Industry Circular No. 4 - Red Alert: Financial Sanctions Evasion Typologies: Russian Elites and Enablers

Red Alert – Financial Sanctions Evasion Typologies: Russian Elites and Enablers

A “Red Alert” has been issued by the UK National Economic Crime Centre (NECC), a multi-agency unit in the UK National Crime Agency (NCA), and HM Treasury’s Office of Financial Sanctions Implementation (OFSI), working in conjunction with law enforcement and financial sector partners as part of their Joint Money Laundering Intelligence Taskforce (JMLIT).

A Red Alert is a mechanism that provides a series of sanctions evasion indicators identified from real-world case studies and also sets out recommendations as to the level and type of due diligence that companies should perform on higher-risk transactions and counterparties. 

The purpose of the Red Alert is to combat and disrupt financial sanctions evasion by complementing the private sector’s existing knowledge of these issues. This facilitates preventative action in the form of enhanced business processes and procedures to identify and mitigate any exposure that sectors of the industry may have to sanctions evasion following the unparalleled volume of sanctions designations introduced since the start of the Russian invasion of Ukraine.

This Red Alert is based on Financial Sanctions Evasion Typologies in relation to Russian Elites and Enablers as identified within the UK. However, these typologies are equally applicable to relevant businesses, financial institutions and DNFBPs operating in or from within the Virgin Islands.  The purpose for publishing this Red Alert in the BVI is to:

• promote an awareness of the importance of effectively identifying and mitigating the risks posed by higher-risk transactions and counterparties; 
• underscore the importance of relevant businesses, financial institutions and DNFBPs undertaking robust due diligence that is targeted to appropriately address the sanctions risks, including sanctions evasion risks, posed by such transactions and business relationships and 
• ensure that relevant businesses, financial institutions and DNFBPs consider whether existing sanctions compliance mechanisms take into account sanctions evasion tactics and that such measures are effective in mitigating/prohibiting financial sanctions evasion by designated persons (DP), Russian elites and enablers as outlined in the Red Alert. 

If you suspect that you are dealing with a DP or entity that is utilising techniques in order to evade sanctions impacting on their personal and/or commercial holdings in breach of the Russia (Sanctions) (EU Exit) Regulations, 2019, which have been extended to the Virgin Islands by way of the Russia (Sanctions) (Overseas Territories) (Amendment) Order 2022, you are required to:

• check whether you maintain any accounts or hold any funds or economic resources for the persons set out in the targeted financial sanctions Notice;    
• freeze such accounts and other funds or economic resources;    
• refrain from dealing with the funds or assets or making them available (directly or indirectly) to the designated person unless licensed by the Office of the Governor to do so;    
• report any findings along with any additional relevant information to the Office of the Governor (including information concerning the frozen assets of the designated person that the Governor’s Office may request); and   
• File a Suspicious Activity Report with the Financial Investigation Agency.

Failure to comply with financial sanctions legislation or seeking to circumvent its provisions is a criminal offence.

Information on this Red Alert may be found here and is being provided as a courtesy to relevant businesses, financial institutions and DNFBPs in the Virgin Islands to assist them in ensuring they comply with their AML/CFT obligations surrounding sanctions compliance.