TCSPs “Russian connection” - STEP Europe has produced some guidance for practitioners
STEP Europe has produced some guidance for practitioners who need to withdraw their services from trusts and similar legal arrangements with a “Russian connection” following the fifth package of economic and individual sanctions against Russia imposed by the European Commission (EC) on 8th April 2022.
Purpose of sanctions
- The EC says that it is seeing tangible results from the first four packages of sanctions that it has imposed. They have hit the Russian economy hard and limited the Kremlin’s political and economic options. However, the EC has taken the decision to increase pressure by broadening the sanctions and responsibilities of Member States to further impact the Russian economy.
- The EC says that these sanctions are designed to maximise negative impact for the Russian economy while limiting the consequences for EU businesses and citizens. Ensuring an effective and diligent implementation of sanctions is key to prevent circumvention, which is primarily the responsibility of member states.
- The new fifth sanction: Council Regulation (EU) 2022/576, Article 5m
- As part of the European Union’s (EU) efforts to destabilise Russia’s economy, the EC has imposed a new prohibition in relation to providing certain services to Russian trusts or similar legal arrangements. It will now be prohibited in the EU to register, provide a registered office, business or administrative address as well as management services to, a trust or any similar legal arrangement having as a trustor or a beneficiary a Russian national or resident.
Council Regulation (EU) 2022/576, Article 5m states:
- It shall be prohibited to register, provide a registered office, business or administrative address as well as management services to, a trust or any similar legal arrangement having as a trustor or a beneficiary:
- Russian nationals or natural persons residing in Russia;
- Legal persons, entities or bodies established in Russia;
- Legal persons, entities or bodies whose proprietary rights are directly or indirectly owned for more than 50% by a natural or legal person, entity or body referred to in points (a) or (b);
- Legal persons, entities or bodies controlled by a natural or legal person, entity or body referred to in points (a), (b) or (c);
- A natural or legal person, entity or body acting on behalf or at the direction of a natural or legal person, entity or body referred to in points (a), (b), (c) or (d).
- It shall be prohibited as of 10th May 2022 to act as, or arrange for another person to act as, a trustee, nominee shareholder, director, secretary or a similar position, for a trust or similar legal arrangement as referred to in paragraph 1.
- Paragraphs 1 and 2 shall not apply to the operations that are strictly necessary for the termination by 10th May 2022 of contracts which are not compliant with this Article concluded before 9th April 2022 or ancillary contracts necessary for the execution of such contracts.
- Paragraphs 1 and 2 shall not apply when the trustor or beneficiary is a national of a Member State or a natural person having a temporary or permanent residence permit in a Member State.
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