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Russian attempts to buy property - legal warning over sanctions

A legal expert has warned that everyone is theoretically at risk of committing a breach of sanctions against Russia - but that ignorance about the individual buyer is no longer any form of defence.

Tony Lewis, a partner specialising in financial crime at City law firm Fieldfisher, has been commenting on the Economic Crime Act which was accelerated through Parliament and which won Royal Assent yesterday. 

The legislation includes the creation of a new register of overseas entities requiring foreign owners of property in the UK to declare their true identity.

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The register would need to be updated each year and punishments for failing to declare details, or submitting false information, would result in the asset being frozen and it cannot be sold or rented out.

Lewis, although believing that the legislation remains “full of holes” says it is nevertheless a step forward in the UK's attempt to crack down on economic crime.

He says: “For me the most significant consequence of this legislation is strict liability. Implicated parties are now strictly liable for sanctions breaches, be they Russian or any kind of sanctions, meaning ignorance of the breach is not a defence, whereas before they had to have some degree of knowledge of what they were doing.

 

“Essentially you can be slapped with a penalty in circumstances where you didn't know, or your counterparty didn't know (or deliberately misled you) that they were subject to sanctions.

“It is important to realise that everyone is theoretically at risk of committing a breach as UK sanctions apply to everyone with connections to the UK.

“The sanctions regime has been ratcheted up to previously unimaginable levels, and it's no longer just the financial services sector, which is obviously regulated and has strict Know Your Customer processes, that needs to be acutely mindful about who it does business with.

“At the same time the Office of Financial Sanctions Implementation has been flexing its muscles with a series of recent fines for sanctions breaches, most notably a £20 million fine against Standard Chartered Bank.

“So it's a double whammy, sanctions are expanding massively and at the same time the enforcement side has become a lot stricter. It's really quite draconian and everyone now needs to be a lot more aware of sanctions."

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