The Licence was issued under Russia Sanctions Regulations and Belarus Sanctions RegulationsRegulation 64 of the Russia (Sanctions) (EU Exit) Regulations 2019 and Regulation 32 of the Republic of Belarus (Sanctions) (EU Exit) Regulations 2019.
The Licence term is six months expiring at 23:59 on 21 November 2023.
Licence Rationale
OFSI stated that it has received an unprecedented number of applications for licences authorising UK individuals and legal entities (“UK Persons”) to receive payments from designated persons in Russia and Belarus (and companies owned or controlled by designated persons) (“DPs”) under contracts entered into prior to the imposition of sanctions against DPs.Previously, the receipt by UK Persons of payments from a DP under prior contracts required individual licences to be obtained. In this connection, OFSI issued the Licence.
Subject Matter and Terms of the Licence
DPs may transfer funds or economic resources to UK Persons in satisfaction of a contractual obligation, provided that:- the contractual obligation arose before the date on which the DP became designated;
- the payment is for the benefit of a UK person;
- the total value of the funds or economic resources does not exceed of GBP200,000 incl. VAT;
- no payments are made to another DP, whether directly or indirectly (although the UK bank or financial institution required to process payments, which is itself a DP, may process such payments).
The Licence permits Relevant InstitutionsA person that has permission under Part 4A of the Financial Services and Markets Act; a person that is authorised or registered under Part 2 of the Payment Services Regulations; a person that is authorised or registered under Part 2 of the Electronic Money Regulations; a person that is a “recognised clearing house”, “third country central counterparty”, “recognised CSD” or “third country CSD” for the purposes of s. 285 of the Financial Services and Markets Act; a person that is an operator of a recognised payment system (or that is a service provider in relation to recognised payment systems) for the purposes of Part 5 of the Banking Act (“Relevant Institutions”) to process payments made in accordance with the Licence.
OFSI emphasised that the Licence only applies to where there is a clear, demonstrable, and enforceable contractual obligation.
Contracts not covered by the Licence
The Licence does cover payments under the following contracts/obligations or transactions:- contracts which were signed prior to the date a DP was designated but the services were incurred post-designation;
- contracts in which UK persons would be due to receive payments that exceed GBP200,000 incl. VAT;
- contracts to provide legal services and/or involving the payment of legal expenses (for more details please see our previous legal update on the Updated Legal Services Licence);
- bonds;
- derivative contracts;
- derivatives;
- credit default swaps;
- repo transactions;
- the use or withdrawal of funds by a UK Person from an account held at a designated bank (“DP Bank”); and
- the discharge of an obligation of a non-designated person using funds held in an account with a DP Bank.
Reporting and Record-Keeping Requirements
Within one month of receiving payment under this General Licence, a UK person (excluding Relevant Institutions) must send to HM Treasury the necessary information, in particular:- confirmation of the existence of a contractual obligation;
- any other document, communication or other record which sets out the obligation pursuant to which the payment is made and received;
- the relevant invoice(s) which are being paid;
- the amount received;
- the date on which the funds were transferred and received; and
- confirmation that no other UK person will use the licence to receive funds or economic resources arising from the same contractual obligation.
A DP or UK person must keep accurate, complete, and readable records, on paper or electronically, of any activity purporting to have been permitted under this Licence for a minimum of six years.
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Therefore, the Licence seeks to significantly simplify payments by DPs under contracts entered into pre-designation.
However, all parties concerned will need to strictly adhere to the terms of the Licence. Furthermore, considering the cautious approach of UK banks and other persons, in practice there may be difficulties making the relevant payments.
