Initial key steps will likely be as follows:

1. Learn more about the scope and impact of sanctions.
2. Consider whether legal services or payments have been, are or are about to be provided to clients or third parties from or connected to Russia/Belarus. Document the outcome.
3. If your firm may be exposed to Russia/Belarus, check sanctions lists, identify relevant law and ensure you comply if any hits are found. Document the steps taken.
4. Ensure all relevant staff are aware of and fully understand their obligations in respect of the sanctions regime.
5. Keep up-to-date as new sanctions emerge.

These steps have been designed to help sole practitioners and small/medium firms. The business model of these firms is typically national focused, for example, conveyances where the source of funds is mortgages from Irish pillar banks or the sale of property in Ireland. It is unlikely that these firms would need to screen every client against sanctions lists. Large firms will already have systems in place to screen clients via commercial providers.

By following these steps, your firm will have effectively developed an up-to-date sanctions risk assessment as well as a policy on sanctions compliance. It is important to capture the risks assessed and steps taken to be able to demonstrate compliance. Document the steps you take under each of the 5 suggested key steps. 

1. Learn more about the scope and impact of these sanctions

The EU’s Infographic on Sanctions Against Russia Over Ukraine is an excellent resource. It visualises the six sectors of the Russian economy which are affected.

Summaries of all EU sanctions regimes are available on the EU Sanctions Map website.

The Department of Foreign Affairs website provides detailed information about restrictive measures/sanctions. They explain that EU Regulations have direct effect in Irish law, meaning that they must be complied with in the same way as domestic Irish legislation. Penalties for the breach of such EU Regulations are provided for through the enactment of Statutory Instruments, predominantly under the European Communities Act 1972 (as amended).

Within the EU, each Member State is required to designate competent authorities that are engaged with sanctions issues. At the moment, in Ireland, the three competent authorities are: the Department of Foreign Affairs; the Department of Enterprise, Trade and Employment; and the Central Bank of Ireland.

Given recent events in Ukraine, the following webpages are constantly being updated by relevant competent authorities:

• Department of Foreign Affairs notice on sanctions in respect of the situation in Ukraine
• Department of Enterprise, Trade and Employment notice on EU Trade Sanctions in Response to the Situation in Ukraine
• Central Bank of Ireland notice on changes to the Russia/Ukraine Regulations

View also the latest updates from the Department of Finance. Queries may also be directed to the relevant competent authority, using the contact details they provide via the above links.

2. Consider sanctions status of relevant parties

Consider whether legal services or payments have been, are or are about to be provided to clients, entities or third parties from or connected to Russia/Belarus. Document the outcome.

Solicitors should consider the potential applicability of the sanctions on the legal services they provide. Sole practitioners and small to medium firms typically personally know their clients and will be able to tap into this knowledge when considering potential exposure to sanctions. Document the outcome of your thought process about the potential exposure of your firm to new sanctions.

The Law Society of England and Wales provides the following guidance with regard to UK sanctions:

You may apply a risk-based approach to setting up a system that checks your clients against the sanctions lists.

Factors that may increase the risk of a person being on the sanctions list, and so increase the reason for checking the list, include:

• clients or transactions with links to jurisdictions subject to sanctions, even if the clients are based locally
• clients or transactions involving politically exposed persons (PEPs)from jurisdictions subject to sanctions
• clients or transactions involving complex corporate structures in jurisdictions with high terrorist financing risks
• clients who seem unable to receive funds or send funds from a bank account in their name, for no good reason

The Law Society of England and Wales provides the following indicators of sanctions evasion risk:

• Russian clients communicating changes to the beneficial ownership of their private investment companies (PICs) to non-Russian or dual national family members
• Requests to transfer assets between Russian national/dual-national family members
• Use of trust arrangements, with circumstances of transfers calling into question whether the original owner retains indirect control or otherwise could retain a benefit from the assets transferred
• Assets transferred have usually been shares in companies, both UK and overseas, including both minority and controlling stakes in these businesses
• Payments from venture capital and private equity vehicles, many located in offshore jurisdictions or the far east
• Clients seeking to move all their assets to other financial institutions and closing their accounts in London
• Clients domiciled in Russia asking whether they can make transfers to their London account
• Attempts to purchase sanctioned Russian securities, which have drastically fallen in price
• Increased volume of transaction monitoring alerts resulting from Russian and Ukrainian clients making and receiving larger transfers than is typical
• Payments received by UK businesses, often in innovative areas, also with some elements of ownership by Russia nationals
• Payments via a fintech with Russian investor nexus
• Research on private equity/venture capital vehicles and some people with significant control/officers of UK businesses showing individuals connected to Russian industry previously subject to sectoral sanctions and on occasion politically exposed persons (PEPs)
• Russian high net worth individuals who are already on international sanctions lists (but not UK list) and/or who anticipate that they may become a sanctions target, transferring assets to family members and/or close associates such as employees
• Change in address and names for Russian entities one day prior to invasion
• Change of ultimate beneficial owners from Russian to other nationalities
• Circumvention attempts through open account trade-based money laundering (TBML) typology – for example, increase in third-party open account payments

3. Identify relevant law

If your firm may be exposed to Russia/Belarus, check sanctions lists, identify relevant law and ensure you comply if any hits are found. Document the steps taken.

The Law Society of England and Wales recommends that, if your firm has a low general risk of working for clients on the sanctions list, but individual clients have higher risks, those clients should be checked against the sanctions lists. 

If you have a high risk of clients being on sanctions lists, the Law Society of England and Wales advised the following:

If your firm has a higher risk of dealing with clients on the sanctions list, you may want to use an e-verifier. These services incorporate the sanctions list into the databases they use to check identity information.

If you have a high risk of dealing with clients on the sanctions list, you should also have processes in place to help you find out whether key beneficial owners, or the intended recipient of funds from a transaction you’re undertaking, are subject to the restrictions.

An excellent resource is the EU’s free consolidated list of persons, groups and entities subject to EU financial sanctions, updated on a regular basis, which can be found here. 

Use the search function in pdf to search by name (the pdf is hundreds of pages long). This will identify the applicable Regulation – which tend to be lists of sanctioned individuals. The applicable Regulation will identify the Regulation containing the sanctioning powers. Therefore, typically, you will be looking for two Regulations.

Example of how to find the Regulation naming an individual sanctioned

If you search the name Vladimir Putin EU on the consolidated list available here the following information is provided:

Click on the ‘Legal Basis’ link 2022/332 (OJ L53) and download the Regulation. 

Here is a link to the pdf of the applicable Regulation in English which lists Vladimir Putin alongside many other names. Article 1 applies persons listed to Regulation (EU) No 269/2014 which is one of many Regulations which set out the EU’s specific sanctioning powers.

Example of the types of legal powers in Regulations

Regulation (EU) No 269/2014 is one of a number of key EU regulations.

Definitions include:

• 'economic resources' means assets of every kind, whether tangible or intangible, movable or immovable, which are not funds but may be used to obtain funds, goods or services;
• 'freezing of economic resources' means preventing the use of economic resources to obtain funds, goods or services in any way, including, but not limited to, by selling, hiring or mortgaging them;
• 'freezing of funds' means preventing any move, transfer, alteration, use of, access to, or dealing with funds in any way that would result in any change in their volume, amount, location, ownership, possession, character, destination or any other change that would enable the funds to be used, including portfolio management;
• 'funds' means financial assets and benefits of every kind, including, but not limited to:
  • cash, cheques, claims on money, drafts, money orders and other payment instruments;
  • deposits with financial institutions or other entities, balances on accounts, debts and debt obligations;
  • publicly- and privately-traded securities and debt instruments, including stocks and shares, certificates representing securities, bonds, notes, warrants, debentures and derivatives contracts;
  • interest, dividends or other income on or value accruing from or generated by assets; credit, right of set-off, guarantees, performance bonds or other financial commitments;
  • letters of credit, bills of lading, bills of sale; and
  • documents showing evidence of an interest in funds or financial resources;

Article 2 explains what not to do with the funds/resources:

Article 8 outlines the duty to report to relevant competent authorities:

Article 9 requires member states to create an offence of knowingly and intentionally participating in activities the object or effect of which is to circumvent the measures referred to in Article 2.

Article 10 contains provisions with regard to liability and a defence.

Article 16 requires member states to list competent authorities on relevant websites. As of 4 March 2022, the Central Bank and the Department of Foreign Affairs are currently listed.

Example of offence in Irish law of failing to comply with a sanction

Irish implementing Statutory Instruments typically provide for the following;

What to do if you get a ‘hit’ on a sanctions list?

The Central Bank’s guidance for the financial sector recommends the following:

The Central Bank’s guidance further recommends:

You can report the “hit” to the Central Bank by email to sanctions@centralbank.ie, using the Sanctions Return Form. For further information on sanctions reporting, please visit the Central Bank’s dedicated Sanctions Reporting webpage.

For further information on derogations, please visit the Central Bank’s dedicated Derogations webpage.

Competent Authority contact details:

The Law Society is not a competent authority for sanctions. Solicitors are welcome to contact the Society by emailing aml@lawsociety.ie, however, financial sanctions is a complex area of law and any solicitor who is unsure of their legal obligations should seek legal advice. The Society cannot confirm the adequacy of approach in specific circumstances and legal advice cannot be provided.

4. Ensure awareness

Ensure all relevant staff are aware of and fully understand their obligations in respect of the sanctions regime.

Document the way in which you ensure all relevant staff in your firm are informed about sanctions, for example, staff meetings to discuss your approach, guidance and how you will stay up-to-date.

5. Keep up-to-date as new sanctions emerge

The Solicitors Regulation Authority in the UK recommends the following:

The Solicitors Regulation Authority in the UK has highlighted the importance of re-checking sanctions lists if there is a period of time before a transaction takes place: