UK to follow EU in sanctioning Russian-connected TCSPs

Hong Kong could see increase in Russian nationals seeking TCSP services

The government of the United Kingdom (UK) has announced that it will be following the European Union’s (EU) decision to impose sanctions on trust and company service providers (TCSPs) who provide services for Russian nationals or entities.

In May 2022 the EU announced that it would impose sanctions on EU TCSPs, restricting them from providing fiduciary and management services to trusts that were connected to Russian nationals or entities. Unless the trust settlor or beneficiary was a national of a member state, or a resident in a member state, all TCSPs were required to terminate their services.

The UK government has now announced that it would follow suit. While the new rules have not been articulated yet, they are likely to affect the UK’s Crown Dependencies and Overseas Territories, it is also likely that the rules would follow the EU’s Article 5m of EU Regulation (EU) No 833/2014.

Article 5m(1) applies to TCSPs in the EU (though it extends worldwide, applying to all EU persons and entities) and prohibits the registration of, provision of a registered office, business or administrative services as well as management services to, a trust or any similar legal arrangement having as a settlor or a beneficiary a Russian national or a Russian legal entity, among others.

These sanctions also prohibit service providers from acting, or arranging for another person to act, as a trustee, nominee shareholder, director, secretary or a similar position for such persons.

While the UK regulations have yet to come into effect, or be articulated by the government, it is imperative that TCSPs in the UK and in UK Crown Dependencies review their client roster and anticipate for sanctions to be imposed in the near future.

It is also highly probably that TCSPs in Hong Kong and other jurisdictions will see an increase in interest from Russia-connected individuals and entities seeking TCSP services.

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