2022 was an unprecedented year for the development of international financial and trade sanctions following Russia’s invasion of Ukraine in February 2022. The sanctions imposed on Russia by the UK, EU, US, Japan, Switzerland and others represent the most severe sanctions ever imposed on a major economy. For the UK and EU in particular, the breadth and speed with which such sanctions have been imposed on Russia is without parallel. Bolstered by the expansion of the enforcement powers of UK and EU regulatory authorities, UK and EU regulators are now shifting some of their focus from introducing new sanctions to enforcing them.
Milbank LLP partners Tom Canning and Andrea Hamilton and associate Mark Padley from Milbank’s London Corporate, Litigation and Arbitration Groups recently spoke with S&P Global Market Intelligence about these far-reaching sanctions and how increased enforcement in 2023 may affect banks and other financial institutions. In the article “Banks, funds on alert as Europe’s enforcement of Russia sanctions ramp up,” Ms. Hamilton notes that “Clearly, there’s an intention and focus on enforcement [in the UK and EU] as a next step beyond the expansion of the scope of the sanctions themselves.”
Mr. Canning also explains that we are likely “seeing a paradigm shift” due to the unprecedented “scale of new regulation.” In that environment, financial institutions are likely to continue to face heightened scrutiny as the UK and EU authorities increasingly focus on enforcement. As Mark Padley notes in the article, it is also possible that “non-bank financial actors … may face a higher risk of regulatory action because they generally have less developed sanctions screening infrastructure compared to banks.” As noted in a recent Milbank Insight, “A New Era for UK and EU Sanctions Following Russia’s Invasion of Ukraine: 2022 in Review and What 2023 May Bring,” there have been over 236 breach reports received by OFSI since the invasion of Ukraine in June 2022, which will need to be investigated and may result in penalties or public censure. We expect, therefore, that the regulatory authorities in the UK, EU and elsewhere are likely to have another busy year in 2023.
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