On 20 August, OFSI updated its Ownership and Control: Public Officials and Control Guidance first published on 17 November 2023. The guidance is applicable to all sanctions’ regimes, including Russia.
OFSI updated links to the General Guidance, part 4 of which focuses on ownership and control.
When a person is designated, an asset freeze and some financial services restrictions would apply to entities that are owned or controlled, directly or indirectly, by the sanctioned person even if the name of that entity does not appear on the UK Sanctions List.
Ownership and control tests differ in the UK and EU. In the UK, an entity is considered as being owned or controlled by another person if:
- the person holds (directly or indirectly) more than 50% of the shares or voting rights in an entity;
- the person has the right (directly or indirectly) to appoint or remove the majority of the board of directors of the entity, or
- it is reasonable to expect that the person would be able to ensure the affairs of the entity are conducted in accordance with the person’s wishes.
This could include appointing the majority members of the company’s management and/or supervisory boards or having the ability to direct an entity in accordance with a person’s wishes.
In July 2024, the UK expanded its sanctions designation criteria, introducing additional activities for which a person may get designated (please see our previous blog). It now includes, among others, ownership or control, directly or indirectly of certain entities.
Companies are expected to conduct sufficient due diligence to ensure sanctions compliance, including establishing who owns and controls their counterparties. Checking sanctions lists only is not sufficient for sanctions compliance purposes and it is crucial for international companies with presence in the UK, EU and other jurisdictions to have relevant compliance policies and systems in place.
The UK Government does not prohibit routine transactions with non-sanctioned public bodies, including taxes and fees payments, even if the public official of that public body is designated. However, the existing practices are not set in stone and are regularly reviewed by courts.
Gherson lawyers can advise UK companies on their compliance with the UK sanctions regime, including compliance with the ownership and control guidance.
Should you need any assistance, please do not hesitate to contact us for advice or send us an e-mail. Don’t forget to follow us on X, Facebook, Instagram, or LinkedIn to stay-up-to-date.
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.
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