generally, or of a prescribed description).
What are aircraft sanctions?
Aircraft sanctions are measures designed to impose prohibitions or requirements or to authorise directions with respect to aircraft connected with designated persons and/or prescribed countries.
What are shipping sanctions?
Shipping sanctions are measures designed to do the same with respect to ships that are connected with designated persons and/or prescribed countries, and/or that are ‘specified ships’.
What is the UK sanctions list?
The FCDO also publishes the UK Sanctions List, which provides details of those designated under regulations made under SAMLA 2018. This list details which sanctions measures apply to these persons or ships, and in the case of UK designations, provides a statement of the reasons for the designation.
What offences could a person commit under UK sanctions law?
There are many offences that could be committed, however here are a few examples:
- Making funds or economic resources available to a designated person or entity (except where an exception applies or under licence);
- Dealing with frozen funds or economic resources (except where an exception applies or under licence);
- Activities that circumvent an asset freeze;
- Breaching licensing conditions.
What are the criminal penalties for breaching UK sanctions law?
Sanctions regulations made under SAMLA 2018 generally make provision for how they should be enforced, including the creation of criminal offences punishable by up to ten years’ imprisonment for breaching trade sanctions and seven years for breaching financial sanctions.
What are the monetary penalties for breaching UK sanctions law?
A separate regime exists for OFSI to impose monetary penalties for sanctions breaches as an alternative to criminal proceedings. OFSI has published guidance on the monetary penalties regime which can be accessed here.
Who administers US sanctions?
The US Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctions complement US export control regulations administered by other agencies. Companies must always consider OFAC sanctions regardless of whether or not a transaction is subject to export controls through other US government agencies.
Who must comply with US sanctions?
OFAC sanctions apply to US persons, as well as to non-US persons that engage in transactions involving US-origin goods, or goods otherwise subject to the EAR. OFAC sanctions also apply to non-US persons that cause actions to occur within the US or by US persons in respect of transactions prohibited by US sanctions.
What are US comprehensive and regime-based sanctions?
Comprehensive sanctions programmes prohibit virtually all types of activities with the target, which is generally a country and its current government regime. Regime-based sanctions do not target the country as a whole but prohibit transactions with specified governments, agencies, instrumentalities, and regime members within a country that are generally designated on OFAC’s Specially Designated Nationals List. OFAC enforces list-based programmes that target specific individuals, entities, or organizations, and even industries within certain countries (such as energy, defence, and financial sectors).
Which countries are subject to comprehensive US sanctions?
The countries subject to comprehensive sanctions through the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) are Cuba, Iran, North Korea, and Syria.
The US Bureau of Industry and Security (BIS) also implements sanctions against Cuba, Iran, North Korea, and Syria pursuant to the US Export Administration Regulations (EAR).
Specially Designated Nationals (SDN)?
OFAC’s main list of entities and individuals connected with sanctions targets is the Specially Designated Nationals and Blocked Persons List (SDN list). OFAC also blocks certain entities owned by persons or entities on the SDN list even if that entity is not separately named on the SDN list.
What are secondary sanctions?
Under certain sanctions programmes, non-US persons can be subjected to secondary sanctions. Secondary sanctions target non-US persons for engaging in certain activities contrary to US policy objectives, such as conducting business that benefits a sanctioned country or person, even if the activities have no US nexus. Foreign companies that engage in these types of activities can become subject to various measures, which may include the US government adding them to the SDN list or restricting their access to the US financial system.
What are US penalties for non-compliance?
Criminal penalties for wilful violation of the OFAC can include fines ranging up to $1 million per violation with the possibility of imprisonment for 20 years, or both. Civil penalties vary considerably.
Get in touch for expert legal advice on sanctions and embargoes
Have a question about sanctions and embargoes that we haven’t answered? Please get in touch and we will be happy to advise you.