Mr. Speaker,
The Financial Sanctions Implementation Unit (FSIU) plays an integral role in our economy. It ensures that Bermuda maintains its reputation as a cooperative jurisdiction with a robust sanctions framework to combat the circumvention of financial sanctions.
I am pleased to state, Mr. Speaker, that in supporting the Team’s mandate, the FSIU Team attended the Sanctions Forum 2023 for the UK, Overseas Territories (OTs) and Crown Dependencies (CDs).
The Sanctions Forum 2023 provided an excellent opportunity for the participants to discuss the various components of sanctions’ implementation, and ways to strengthen effectiveness. Key presentations and discussions included the following topics:
- financial sanctions circumvention,
- asset seizure, general licensing,
- specific licence,
- information sharing and legal gateways,
- financial sanctions monitoring and reporting, and
- financial sanctions engagement.
Mr. Speaker,
Please let me expand on a few of the key areas covered:
Financial Sanctions Circumvention:
The strategies used to circumvent financial sanctions tend to be the same as those employed to launder illicit finance and other forms of serious crime. The Forum explored how CDs and OTs can better understand how circumvention may be taking place by looking at how licences are being used and understanding the various legal structures. This is critical for Bermuda as it is important to have a strong and robust enforcement regime to buttress the formal implementation of the sanctions’ framework.
General Licences:
With regard to General Licenses, the UKs Office of Financial Sanctions Implementation (OFSI) has issued, general licences (GL), in addition to specific licences, in order to protect business needs where necessary. To that end the Sanctions Forum focused on this area, and examined the various components of GLs, including:
- the GL powers,
- operational framework,
- the GLs issued by OFSI,
- considerations for the issuance of a GL,
- features of a GL, and
- OFSI’s GL work programme.
Mr. Speaker,
General Licences (GLs) are proving to be a key component in a sanctions regime. They allow multiple parties to undertake specified activities, which would otherwise be prohibited by sanctions legislation, without the need to apply for a specific licence. This has been particularly important under the Russia sanctions regime. Bermuda has the distinction of being the first OT to be issued a GL in October 2022. Pre-2022 there had been no GLs issued to the OTs as GLs were used in the UK primarily:
- To ensure entities implementing sanctions were not adversely impacted by the implementation of financial sanctions legislation;
- To deal with imminent or existing issues with sanctions implementation or compliance;
- In response to a formal policy recommendation from relevant Government Departments; or
- To assist in the staged implementation of new sanctions regimes or listings; or the staged reduction in scope of existing sanctions regimes and listings.
However, as matters and the overall situation evolved, in March 2022, GLs were used more extensively in the following ways:
- To enable the financial sector to exit financial relationships with Russian banks and companies in a systematic fashion;
- To limit the impact on UK individuals and supply chains where possible, without cutting across the purpose of the financial sanctions; and
- Where possible, to align the UK’s approach closely with the approach of its allies.
The Sanctions Forum also provided participants information regarding potential GLs that may be considered by OFSI in the future.
Mr. Speaker, lastly, let me highlight the topic of:
Financial sanctions monitoring and reporting:
This topic highlighted the importance of monitoring the value of frozen assets on an annual basis. This in turn provides the opportunity to identify any fluctuations in value, which may be legitimate. Fluctuations may also be the result of sanctions breach which would require further investigation. Furthermore, capturing such information also allows for transparency in a sanctions regime.
The Sanctions Forum was an excellent opportunity for OTs and CDs to network. It also worked to unify processes and protocols where applicable, particularly regarding licencing, enforcement, and engagement.
Mr. Speaker,
I wish to also take this opportunity to provide an update on the Russia Sanctions Regime in Bermuda overall and our efforts to ensure effective implementation. The FSIU has been at the forefront of Bermuda’s financial sanctions response to Russia’s unprovoked attack on the Ukraine. This has involved a coordinated effort with the UK Authorities, and at times our OT counterparts, in order to ensure the most stringent financial sanctions measures in history put in place by the UK, are implemented effectively in Bermuda.
By way of background Mr. Speaker, the Russia (Sanctions) (EU Exit) Regulations 2019, as extended by the Russia (Sanctions) (Overseas Territories) (Order 2020), via the International Sanctions Regulations 2013, include:
- financial,
- trade,
- aircraft,
- shipping, and
- immigration sanctions.
These all support the purposes of discouraging Russian actions which undermine and threaten the territorial integrity, sovereignty or independence of Ukraine. As a result of the amendments to the regime, in the last year the UK’s Russia Sanctions Regime comprises the most severe sanctions measures ever imposed on any major economy. I will now provide details on the prohibitions contained in the Russia Sanctions Regime.
Financial Prohibitions
Mr. Speaker, Financial provisions under the regime impose asset freezes on designated persons; prevent dealing with or the making available of assets
owned or controlled by designated persons as well as other financial and investment restrictions. This includes the recent prohibition on the provision of trust services to or for the benefit of certain designated persons or for the benefit of persons connected with Russia.
Trade prohibitions
Under the trade provisions Mr. Speaker, a number of prohibitions are in force. These include import, export, supply and transfer bans on military, aviation, space, oil refining, dual-use, energy related and infrastructure-related goods, and technology, as well as chemical and biological weapons. This also includes technical assistance, financial services, funds, brokering services and other services in relation to any of these goods and related technology.
Mr. Speaker, I note that, in particular, the trade provisions include expanded prohibitions in relation to the provision of services which enable or facilitate military activities. These span the extensive range of: insurance
and reinsurance services, energy-related services, infrastructure-related services, tourism-related services, internet services, certain professional and business services, which includes accounting, advertising, architectural, auditing, business and management consulting, engineering, IT consultancy and design, and public relations services. Moreover, there are also prohibitions on the export, making available, supply or delivery of luxury goods.
Immigration prohibitions:
Certain designated officials/individuals are subject to travel bans and as such will be refused leave to enter or remain in Bermuda.
Transport prohibitions:
Russian aircraft and ships are prohibited from entering territory airspace and ports and the registration of designated vessels in Bermuda is also banned.
Mr. Speaker,
The Russia Regulations as extended, contain licensing powers enabling legal persons to carry out certain prohibited activities under certain grounds. Since the invasion of Ukraine in February 2022, I am pleased to note that I have issued 11 licences under the Russia Regime. These amount to four (4) general licences, five (5) individual Financial Sanctions Licences and two (2) individual Trade Licences.
A summary of the General Licences issued under the Russia Sanctions Regime include the following:
- Vessels GL
This GL was issued on 20 October 2022, which provides regulation of the provision of technical assistance, financial services and funds, and brokering services, related to vessels.
- Legal Fees GL
This GL was issued on 20 December 2022, which allows for payment for the provision of legal services to a designated person under the Russia or Belarus regimes. Firms did not have to wait for a specific licence before they can receive payment from these designated persons, provided that the terms of the general licence are met.
- Russian Oil Price Cap
This GL was issued on 17 March 2023, which permits the supply or delivery of Russian oil and oil products by ship, as well as provision of associated services, subject to the price cap terms being met.
- Wind down of Trust Services Provided to Designated Persons GL
This GL was issued on 21 March 2023, which permits Persons to undertake activity necessary to terminate an arrangement to provide Trust Services between them and a Designated Person, provided that the terms of the general licence are met.
Mr. Speaker,
But for the extension of General Licences to Bermuda, local entities that would otherwise be prevented from carrying out business activities which their UK counterparts have been permitted to conduct same by reason of UK GLs. The FSIU continues to advocate for the extension of these permissions as needed, taking the policy position that Bermuda entities should have the same permissions as those in the UK.
The Regime also provides for reporting obligations in respect of asset freezes. These obligations require all relevant firms, natural and legal persons, entities, and bodies to supply the FSIU as soon as practicable, with any relevant information. The precondition is that they know or reasonably suspect a person is designated or has committed offences under the Regulations, where such information is received in the course of carrying on their business. Since February 2022, the FSIU has logged 139 compliance reporting forms, including notification of frozen assets totalling over $219.5 million.
Mr. Speaker,
The FSIU has embraced the important role in ensuring sanctions obligations are complied with in Bermuda. Thus, it is crucial for both the public and private sector to understand their sanctions’ obligations. The FSIU intends to expand its engagement with various sectors in order to ensure sanctions measures are implemented in an effective manner thus increasing compliance and combating circumvention of sanctions obligations.
Mr. Speaker, I take this opportunity to commend the Sanctions Unit, led by Ms. Renee Foggo, and Ms. Jaleesa Simons for their untiring work, to date. They have steadied Bermuda’s role in the regime and will continue their vigilance using all tools at their disposal.
Thank you, Mr. Speaker, as this ends my update on the Financial Sanctions Implementation Unit.