“Little has changed” in terms of how much money, or other assets, is frozen in the Bailiwick as a result of the Russian/Ukraine war, over the past two years.
As the conflict marked three years at the end of last month, Guernsey’s Policy & Resources Committee decided it was time to provide an update on Russian sanctions.
UK sanctions were imposed on Russia when it invaded its neighbour in February 2022.
As UK sanctions, including those on Russia, take automatic effect in the Bailiwick too, there have been restrictions on Russian entities using the islands’ financial services sector for four years now.
The UK sanctions framework has developed further over the last three years, in terms of the number of persons and entities designated and the scope of what is covered. The main policy drive has always been to reduce as much as possible Russia’s ability to wage war in Ukraine.
The sanctions framework is principally a financial sanctions-based framework, explained P&R in its latest update on the impact of the Russian sanctions on the Bailiwick’s businesses.
“The effect of a designation is to freeze the assets of the person or entity designated and this applies to all types of assets, whether they comprise funds in a bank account, an investment or a physical asset such as real property or a yacht,” explained a spokesperson for the States of Guernsey.
“The effect of the financial sanction framework is not only to prohibit making funds or economic resources available to designated persons but also to freeze specific investments, such as a bond issued by a Russian bank, which is not owned or controlled by a designated person.”
When the sanctions were first imposed in 2022, a range of sectors were affected and in most cases they involved assets linked to the fiduciary sector but located outside the Bailiwick.
Initial estimates, in May 2022, suggested the funds held within Bailiwick bank accounts on behalf of a designated person amounted to less than £5 million. By the end of 2023, P&R had a better idea of the extent of the impact the sanctions were having.
A survey was issued towards the end of the year, requiring the private sector to provide information at a single point in time. Service providers were asked to characterise whether assets were ‘under their control and frozen in the Bailiwick’ or, while legally owned or controlled from the Bailiwick assets were located in another jurisdiction and therefore in practice frozen there.
The responses indicated that as at that time (2023), the total figure for bank deposits frozen in the Bailiwick was £4.7 million. The estimated total figure for other types of assets frozen in the Bailiwick was £67 million. The estimated total figure for assets frozen elsewhere but owned or controlled from the Bailiwick was £12.7 billion.
“The information the Committee has received indicates that little has changed since the end of 2023, which is underpinned by the fact that, since the survey was carried out, there has been a decrease in the number of matters raised under the Russia sanctions regime,” said P&R.
“That being so, and as the international position regarding Russia sanctions is rapidly evolving, the Committee considers this an appropriate moment to publish information about the value of assets frozen under the Russia sanctions regime to date. The Committee together with other authorities in the Bailiwick continue to monitor the position.”
The response to the imposition of the sanctions was one of the areas explored during the MONEYVAL review, which saw Guernsey receive a positive rating earlier this year.
Although concerns were raised that sophisticated money laundering operations could go ‘untouched’, the island’s Home Affairs President, Deputy Rob Prow said: “We are entirely confident that the work that we’ve done this term holds us in very, very good stead”.
“The recent report issued by MONEYVAL confirms that the Bailiwick’s implementation of sanctions has been timely and the jurisdiction was one of very few in the world to receive ‘High’ ratings in both categories relating to sanctions,” said P&R this month.
“The MONEYVAL report also commends the Guernsey Financial Services Commission’s supervision in relation to sanctions,” it added.