Red Alert - Financial Sanctions Evasion Typologies: Russian Elites and Enablers (2022-07)

Summary

This is a Red Alert originally issued by the UK's National Economic Crime Centre (NECC) and HM Treasury's Office of Financial Sanctions Implementation (OFSI), circulated by the GFSC to the Guernsey regulated sector for awareness. It describes typologies used by sanctioned Russian elites (Designated Persons, or DPs) and their professional enablers to evade financial sanctions, and sets out recommended detection and reporting actions for firms.

• Evasion techniques: DPs use trusted proxies (relatives, employees) to hold shares, sell or transfer assets at a loss before sanctions bite, or divest stakes below the 50 percent ownership/control threshold while retaining influence.
• Enablers: Lawyers, accountants, wealth managers, TCSPs, estate agents, company directors and family offices may knowingly, wilfully blindly, or unwittingly facilitate evasion.
• Legal basis (UK): Breach and circumvention offences arise under the Sanctions and Money Laundering Act 2018 and the Russia (Sanctions) (EU Exit) Regulations 2019, which have extra-territorial reach including to Crown Dependencies.
• Red flags: The document lists indicators for detecting frozen asset transfers, enablers, and suspicious payments, and provides money laundering red flags and account/transactional indicators.
• Industry recommendations: Firms are urged to enhance due diligence on high-risk clients, verify source of funds/wealth, and remain alert to overtly litigious or obstructive tactics used to conceal DP ownership or control.

The alert reinforces existing reporting duties rather than creating new statutory obligations under Guernsey law: relevant firms that identify UK sanctions breaches or frozen assets must report to OFSI, and businesses in the regulated sector may file a Suspicious Activity Report referencing the alert code 0697-NECC.

Key obligations

• Report suspected breaches of UK financial sanctions, knowledge that a person is a Designated Person, or holding of frozen assets to OFSI if the firm is a 'relevant firm' under regulation 71 of the Russia (Sanctions) (EU Exit) Regulations 2019
• File a Suspicious Activity Report (SAR) with the NCA where regulated-sector activity indicates the sanctions evasion typologies described, including the reference 0697-NECC and code XXJMLXX
• Apply enhanced due diligence, verify source of funds and source of wealth, and maintain robust KYC documentation for high-risk clients and matters to mitigate exposure to Designated Persons and frozen assets
• Screen clients against UK sanctions lists and OFSI's consolidated list of asset freeze targets and maintain adequate policies, controls and procedures to identify and mitigate sanctions evasion risk

Applies to

financial institutions, legal sector firms (solicitors and barristers), accountants and accountancy firms, trust and company service providers, estate agents, auction houses, investment advisors and wealth managers, payment processors, private equity firms, company directors and private family offices, DNFBPs generally