OFSI issues new General Licence on correspondent banking

On 7 November, the HM Treasury Office of Financial Sanctions Implementation (OFSI) issued a new General Licence – INT/2024/5394840, known as the Correspondent Banking – 2022 Blocked Payments (General Licence).

UK Russia sanctions regulations

Under regulation 17A of the Russia (Sanctions) (EU Exit) Regulations 2019, a UK credit or financial institution must not establish or continue a correspondent banking relationship with either a designated person or an entity, which is owned or controlled directly or indirectly by a designated person. UK credit or financial institutions are also prohibited from processing payments to, from or via a designated person, or those who are owned or controlled by a designated person.

Those who contravene the above prohibitions commit an offence, punishable upon conviction by up to 7 years in prison. 

The ban on correspondent banking relationships and payment processing is subject to exceptions and licences.

Overview of the General Licence

In 2022, the UK Government designated a large number of Russian banks, which resulted in some payments originating from those banks being caught by the sanctions ban. In order to get their money back, non-designated individuals and entities had to either rely on the now expired General Licence – Correspondent Banking Payments INT/2023/3566356 or apply for an OFSI-specific licence.

The new General Licence authorises the release of frozen funds, even if they have been processed by a designated bank acting as the originating, correspondent or intermediary institution. However, payment processing is subject to the conditions set out in the General Licence, which include the following.

Conditions of the General Licence:

1. The payment was first received by a UK credit or financial institution from the account holder between 1 January 2022 and 31 December 2022 (inclusive). Payments made after 31 December 2022 are not covered by the General Licence and an application for a specific licence is required.
2. Both the original sender and the original intended recipient of the payment are not designated persons, as payments involving designated persons are prohibited. If either the payment sender or  recipient is a UK designated person, the General Licence does not apply. 
3. The released funds can only be processed through a non-designated credit or financial institution to the account which is held by either the original sender or original recipient of funds.

In cases where a holder of blocked funds (a UK-based bank) has offices in other jurisdictions (e.g. USA, Switzerland or EU) and these funds were transferred there due to those financial institutions’ internal policies, the release of blocked funds would not be possible without a correspondent licence from the relevant jurisdiction (e.g. an OFAC or SECO licence). Gherson lawyers work closely with partner law firms in multiple jurisdictions and can with licence applications outside the UK.

The General Licence expires at 23:59 on 6 November 2025, but HM Treasury may vary, revoke or suspend this licence at any time.

Updated 13 November 2024

How Gherson can assist

Gherson lawyers have significant experience assisting both individuals and corporates in getting their frozen funds released. We regularly engage with OFSI and UK and international financial institutions on matters of assets freeze and funds release, and have successfully acted on matters that involved banking relationships and processing payments.

If you would like to discuss any issues raised in this article or need advice regarding your specific circumstances, please do not hesitate to contact us. You can also reach out via email or follow us on X, Facebook or LinkedIn to stay updated.

The information in this blog is for general information purposes only and does not purport to be comprehensive or to provide legal advice. Whilst every effort is made to ensure the information and law is current as of the date of publication it should be stressed that, due to the passage of time, this does not necessarily reflect the present legal position. Gherson accepts no responsibility for loss which may arise from accessing or reliance on information contained in this blog. For formal advice on the current law please do not hesitate to contact Gherson. Legal advice is only provided pursuant to a written agreement, identified as such, and signed by the client and by or on behalf of Gherson.

©Gherson 2024