C - Consolidated FAQs on the implementation of Council Regulation No 833/2014 and Council Regulation No 269/2014

Consolidated FAQs on the implementation of Council Regulation No 833/2014 and Council Regulation No 269/2014

C. FINANCE AND BANKING

1. TRADING

RELATED PROVISION: ARTICLE 5; ARTICLE 5a OF COUNCIL REGULATION 833/2014

1. Is secondary trading of instruments between EU counterparties of sanctioned entities also suspended under Council Regulation (EU) No 833/2014?

Last update: 4 May 2022

Yes it is, but with the following caveat: for securities issued by Russia, its government, and Central Bank, or sanctioned entities, we distinguish between trade with securities issued before the dates indicated in respectively Article 5a and Article 5(1) to 5(4) of Council Regulation (EU) No 833/2014 (allowed), and trade with securities issued thereafter (prohibited).

2. Can a bond issued by an entity subject to a refinancing prohibition under Article 5 of Council Regulation (EU) No 833/2014 and held by an entity not targeted by sanctions be sold to another entity not targeted by sanctions?

Last update: 4 May 2022

Article 5 of Regulation 833/2014 clearly sets out which prohibition applies to which type of targeted entity. If the transferable securities or money market instruments were issued by a targeted entity between 1 August 2014 to 12 September 2014 with a maturity exceeding 90 days, or after 12 September 2014 with a maturity exceeding 30 days, or after 12 April 2022 irrespective of the maturity, EU persons or entities are prohibited from directly or indirectly purchasing, selling, providing investment services for or assistance in the issuance of, or otherwise dealing with these securities.

3. Can securities of private Russian entities not subject to the restrictions envisaged by Article 5 of Council Regulation (EU) No 833/2014 still be traded?

Last update: 4 May 2022

Yes, they can in principle. It should however be verified that the entity is not subject to an assets freeze and prohibition to make funds and economic resources available to it or for its benefit under Council Regulation (EU) No 269/2014, if it would be owned or controlled by a person listed in Annex I to said Regulation. Should that be the case, the trading on primary markets of its securities would be prohibited.

4. Does the currency-denomination in which instruments are traded make a difference for the prohibition enshrined in Article 5 of Council Regulation (EU) No 833/2014? Last update: 4 May 2022

No, it does not. The prohibition covers all new securities or money market instruments, irrespective of the currency in which they are traded.

5. Is the dealing of derivative instruments with Russian investments suspended?

Last update: 4 May 2022

The restrictions under Article 5(1) to 5(4) apply also for derivative products where the underlying instrument/security falls under the scope of Article 1(f) of Council Regulation (EU) No 833/2014. The restrictions apply for financial instruments issued after the dates indicated in Article 5(1) to 5(4) of Regulation 833/2014.

6. Is the dealing of derived instruments listed on the Moscow stock exchange suspended?

Last update: 4 May 2022

The listing venue as such is not relevant, since the restrictions imposed by Council Regulation (EU) No 833/2014 apply to all Member State nationals and Member State- incorporated or constituted companies, irrespective of where they are operating.

7. Are EU firms still allowed to trade (non-prohibited instruments) on Russian exchanges?

Last update: 4 May 2022

EU firms are still allowed to trade on Russian exchanges as long as the trading does not concern securities or derivatives issued by the Russian State, the Russian Central Bank, the banks or state-owned enterprises subject to a financing ban pursuant to Article 5(1) to Article 5(4) of Council Regulation (EU) No 833/2014. Trading financial instruments issued before the relevant dates indicated in Article 5(1) to Article 5(4) is possible.

8. Are new admissions to trading/official listings of financial instruments of companies indicated in Article 5(5) of Council Regulation (EU) No 833/2014 allowed on EU trading venues?

Last update: 4 May 2022

New admissions to trading/official listings on EU trading venues are not allowed.

9. Should existing financial instruments of companies indicated in Article 5(5) of Council Regulation (EU) No 833/2014 be suspended or delisted from EU trading venues?

Last update: 4 May 2022

Article 5(5) of Regulation 833/2014 provides that as of 12 April 2022, EU trading venues can no longer list and provide services in relation to transferable securities of any legal person, entity or body established in Russia and with over 50% of public ownership. As of 12 April 2022 they cannot provide any services in relation to them, irrespective of their date of issuance.

Last update: 4 May 2022

Investment services and instruments covered by restrictions are specified in Regulation 883/2014.

Addressees are market participants, e.g. investment firms. As for trading venues, they may be impacted by the prohibition to admit new instruments to be traded or indirectly, by not suspending trading in prohibited instruments, which would enable their members to continue illegal trading.

11. What are the criteria to identify legal persons, entities or bodies acting on “behalf or at the direction of” pursuant to Article 5(1)(c) of Council Regulation (EU) 833/2014 ?

Last update: 4 May 2022

The Commission Opinion of 17 October 2019 provides guidance on how to determine whether an entity is acting on behalf or at the direction of an entity listed in Annex III to Regulation 833/2014. Generally speaking, ‘acting on behalf or at the direction of an entity’ is distinct from the notions of ownership and control. While ownership of or control over an entity is an element that can be considered to increase the likelihood of such conduct, they cannot suffice in determining whether an entity is acting on behalf or at the direction of another entity. EU operators should take into account all the relevant circumstances in order to assess the situation at hand.

12. Should index providers exclude from the index the securities of those subject to the trading restrictions pursuant to Article 5(5) of Council Regulation (EU) No 833/2014?

Last update: 4 May 2022

Article 5(5) of Regulation 833/2014 does not require EU benchmark administrators to withdraw or exclude securities from their indices. Nonetheless, product manufacturers making available products tracking such benchmarks will be subject to restrictions on the underlying securities which are themselves subject to sanctions. Benchmark administrators should adapt their benchmark compositions accordingly.

13. Do “investment services” include settlement services and corporate services provided by Central Securities Depositories (CSDs) and International Central Security Depositories?

Last update: 4 May 2022

Although the definition of “investment services” in Directive 2014/65/EU does not expressly refer to settlement and corporate services provided by CSDs, the latter fall within the scope of Article 5e of Council Regulation (EU) No 833/2014 which prohibits Union’s Central Securities Depositories to provide any services for transferable securities issued after 12 April 2022 to any Russian national or natural person residing in Russia or any legal person, entity or body established in Russia. Furthermore, Article 5 covers the provision of investment services as well as the purchase, sale, assistance in the issuance of, or otherwise dealing with transferable securities.

14. Does Article 5(1) of Council Regulation (EU) No 833/2014 cover existing securities or does it apply only to new securities (issued after 12 April 2022)?

Last update: 4 May 2022

It depends on whether the security was subject to previous sanctions or not. Please see the conditions set out under Article 5(1):

“It shall be prohibited to directly or indirectly purchase, sell, provide investment services for or assistance in the issuance of, or otherwise deal with transferable securities and money-market instruments with a maturity exceeding 90 days, issued after 1 August 2014 to 12 September 2014, or with a maturity exceeding 30 days, issued after 12 September 2014 to 12 April 2022 or any transferable securities and money market instruments issued after 12 April 2022".

15. Are American Depositary Receipts (ADRs) covered by the restriction envisaged by Council Regulation (EU) No 833/2014? If so, could they be cash settled?

Last update: 4 May 2022

Depositary receipts should be treated like any other transferable securities, as defined in Directive 2014/65/EU. In the context of Article 5 of Regulation 833/2014, transactions in ADRs should be considered as a way to indirectly purchase or sell transferable securities. Hence, any settlement of transactions on ADRs for which the underlying transferable security is subject to the provision of Article 5 or Article 5e, and irrespective of whether it is settled against cash or not, can be subject to the provisions of Articles 5 and 5e of Regulation 833/2014 if it fulfils the conditions specified therein.

16. What percentage of the affected financial instruments must a multi-asset product (e.g. ETF) contain to fall under the restrictions pursuant to Article 5 and Article 5a of Council Regulation (EU) No 833/2014?

Last update: 4 May 2022

Articles 5(1) to 5(4) and Article 5a(1) of Regulation 833/2014 prohibit to directly or indirectly purchase, sell, provide investment services for or assistance in the issuance of, or otherwise deal with transferable securities and money-market instruments of a number of legal persons, entities and bodies. Multi-asset products (e.g. ETF) shall not be exposed to any of these sanctioned securities and money-market instruments. In other terms, zero percent of the affected financial instruments (issued after 9 March for entities sanctioned by Article 5a(1)), or 12 April for entities sanctioned by Articles 5(1) to 5(4)) may be traded via ETFs.

17. Does the definition and interpretation of transferable securities in Council Regulation (EU) No 833/2014 include bonds?

Last update: 4 May 2022

Yes, the definition of transferable securities under Article 1(f) of Regulation 833/2014 includes bonds.

18. Does the ban in Article 5 of Council Regulation (EU) No 833/2014 also apply to transferable securities denominated in a virtual currency?

Last update: 4 May 2022

Yes, transferable securities in the form of crypto-assets are also subject to the prohibition.

19. For an existing derivative contract (e.g. an interest rate swap) subject to daily margining requirements, is one party allowed to receive collateral that is contractually due even if the counterparty is a designated entity under Council Regulation (EU) No 269/2014?

Last update: 4 May 2022

In this situation, a designated entity is fulfilling a non-listed entity's margin call by making payments to that entity linked to an already concluded derivative contract with a non-listed entity. Forbidding such payments would result in the absence of transfer of funds owed by the designated entity to the non-designated entity, which would amount to a transfer of economic resources to the designated entity. Considering the wide interpretation of the notion of ‘making economic resources available’ to listed entities by the Court of Justice, this situation is not compatible with the restrictive measures taken vis-à-vis those designated entities. Non- designated entities can therefore receive collateral.

20. Can the Russian State pay coupons on its Eurobonds?

Last update: 4 May 2022

EU sanctions do not impose any impediments to receive income payments, dividend payments or principal repayments of existing securities from Russian issuers. The restrictive measures imposed by the EU in Council Regulation (EU) No 833/2014 in relation to purchases of the securities issued by the Russian State, certain banks and corporations apply to purchases of securities issued after a certain date (i.e. 9 March 2022 for securities issued by the Russian State or the Russian Central bank).

21. Does Council Regulation (EU) No 269/2014 allow secondary trading of securities issued by an entity subject to an asset freeze and prohibition to make funds and economic resources available to it or for its benefit?

Last update: 13 May 2022

Supposing the entity is not subject to securities transactions restrictions under Article 5 of Council Regulation (EU) No 833/2014 (see answer 1), secondary market trading of its securities would not be forbidden. Securities traded on a secondary market cannot be considered as “belonging to, owned, held or controlled by” the entity, nor can their purchase be considered as making funds or economic resources available to that entity.

It should nonetheless be reminded that pursuant to Article 9 of Regulation 269/2014, it is prohibited to participate, knowingly and intentionally, in activities the object or effect of which is to circumvent the measures referred to in Article 2 of said Regulation. If you believe you are witnessing sanctions violations or circumvention, these can be reported to your national competent authority or anonymously via the EU whistle blower tool.

2. FINANCING AND REFINANCING RESTRICTIONS

RELATED PROVISION: ARTICLE 5 OF COUNCIL REGULATION 833/2014

1. Can a bond issued by a listed entity and in possession of a non-listed entity be sold to another non-listed entity?

Last update: 20 April 2022

Assuming that the word “listed” refers here to the entities targeted by refinancing prohibitions and not to entities subject to an asset freeze, Article 5 of Council Regulation (EU) No 833/2014 clearly sets out which prohibition applies to which type of targeted entity. If the transferable securities or money market instruments were issued by a targeted entity between 1 August 2014 to 12 September 2014 with a maturity exceeding 90 days, or after 12 September 2014 with a maturity exceeding 30 days, or after 12 April 2022 irrespective of the maturity, EU persons are prohibited from directly or indirectly purchasing, selling, providing investment services for or assistance in the issuance of, or otherwise dealing with them.

2. Might payment terms for goods and services whose trade is not prohibited under Council Regulation (EU) No 833/2014 be considered as new loans or credit for the purpose of Article 5 of said Regulation?

Last update: 20 April 2022

No, payment terms or delayed payment for goods or services are not in general considered as loans or credit for the purpose of Article 5 of Council Regulation (EU) No 833/2014. However, the provision of payment terms/delayed payment may not be used to circumvent the prohibition to provide new loans or credit under Article 5. Payment terms which are not in line with normal business practice or which have been substantially extended may constitute circumvention.

3. Are branches or Russian entities subject to (re)financing restrictions under Articles 5(1) to 5(4) of Council Regulation (EU) No 833/2014 subject to these restrictions themselves when they are located in the EU?

Last update: 20 April 2022

The branch of a Russian entity is subject to the (re)financing restrictions under Articles 5(1) to 5(4) if it acts at the direction or on behalf of its parent company, which is itself targeted by these Articles.

Last update: 20 April 2022

The entities listed under Article 5 of Council Regulation (EU) No 833/2014 can be found in the corresponding Annexes. On the determination of whether an entity is acting on behalf of or at the direction of one of these entities, we recommend consulting the Commission opinion of 17 October 2019 on this matter.

3. INVESTMENT FUNDS

RELATED PROVISION: ARTICLE 5; ARTILE 5a; ARTICLE 5f OF COUNCIL REGULATION 833/2014

1. Where a management company as defined in point (b) of Article 2(1) of Directive 2009/65/EC or an alternative investment fund manager in the meaning of point (b) of Article 4(1) of Directive 2011/61/EU, carries out business on behalf of its managed fund(s), are the restrictive measures set out in Council Regulation (EU) 833/2014 applicable to those funds or the unit-/shareholders of those funds? Specifically, where the management company or the alternative investment fund manager purchases, sells, provides investment services for or assistance in the issuance of, or otherwise deals with transferable securities and money-market instruments, on behalf of its managed funds, or sells transferable securities denominated in the currency of a Member State issued after 12 April 2022, or denominated in any other currency issued after 6 August 2023 or units in collective investment undertakings providing exposure to such securities, do the prohibitions in Articles 5(1)–5(4), Article 5a(1) and Article 5f(1) of Council Regulation (EU) 833/2014 apply to the funds or the unit-/shareholders of those funds?

Last update: 30 June 2023

The prohibitions laid down in Articles 5(1)-5(4) and Article 5a(1) apply to any entity or person that are transactional parties to, or arrange or otherwise facilitate, the sale, purchase or issuance of securities of entities sanctioned under these Articles.

The prohibition in Article 5f(1) applies to any entity or person selling transferable securities, or units in collective investment undertakings providing exposure to such securities, to Russian nationals or natural persons residing in Russia, or legal persons, entities or bodies established in Russia, save for nationals of a Member State or natural persons having a temporary or permanent residence permit in a Member State.

Collective investment undertakings managed by management companies as defined in point (b) of Article 2(1) of Directive 2009/65/EC or alternative investment fund managers in the meaning of point (b) of Article 4(1) of Directive 2011/61/EU are covered by the prohibition laid down in Article 5f of Council Regulation (EU) 833/2014 if their activities fall within the scope of this prohibition.

Management companies, alternative investment fund managers or investment firms are covered by the prohibitions in Articles 5(1)-5(4) and Article 5a(1) if their activities fall within the scope of these prohibitions.

2. If the manager of an investment fund has an indirect investment which falls in scope of the sanctions, to what extent may this manager purchase and/or sell in this investment fund?

Last update: 14 April 2022

The prohibition to "directly or indirectly purchase, sell, provide investment services for or assistance in the issuance of, or otherwise deal with transferable securities or money market instruments" of entities sanctioned in Articles 5(1) to 5(4) of Council Regulation (EU) 833/2014 applies to all market participants, including asset managers, fund administrators, depositaries, etc. The failure or insufficient measures to ensure compliance with the prohibition of indirect investment would amount to breaching this prohibition.

3. Are the prohibitions to provide brokering services or financing for the provision of brokering services, e.g. in Articles 2(2), 2a(2), 3b(2) and 3c(4) of Council Regulation (EU) No 833/2014, and the prohibitions to provide brokering services in point (a) of Article 4(2) and Article 5(1) applicable to management companies, alternative investment fund managers or investment firms?

Last update: 14 April 2022

Pursuant to its Article 13, Council Regulation (EU) 833/2014 applies (i) within the territory of the Union; (ii) to any legal person, entity or body, inside or outside the territory of the Union, which is incorporated or constituted under the law of a Member State; (iii) to any legal person, entity or body in respect of any business done in whole or in part within the Union. For example, if the manager of an alternative investment fund is an EU citizen working in a fund incorporated under the law of a third country, (s)he is subject to the restrictive measures enshrined in the Regulation.

4. Do the prohibitions in paragraphs Articles 5(1)–5(4) and Article 5a(1) of Council Regulation (EU) No 833/2014, cover transferable securities and money-market instruments traded on the secondary market? Under what conditions? Could, for instance, a management company or an alternative investment manager on behalf of a fund it manages, purchase or sell such instruments on the secondary market, or provide investment services for such instruments, if the transaction or investment service neither actually nor potentially results in additional capital being made available to a targeted entity?

Last update: 14 April 2022

The respective prohibitions apply irrespective of whether the instruments are traded on secondary or primary markets. Secondary trading between EU counterparties of instruments of entities sanctioned under Articles 5(1)–5(4) and Article 5a(1) of Council Regulation (EU) No 833/2014 shall be suspended. The only conditions to take into account concern the date of issuance of the securities. These conditions are clearly set out in Articles 5(1)–5(4) and Article 5a(1).

5. Are EU regulated UCITS (Undertakings for Collective Investment in Transferable Securities) issued by Russian companies subject to the EU Sanctions regime? If yes, should one block UCITS that were issued by targeted Russian entities?

Last update: 14 April 2022

The prohibitions laid down in Articles 5(1) to 5(4) of Council Regulation (EU) 833/2014 do not cover Undertakings for Collective Investments in Transferable Securities (UCITS) issued by entities sanctioned under these Articles.

However, Council Regulation (EU) 269/2014 provides for individual financial restrictive measures targeted at a number of natural or legal persons, entities or bodies. Specifically, Article 2(1) of Council Regulation (EU) 269/2014 provides that all funds and economic resources belonging to, owned, held or controlled by any natural or legal persons, entities or bodies, or natural or legal persons, entities or bodies associated with them, as listed in Annex I to said Regulation, shall be frozen. In addition, Article 2(2) of Council Regulation (EU) 269/2014 provides that no funds or economic resources shall be made available, directly or indirectly, to or for the benefit of natural or legal persons, entities or bodies, or natural or legal persons, entities or bodies associated with them, as listed in Annex I of said Regulation.

The relationships that natural or legal persons, entities or bodies targeted by Article 2 of Council Regulation (EU) 269/2014 may have with UCITS shall then be duly examined. Specifically, if investors in the fund or Ultimate Beneficial Owners would turn out to be persons, entities or bodies listed in Annex I, their units or shares should be frozen and shall not give rise to any remuneration towards them. Likewise, if for instance the depository, UCITS manager, portfolio manager, advisor or delegate would be a person or entity listed in Annex I of Council Regulation (EU) 269/2014, the UCITS should be blocked, as its existence would result in the provision of funds or economic resources to persons or entities listed in Annex I, for instance via management fees.

6. Article 5f of Council Regulation (EU) 833/2014 prohibits the sale of “transferable securities denominated in any official currency of a Member State issued after 12 April 2022, or denominated in any other currency issued after 6 August 2023 or units in collective investment undertakings providing exposure to such securities, to any Russian national or natural person residing in Russia or any legal person, entity or body established in Russia”. Are units in collective investment undertakings transferable securities within the meaning of this Article?

Last update: 30 June 2023

The notion of "collective investment undertakings" within the meaning of Article 5f of Council Regulation (EU) 833/2014 appear to be distinct from and not covered by the term "transferable securities" as defined in Article 1(f) of Council Regulation (EU) 833/2014.

7. Depending on their legal nature (common funds, unit trusts, investment companies), collective investment undertakings (CIU) can alternatively issue units or shares. Could you confirm that the sale of both units and shares of a CIU providing exposure to transferable securities denominated in any official currency of a Member State issued after 12 April 2022 is prohibited?

Last update: 14 April 2022

Investment-fund related Directives or Regulation usually refer to units or shares indistinctly. Directive 2009/65/EC sets out, in its Article 1(3)(b), that ‘units’ of UCITS shall also include shares of UCITS. Given the inter-changeable use of 'units' and 'shares' of CIUs, both units and shares of collective investment undertakings are within the scope of Article 5f of Council Regulation (EU) 833/2014.

8. Does Council Regulation (EU) 833/2014 prohibit the purchase of transferable securities denominated in the currency of a Member State by third-country collective investment undertakings (CIU) if their units are marketed to Russian national or entities? Are EU operators prohibited from selling transferable securities denominated in the currency of a Member State to third-country CIUs? Last update: 14 April 2022

If it can be established or if there are reasonable grounds to suspect that units of these third- country CIUs are indeed marketed to Russian national or entities, then the prohibition to sell transferable securities denominated in any official currency of a Member State can extend to these third country CIUs when the seller is an EU person or entity.

However, EU sanctions have no extraterritorial effect. Therefore, the prohibition cannot as such be applied to third-country CIUs as purchasers.

9. The prohibition in Article 5f of Council Regulation (EU) 833/2014 refers to any “legal person, entity or body established in Russia”. Does the EU branch of a legal person, entity or body established in Russia fall within the scope of the sale prohibition? What about the EU subsidiaries of a Russian entity?

Last update: 14 April 2022

The EU branch of a legal person, entity or body established in Russia falls within the scope of the prohibition.

As it is established in the EU, an EU subsidiary of an entity established in Russia does not fall in the scope of the prohibition. However, the subsidiary cannot be used to circumvent the prohibition and itself sell transferable securities denominated in any official currency of a Member State, or units in collective investment undertakings providing exposure to such securities, to its parent entity established in Russia.

10. Do units of collective investment undertakings (CIUs) denominated in a non-EU currency and providing exposures to transferable securities denominated in an official currency of a Member State fall within the scope of the prohibition in Article 5f of Council Regulation (EU) 833/2014?

Last update: 30 June 2023

If the units provide exposure to transferable securities denominated in the currency of a Member State issued after 12 April, then their sale is prohibited, irrespective of their own currency denomination. As of 6 August 2023, if the units provide exposure to transferable securities denominated in any currency, then their sale is prohibited.

4. CENTRAL BANK OF RUSSIA

RELATED PROVISION: ARTICLE 5a OF COUNCIL REGULATION 833/2014

1. Are the assets of the Central Bank of Russia frozen?

Last update: 20 April 2022

Pursuant to Article 5a(4) of Council Regulation (EU) 833/2014, all transactions with the Central Bank of Russia are prohibited to the extent that they are related to "the management of reserves as well as of assets” of the Central Bank. A similar prohibition applies to the Belarussian Central Bank.

Last update: 20 April 2022

EU sanctions do not apply extra-territorially. Therefore, Russian subsidiaries of EU parent companies are not obliged to comply with the sanctions. However, it is prohibited for EU parent companies to use their Russian subsidiaries to circumvent the obligations that apply to the EU parent.

3. Can you provide examples of which entities might be ‘acting on behalf of or at the direction of the Central Bank of Russia?

Last update: 20 April 2022

This is a case-by-case assessment. The Central Bank of Russia may try to conduct operations via a variety of legal persons, entities or bodies.

4. What criteria should be used to assess whether an entity acts on “behalf of or at the direction of the Central Bank of Russia”? To what extent do the criteria specified in the Commission Opinion of 17 October 2019 on Article 5(1) of Council Regulation (EU) No 833/2014 still apply here, given that the Central Bank of Russia isn’t a corporate entity?

Last update: 20 April 2022

This is a case-by-case assessment. Many of the examples of criteria provided in the quoted opinion remain relevant indeed: “the precise ownership/control structure ［…］; the nature and purpose of the transaction, coupled with the stated business duties of the entity that is owned or controlled; previous instances of acting on behalf or at the direction of the targeted entity; disclosure made by third parties and/or factual evidence indicating that directions were given by the targeted entity”.

Last update: 20 April 2022

Paying lawfully due taxes in Russia does not amount to enabling the Russian Central Bank to manage its reserves or assets. Article 5a does therefore not apply to the payment of taxes.

New reporting obligations introduced by Council Regulation (EU) 2023/427 of 25 February 2023 amending Council Regulation (EU) 833/2014 (‘10th Russia sanctions package’)

‘Immobilised’1 assets reporting under article 5a(4) of Regulation n°833/2014

6. A common reporting template, reporting timelines

Last update: 26 April 2023

A common template for reporting immobilised assets under article 5a(4) of Regulation n°833/2014 has been developed and is available here from the website of the European Commission, DG FISMA.

It can be used by operators that have immobilised assets to report to their NCAs and to the Commission. Operators that have not immobilised any assets are not expected to submit nil reports.

The first reporting shall be provided by relevant operators no later than two weeks after 26 April 2023 to the competent authority of the Member State where they are resident or located, and simultaneously to the Commission. It shall be updated every three months.

The reporting requirement applying as from 27 April 2023, the value date for the reported assets should be that date (27 April). It is necessary to align subsequent reporting for the three monthly updates with quarterly reporting (e.g the first quarterly update would be based on Q2 value date, i.e. 30 June 2023).

7. Where/ to whom to report on immobilised assets?

Last update: 26 April 2023

Regarding which national competent authority to report to and from an enforcement perspective, it matters that reporting lines point to the competent national authority that supervise and can enforce the reporting obligations. From an enforcement perspective, it matters that reporting lines point to the NCA that supervise and can enforce the reporting obligations. For instance, a branch of a financial institution headquartered in Member State A which is located in Member State B is supervised for its financial sanctions compliance by authorities in Member State B. It should therefore address its reports on frozen assets to the NCA in Member State B, unless it opts for group level reporting.

Reporting on group level (e.g a financial institution headquartered in Member State A reporting on group level to the NCA in Member State A for its operations in Member States A, B, C… ): reporting on group level could be possible on condition that NCAs in other Member States than the Member State where report is addressed are informed beforehand and receive a copy of the report indicating the respective national breakdown. The common template for reporting immobilised assets has been developed and is available here from the website of the European Commission, DG FISMA.

8. Should the securities issued by Russian entities and owned by EU persons be reported?

Last update: 6 July 2023

No. The reporting required under article 5a(4a) of Reg.833/2014 is on assets of the Russian Central Bank and of legal person, entity or body acting on its behalf or at its direction.

For instance, a bond issued by a Russian entity and owned by a client of a EU-based entity does not have to be reported by this entity. If such bond is frozen because its owner is designated under Regulation (EU) No 269/2014, the relevant reporting foreseen under Reg.269/2014 should apply.

9. Should operators that have not immobilised any CBR assets submit nil reports?

Last update: 6 July 2023

No. Only operators that have actually immobilised CBR assets have to report them.

10. Can the three monthly update be aligned with usual quarterly updates regarding the value date for the reported CBR assets?

Last update: 6 July 2023

Yes. In line with FAQ 6, it is advised to align the three-monthly update with standard quarterly updates. Similar to the first two week transmission period for the first report, subsequent updated reports should be transmitted within two weeks of the end of the quarter.

Last update: 31 October 2023

The payment of the so-called ‘exit tax’ is imposed by the Russian Governmental Commission which in this respect is implementing a Presidential Decree (No. 618 of 2022). This is not part of the official tax legislation of Russia. This decree establishes the payment as a precondition for allowing EU companies to divest from Russia and does not amount to enabling the Russian Central Bank to manage its reserves or assets. Therefore, Article 5a does not apply to the payment of the so-called “exit-tax”.

5. DEPOSITS

RELATED PROVISION: ARTICLE 5b; ARTICLE 5c; ARTICLE 5g OF COUNCIL REGULATION 833/2014

1. How should an authorisation in accordance with Article 5c(1)(a)-(f) of Council Regulation 833/2014 take place?

Last update: 12 October 2022

Procedures for granting derogations are established at Member State level by national administrative law. The national competent authorities (NCA) to which the applicant should lodge its request for authorisation are indicated here. Member States are then free to distribute the work internally to assess the request as they sees fit. Member States legislation and procedures must not be in contradiction with the provisions set out in EU law. According to the case law of the Court of Justice of the European Union, NCAs must exercise their powers in a manner that upholds the rights provided for in Article 47 of the Charter of Fundamental Rights of the EU.

2. Are there any formal requirements as to how the authorisation should be designed?

Last update: 12 October 2022

The process and design of the authorisation is to be decided upon by the national competent authority in line with national practice. For instance, it is up to the national competent authority to decide whether to provide a form for the application or not.

3. Which information and documentation should be obtained by the national competent authority for assessments made under Article 5c(1) of Council Regulation 833/2014? Whom should the national competent authority obtain the information and documentation from: natural or legal persons?

Last update: 12 October 2022

It is for the national competent authority to decide on what evidence is required. The national competent authority will need to ascertain that the deposits are indeed required for the purposes providing the grounds for an exemption under Article 5c. Which documents are needed for this needs to be decided on a case by case basis. In particular, the national competent authority will assess whether the information provided by credit institution applying for the authorisation is sufficient, or whether additional documentation from the natural and legal persons is needed. In particular, the applicant should provide solid evidence to demonstrate that the deposit will be used for the purposes required under the derogation (e.g. basic needs in case of Article 5c(1)(a)).

The national competent authority should assess if the deposit is proportionate with those purposes and may impose ex post reporting obligations.

4. What may be considered “necessary to satisfy the basic needs” in accordance with Article 5c(1)(a), and “necessary for official purposes” in accordance with Article 5c(1)(e)? Which elements should be included in the assessment?

Last update: 12 October 2022

For basic needs, please refer to page 27 of the Best Practices for the implementation of Sanctions (payments for foodstuffs, rent or mortgage, medicines and medical treatment, taxes, insurance premiums, and public utility charges). For official purposes, the national competent authority should assess on a case-by-case basis if the deposit falls within the scope of the derogation. Regarding a diplomatic mission or consular post or international organisation, the derogation under Article 5c(1)(e) shall be interpreted as covering all deposits needed to finance the office purposes of such a mission. In general, money transfers by the Russian State to its embassy in one Member State would qualify for this derogation. Nevertheless, it remains up to the national competent authority in to ascertain in the authorisation application process the necessary nature for official purposes of a transfer to the embassy. The national competent authority should assess if the entity qualifies as ‘international’ organisation; that would be the case for instance when three or more countries2 recognised by all EU Member States are members, shareholders or are part of the governance body of that organisation or the parent organisation. The national competent authority should not base its assessment on the ‘size’ of the organization, its role, tasks or activities. See also question 3 regarding the fact that the national competent authority may assess if the deposit is proportionate to the intended purposes and impose ex post reporting obligations.

5. Does the reporting obligation under Article 5g(1)(b) of Council Regulation 833/2014 only take effect on 27 May 2022 or is it already in effect?

Last update: 3 May 2022

The information to be reported under Article 5g(1)(b) shall be provided as soon as possible. This means that credit institutions should take proper action to swiftly collect the information. The deadline of 27 May 2022 envisaged in Article 5g(1)(a) provides, by analogy, a reasonable timeframe for the transmission of the information to be provided under 5g(1)(b). Where credit institutions are not able to provide this information by the set deadline because the information is still being collected, they shall inform the respective competent authorities of the delay and its reasons, and agree on a reasonable deadline with the competent authorities.

6. Art 5g of Council Regulation 833/2014refers to credit institutions. Is the reporting obligation also applicable to other institutions, e.g., payment institutions, financial institutions and/or electronic money institutes?

Last update: 3 May 2022

Article 5g imposes reporting obligations on credit institutions as defined in Article 1(h) and which hold deposits as defined in Article 1(k). In case of doubt, the institution should seek information from its NCA for an assessment on a case-by-case basis. In this respect, it must be recalled that it is prohibited to participate in activities that would circumvent the restrictions in Council Regulation 833/2014.

7. For the purpose of complying with the obligation under Article 5g(1)(b) of Council Regulation 833/2014, how can a credit institution verify whether a deposit holder is a Russian national or natural person residing in Russia who has acquired the citizenship of a Member State or residence rights in a Member State through an investor citizenship scheme or an investor residence scheme?

Last update: 3 May 2022

Investor citizenship schemes and investor residence schemes are defined in Articles 1(l) and 1(m) of Council Regulation 833/2014. A credit institution should first assess the documents that have been submitted to it by the deposit holder. Should it need further assistance, the credit institution can contact its national competent authority.

8. Are EU parent companies obliged to report deposits from Russian persons or entities for the entire group on a consolidated basis (including deposits at their non- EU subsidiaries)?

Last update: 3 May 2022

EU sanctions do not apply extra-territorially. Third-country subsidiaries of EU parent companies are incorporated under third-country law, not under the law of a Member State. They are therefore not expected to comply with Article 5g of Council Regulation 833/2014.

9. Should the prohibition in Article 5b of Council Regulation 833/2014 also be complied with by branches of EU banks outside the EU?

Last update: 3 May 2022

EU sanctions must be complied with by all EU persons – both natural and legal – and therefore by all EU incorporated companies. Branches of EU companies outside the EU remain EU persons, and as such are bound by Council Regulation 833/2014, including Article 5b.

10. Should the prohibition to accept deposits exceeding a total of EUR 100 000 from Russian nationals in Article 5b of Council Regulation 833/2014 apply to deposits made by Russian nationals residing in a third country (e.g. the US)?

Last update: 12 October 2022

The prohibition in Article 5b applies to deposits made by Russian nationals wherever they reside, unless they have a temporary or permanent residence permit in a Member State, a country member of the European Economic Area or Switzerland, or the nationality of one of these States.

11. Does the prohibition in Article 5b apply for all types of account (e.g. savings and current accounts)?

Last update: 3 May 2022

The prohibition applies to all deposits as defined in Article 1(k), irrespective of the type of account they are being held in. The limit of EUR 100 000 should be understood as the sum of all accounts being held at a credit institution.

12. What does the term "Russian national" mean in the context of Article 5b of Council Regulation (EU) No 833/2014 concerning restrictive measures in view of Russia’s actions destabilising the situation in Ukraine? Does it include all holders of the Russian nationality or Russian residents only? What about holders of dual EU- Russia citizenship?

Last update: 12 October 2022

Article 5(b)(1) of Council Regulation (EU) No 833/2014 provides that: “It shall be prohibited to accept any deposits from Russian nationals or natural persons residing in Russia, or legal persons, entities or bodies established in Russia or a legal person, entity or body established outside the Union and whose proprietary rights are directly or indirectly owned for more than 50 % by Russian nationals or natural persons residing in Russia,, if the total value of deposits of the natural or legal person, entity or body per credit institution exceeds 100 000 EUR.”

The prohibition applies to deposits from Russian nationals or natural persons residing in Russia.

However, pursuant to the exception in Article 5b(3), the prohibition does not apply to nationals of a Member State, a country Member of the European Economic Area or Switzerland, or natural persons having a temporary or permanent residence permit in one of these countries.

This means that the accounts of Russian nationals who also have the nationality of one the above countries can be credited above EUR 100 000.

13. Should the broad term “entities” in Article 5b(1) be interpreted as including subsidiaries of European financial institutions in Russia and could it therefore stop them from conducting ordinary business operations, including moving money to nostro accounts or conducting business with other EU banks with which they hold accounts?

Last update: 12 October 2022

The term ‘entities’ in Article 5b of Council Regulation (EU) No 833/2014 comprises all entities established in Russia, including subsidiaries of EU operators which are incorporated in Russia.

Pursuant to Article 5b(1), deposits of a subsidiary in Russia cannot in principle be accepted. However, pursuant to Article 5c(1)(f), competent authorities can authorise deposits that are necessary for non-prohibited cross-border trade in goods and services. Moreover, Article 5c and 5d enable the competent authorities of the Member States to authorise the acceptance of such deposits in other limited and well-defined circumstances.

14. Does the prohibition for EU credit institutions to accept deposits from Russian legal and natural persons, or from a legal person, entity or body established outside the Union and whose proprietary rights are directly or indirectly owned for more than 50 % by Russian nationals or natural persons residing in Russia) above EUR 100 000 refer only to new or also to existing deposits?

Last update: 12 October 2022

The prohibition is to accept any new deposits if the total value of deposits of the natural or legal person, entity or body per credit institutions exceeds EUR 100 000. Implicitly this means that those deposits that are already in EU banks can remain there but their value cannot be further increased above EUR 100 000. The reporting obligation applies to all deposits that exceed the specified value. In practice, this means that:

1. For new deposits:

EU operators must not accept (new) deposits if the total value of deposits of the natural person or legal person, entity or body per credit institution exceeds EUR 100 000.

2. For existing deposits:

• If the natural person or legal person, entity or body had more than EUR 100 000 in deposit on the day of entry into force of the Regulation (26 February 2022; or 21 July 2022 for a legal person, entity or body established outside the Union and whose proprietary rights are directly or indirectly owned for more than 50 % by Russian nationals or natural persons residing in Russia), the relevant deposit is grandfathered. This means that the natural person or legal person, entity or body is entitled to keep the money and do whatever he/she/it wants (e.g. withdraw, leave in the account), but he/she/it cannot increase the balance in a way that would exceed EUR 100 000 (unless the competent authority of a Member State grants an authorisation under Article 5c or 5d)

• If the natural person or legal person, entity or body had less than EUR 100 000, it is entitled to increase the account balance up to EUR 100 000 (but not more) per credit institution.

15. Russian nationals and persons residing in Russia, or legal persons, entities or bodies established in Russia or a legal person, entity or body established outside the Union and whose proprietary rights are directly or indirectly owned for more than 50 % by Russian nationals or natural persons residing in Russia, could have various accounts outside of Russia. If the deposit being received at our bank is generated outside of Russia, does this transaction fall under the EUR 100 000 limitation?

Last update: 12 October 2022

Yes, it does. If the deposit belongs to a Russian national or natural person residing in Russia, or legal persons, entities or bodies established in Russia or a legal person, entity or body established outside the Union and whose proprietary rights are directly or indirectly owned for more than 50% by Russian nationals or natural persons residing in Russia, the transaction would fall under the EUR 100 000 limitation. Banks that have to comply with Council Regulation 833/2014 need to monitor incoming deposits from Russian nationals and natural persons residing in Russia, or legal persons, entities or bodies established in Russia or a legal person, entity or body established outside the Union and whose proprietary rights are directly or indirectly owned for more than 50% by Russian nationals or natural persons residing in Russia, to ensure that the EUR 100 000 limit is not exceeded. Banks also have a reporting obligation under Article 5g(1)(a) regarding the accounts of Russian nationals or natural persons residing in Russia, or legal persons, entities or bodies established in Russia that they operate and whose balance exceeds EUR 100 000.

16. With regard to legal persons, is there a prohibition on deposits per legal entity or should the group structure be considered?

Last update: 12 October 2022

The prohibition in Art. 5b applies per legal entity.

17. Are limits targeting new deposits received from 26 February 2022 (or from 21 July 2022 in case of a legal person, entity or body established outside the Union and whose proprietary rights are directly or indirectly owned for more than 50 % by Russian nationals or natural persons residing in Russia)? Does any account balance held for Russian nationals and residents fall into the targeted categories? If yes, what action would be required on balances held at the bank that are over EUR 100 000?

Last update: 12 October 2022

The deposit shall not be accepted if it is from a Russian national, a natural person residing in Russia, or legal persons, entities or bodies established in Russia or a legal person, entity or body established outside the Union and whose proprietary rights are directly or indirectly owned for more than 50 % by Russian nationals or natural persons residing in Russia.

As regards existing deposits of persons whose account cannot be credited in excess of EUR 100 000, if the account holder had more than EUR 100 000 in deposit on the day of entry into force of the provision (26 February 2022 or 21 July 2022), the relevant deposit is grandfathered. This means that the account holder is entitled to keep the money and do whatever he/she/it wants (e.g. withdraw, leave in the account), but they cannot increase the balance so it exceeds EUR 100 000 (unless the competent authority of a Member State grants an authorisation under Article 5c or 5d).

As regards new deposits, EU operators must not accept them if the total value of deposits of the natural person or legal person, entity or body per credit institution exceeds EUR 100 000.

18. Financial instruments, as defined in Section C of Annex I to Directive 2014/65/EU, are not qualified as deposits. Should other financial assets than financial securities be qualified as deposits? For example, do they include express trusts and similar legal entities or arrangements; a legal entity or special structure whose object is to manage wealth of its legal representative or Ultimate Beneficial Owner?

Last update: 3 May 2022

Article 1(k) of Council Regulation (EU) No 833/2014 (the Sanctions Regulation) provides the following definition of deposit:

(k) “deposit” means a credit balance which results from funds left in an account or from temporary situations deriving from normal banking transactions and which a credit institution is required to repay under the legal and contractual conditions applicable, including a fixed term deposit and a savings deposit, but excluding a credit balance where:

ts existence can only be proven by a financial instrument as defined in Article 4(1)(15) of Directive 2014/65/EU of the European Parliament and of the Council, unless it is a savings product which is evidenced by a certificate of deposit made out to a named person and which exists in a Member State on 2 July 2014
its principal is not repayable at par
its principal is only repayable at par under a particular guarantee or agreement provided by the credit institution or a third party

It would be up to the credit institution to assess whether the individual product/circumstance therefore falls within this definition of ‘deposit’.

19. Is it correct that “deposit” does not include any credit/debit entry or cash flow resulting from transactions or corporate events, whether linked or not with financial instruments, as defined in Annex I to Directive 2014/65/EU?

Last update: 12 October 2022

The prohibition provides that: “It shall be prohibited to accept any deposits from Russian nationals or natural persons residing in Russia, or legal persons, entities or bodies established in Russia or a legal person, entity or body established outside the Union and whose proprietary rights are directly or indirectly owned for more than 50 % by Russian nationals or natural persons residing in Russia, if the total value of deposits of the natural or legal person, entity or body per credit institution exceeds EUR 100 000.” Therefore, if the transaction or corporate event results in a positive cash flow, and thereby becomes a deposit as defined under Article 1(k), into an account which cannot be credited above EUR 100 000, the incoming cash flow should be rejected.

Note: payments made by CSD participants for the settlement of transactions that are not affected by the sanctions set out in Council Regulation (EU) No 833/2014 may benefit from a derogation if authorised by the competent authority under Article 5c(1)(f) where the acceptance of such a deposit is considered to be “necessary for non-prohibited cross-border trade in goods and services between the Union and Russia.” Then, if the counterparty to the transaction who receives the cash payment is a Russian person, the provisions in Article 5b applies to any further transfer of the cash out of the account where it was credited in the context of the settlement of the transaction.

20. What should a bank do if it has already received the deposit?

Last update: 12 October 2022

The bank should not accept the deposit. If the deposit was received before the sanction entered into force on 26 February 2022, the deposit can however be kept in the account. Violations of the prohibition will be treated according to national law, and that NCAs can advise on that.

21. Is it correct that the concept of “total value” must be calculated taking into account customers' positions with the bank in current accounts and deposits at the point in time when the restrictions entered into force?

Last update: 3 May 2022

This is correct.

22. Does the concept of “total value” have to be calculated taking into account customers' accounts in currencies different from the euro?

Last update: 3 May 2022

Yes, the total value should take into account all deposits per credit institution, irrespective of the currency in which they are denominated.

23. Does the meaning of “deposit” also include (i) accounts opened to hold collateral for financing arrangements (ii) shared accounts, for example accounts of spouses?

Last update: 3 May 2022

i. Collateral would fall within the exemption of the definition of deposit as set out in Article 1(k)(iii). However, if accounts used to hold collateral have excess collateral, EU operators should ensure, via their due diligence, that this excess collateral is not held in the account with the purpose of circumventing the prohibition in Article 5b.

ii. In case the person with whom the account is shared falls within the scope of the prohibition (i.e. being a Russian national or a natural person residing in Russia, or a legal person, entity or body established in Russia), then these deposits fall within the scope of the prohibition. As the prohibition applies per natural or legal person, entity or body, the total value of the deposits can be split over two persons to calculate whether the individual value of the deposits exceeds EUR 100 000. In this case, for an account shared by two persons both subject to the prohibition, the maximum value of deposits which can be held per credit institution would be EUR 200 000.

The prohibition does not apply to EU nationals, nationals of a European Economic Area country or of Switzerland, or natural persons having a temporary or permanent residence permit in a Member State, in a country member of the European Economic Area or in Switzerland. (Article 5b(3)). In case any of those persons jointly holds the account, the prohibition does not apply. However, the joint account cannot be used to circumvent the rules (Article 12).

24. Does the meaning of “deposit” also include correspondent accounts for Russian banks, especially of Russian bank subsidiaries of banks headquartered in the EU?

Last update: 12 October 2022

The prohibition applies to deposits from “legal persons, entities or bodies established in Russia”. Russian banks, including subsidiaries of banks headquartered in the EU, would fall under that definition and would therefore be subject to the prohibition. However, the deposit may benefit from a derogation if authorised by the competent authority under Article 5c(1)(f) where the acceptance of such a deposit is considered to be necessary for non-prohibited cross-border trade in goods and services between the European Union and Russia. Whether the deposit issued from the correspondent account qualifies for this derogation would need to be assessed on a case-by- case basis.

25. Is it correct that any portion of a credit entry in excess to the EUR 100 000 aggregated limit should not be blocked but returned to the remitting bank or wired outward according to our customer instructions?

Last update: 3 May 2022

Council Regulation (EU) No 833/2014 prohibits the acceptance of deposits, but does not prescribe how credit institutions should do this. This will be left to the individual institution to decide, possibly in dialogue with the relevant customer.

26. Should interest, dividend payments or coupon payments be booked if the EUR 100 000 limit is already exceeded?

Last update: 3 May 2022

The payment of interest or dividend should in this case not be accepted. Where and how the interest or dividend payment should be made to would need to be decided by the parties involved.

27. Do legal persons, registered or established outside Russia, whose ultimate beneficial owner meets the criteria laid down in Article 5b(1), but not the exception criteria in Article 5b(2) or 5b(3), fall within the scope of the Regulation?

Last update: 12 October 2022

The prohibition in Article 5b of Regulation 833/2014 initially only applied to Russian nationals or natural person residing in Russia or any legal person, entity or body established in Russia. Strictly speaking, it did not apply to entities owned by Russian/ nationals or natural persons residing in Russia when the entities are registered in a country other than Russia.

However, with the amendment of Council Regulation 833/2014, which entered into force on 21 July 2022, from that date Article 5b also applies to a legal person, entity or body established outside the Union and whose proprietary rights are directly or indirectly owned for more than 50% by Russian nationals or natural persons residing in Russia.

In addition, the provision should be read in conjunction with Article 12 of Council Regulation 833/2014 which prohibits to participate knowingly and intentionally in activities the object or effect of which is to circumvent prohibitions in the Regulation. EU operators should therefore exert enhanced due diligence when the deposit is made to an account of an entity owned by a Russian/Belarussian national or a natural person residing in Russia.

28. Does Article 5b(3) exclude dual nationals (having Russian nationality and the nationality of an EU Member State) as well as persons of Russian nationality who have a temporary or permanent residence permit in another Member State?

Last update: 3 May 2022

Yes, it does.

29. How is the term “temporary or permanent residence permit in a Member State, in a country member of the European Economic Area or in Switzerland” in Article 5b(3) of Council Regulation (EU) 833/2014 defined?

Last update: 3 May 2022

Each State defines its own national rules thereon. However, it is worth recalling that pursuant to Article 12, it is prohibited to participate, knowingly and intentionally, in activities the object or effect of which is to circumvent prohibitions in the Regulation.

30. Does the term “Russian nationals” in Article 5b of Council Regulation (EU) No 833/2014 also include refugees from Russia who might not be able to easily discard their nationality and who might have found refuge in a non-EU country (such as Switzerland or Norway)?

Last update: 3 May 2022

Dual nationals whose one nationality would be that of a Member State or a country that is a member of the European Economic Area or Switzerland, or otherwise natural persons having a temporary or permanent residence permit in a Member State or a country that is a member of the European Economic Area or Switzerland, fall under the exception laid down in Article 5b(3). If the dual nationality falls outside the scope of this exception (i.e. a dual national having both a Russian nationality and a nationality of a country other than that of a member of the European Union, the European Economic Area or Switzerland), the prohibition in Article 5b would apply.

31. Does the restriction apply per banking licence or to a combination of EU banks?

Last update: 3 May 2022

The restriction applies per banking license.

32. What are the criteria for joint account holders to deposit euros into bank accounts?

Last update: 12 October 2022

In cases where the two persons who share the account both fall within the scope of the prohibition to have deposits in excess of EUR 100 000, then the joint account falls within the scope of the prohibition. As the prohibition applies per natural or legal person, entity or body, the total value of the deposits can be split over the two persons. For an account shared by two in- scope persons, the maximum value of deposits allowed to be held per credit institution would therefore be EUR 200 000.

In cases where one of the joint-account holders benefit from the exemption laid down in Article 5b(3), the prohibition to have deposits in excess of EUR 100 000 does not apply. However, pursuant to Article 12, the joint account shall not be used to circumvent the rules.

33. Can currency exchange transactions be processed on behalf of a Russian national without account opening?

Last update: 3 May 2022

This would be permissible as long as it does not result in deposits being accepted if the total value of deposits of the natural person or legal person, entity or body per credit institution exceeds EUR 100 000.

34. How are basic accounts requested by refugees treated?

Last update: 3 May 2022

Basic accounts are treated no differently from other accounts. The prohibition as set out in Article 5b, including the derogations for example set out in Article 5c(1)(a) for the basic needs of those in scope of the prohibition, would apply.

35. How should the bank proceed if a deposit of a Russian national with temporary or permanent residence in a Member State exceeds EUR 100 000 and his/her residence permit later on expires or get revoked? Is there an obligation to reduce or block the amount of deposits exceeding EUR 100 000?

Last update: 3 May 2022

When the residence permit is revoked, the Russian national no longer benefits from the exception to the prohibition in Article 5b(3). As the prohibition would start applying from that point in time, there would be no obligation to retrospectively reduce or block deposits exceeding EUR 100 000. From the point of revocation of the residence permit, it shall however be prohibited to accept any new deposit if the account balance is in excess of EUR 100 000.

36. How should a Russian person who acts on behalf of an EU account holder and also carries out transactions including cash deposits on the account be treated regarding the prohibition in Article 5b?

Last update: 12 October 2022

The prohibition in Article 5b applies to the deposits from Russian nationals or natural persons residing in Russia, or legal persons, entities or bodies established in Russia or a legal person, entity or body established outside the Union and whose proprietary rights are directly or indirectly owned for more than 50 % by Russian nationals or natural persons residing in Russia. Managing an account is not per se prohibited under the Regulation, however making deposits into it may fall under the prohibition if the other conditions are met. Note also that, EU operators should ensure, via their due diligence, and pursuant to Article 12 of Council Regulation 833/2014, that prohibitions are not circumvented.

37. If a Russian national sells a property, in order to receive the purchase price, can he or she refer to a bank account in the EU or in a third country?

Last update: 17 May 2022

Yes. The restriction in Article 5b(1) of Council Regulation (EU) No 833/2014 concerns deposits from Russian nationals or natural persons residing in Russia or legal persons, entities and bodies established in Russia. It follows that EU operators are not prohibited from making payments into the accounts held by these persons in the EU or in third countries.

If the buyer fit one of the criteria in Article 5b(1), EU credit institutions would in principle not be able to receive the purchase price if the amount threshold was reached. However, according to Article 5b(4), the restriction does not apply to deposits which are necessary for non-prohibited cross-border trade in goods and services between the Union and Russia. It should be noted that it is prohibited for EU operators to take part in any activities seeking to circumvent EU restrictive measures, for instance by acting as a substitute for a person referred to in Article 5b(1).

38. If a Russian national acquires a property in the EU, can he or she transfer the purchase price from a bank account in the EU or in a third country?

Last update: 17 May 2022

The restrictions in Article 5b(1) of Council Regulation (EU) No 833/2014 concern the acceptance of deposits, not the use of them. A Russian national holding deposits in a bank account in the EU is therefore entitled to keep the money and do whatever The restriction in Article 5b(1) of Council Regulation (EU) No 833/2014 concerns any deposits from Russian nationals or natural persons residing in Russia or legal persons, entities and bodies established in Russia. However, according to Article 5b(4), this does not apply to deposits which are necessary for non-prohibited cross-border trade in goods and services between the Union and Russia. It should be noted that it is prohibited for EU operators to take part in any activities seeking to circumvent EU restrictive measures, for instance by acting as a substitute for a person referred to in Article 5b(1).

39. According to Article 5g imposing reporting obligations, could you please clarify to which Member State credit institutions shall report?

Last update: 23 May 2022

The reporting instructions from the EBA template stipulate that: “Credit institutions shall provide to the national competent authority of the Member State where they are located or to the Commission information regarding deposits as specified in Article 5g(1) of RSR and Article 1z of BSR. […] Re underlying data shall be reported by credit institutions on an individual basis, including data for their branches in the EU or third countries (data for branches to be included in the institution’s report).”

Examples:

- Parent credit institution in Member State X: Parent credit institution reports its deposits to the NCA for sanctions in Member State X;

- Branch in Member State Y of the parent credit institution in Member State X: Parent credit institution in Member State X reports deposits of its branch in Member State Y to the NCA for sanctions in Member State X;

- Subsidiary in Member State Y of the parent credit institution in Member State X: Subsidiary reports its deposits to NCA in Member State Y;

- Branch in Russia of its subsidiary in Member State Y of the parent credit institution in Member State X: Subsidiary reports deposit of the Russia branch to NCA in Member State Y.

40. Can a Russian national, a natural person residing in Russia or a legal person established in Russia re-pay a loan obtained from an EU credit institution?

Last update: 12 October 2022

In principle, it is possible for a Russian national, a resident or a legal persons established in Russia to re-pay a loan obtained from an EU credit institution, provided that such re-payment does not fall within the scope of the prohibition laid down in Article 5b(1) of Council Regulation (EU) 833/2014 (i.e. cumulatively, the total value of deposit of the natural or legal person, entity or body per credit institution does not exceed EUR 100 000).

In that case, subject to a case-by-case assessment, the loan re-payment could nevertheless benefit from the exemption laid down in Article 5c(1)(f) regarding deposits necessary for non-prohibited cross-border trade in goods and services between the Union and Russia.

Nonetheless, EU credit institutions should recall that engaging in any type of activity aimed at circumventing sanctions is prohibited under Article 12 of that Regulation.

41. Can national competent authorities grant bundled authorisations for ‘non- prohibited cross-border trade in goods and services between the Union and Russia under Article 5c, paragraph 1, point (f)?

Last update: 12 October 2022

Yes. National competent authority could grant bundled authorisations for similar operations and transactions. By way of example, a national competent authority could grant an individual authorisation to a specific bank for a number of similar or identical operations to be carried out during a specific timeframe (e.g. weekly). That authorisation could be coupled with reporting obligations at the end of said period to ensure that the authorisation has been used properly.

42. Can a company established in a third country that is majority owned for more than 50% by Russian nationals or natural persons residing in Russia benefit from the derogation under Article 5c, paragraph 1, letter f) (non-prohibited cross-border trade), even if trade is between the EU and the third country where that company is established?

Last update: 12 October 2022

Yes. Article 5b of Council Regulation (EU) No 833/2014, as amended by Council Regulation (EU) 2022/1269, entails the prohibition to accept any deposits from Russian nationals or natural persons residing in Russia, legal persons, entities or bodies established in Russia or a legal person, entity or body established outside the Union and whose proprietary rights are directly or indirectly owned for more than 50% by Russian nationals or natural persons residing in Russia, if the total value of deposits of that natural or legal person, entity or body per credit institution exceeds EUR 100 000. Therefore, such prohibition also extends to non-EU companies that are majority owned by Russian for more than 50 % by Russian nationals or natural persons residing in Russia.

According to Article 5c, paragraph 1, letter (f), national competent authorities may authorise the acceptance of a deposit after having deemed that it is necessary for non-prohibited cross-border trade in goods and services between the Union and Russia. Companies established in a third country that are majority owned for more than 50 % by Russian nationals or natural persons residing in Russia may also benefit from such a derogation, as far as they are subject to EU sanctions and, in such a case, like EU operators, under the specific condition that such trade involves Russia. It is for the company or companies required to comply with EU sanctions to provide sufficient evidence for that purpose to the NCA.

43. Article 5b(1) now also applies to a legal person, entity or body established outside the Union and whose proprietary rights are directly or indirectly owned for more than 50 % by Russian nationals or natural persons residing in Russia. Is this also the case if the Russian national or natural person residing in Russia directly or indirectly owning the proprietary rights for more than 50% benefits from the exemption in Article 5b(3)?

Last update: 12 October 2022

If the Russian national or natural person residing in Russia also has a citizenship or residence rights of an EU/EEA member state or Switzerland, the legal person, entity or body majority, owned by this person, that is established outside the Union can benefit from that exemption, with the exception of those established in Russia. In this case, the fact that the owner is a Russian national or natural person residing in Russia that also has citizenship or residence rights of an EU/EEA member state or Switzerland does not render the legal person, entity or body eligible for the exemption.

44. Can profits generated from collateral be considered as excess collateral for these purposes and exempt from the definition of “deposit” set out in Article 1(k)(iii) and therefore can these profits remain/be deposited in the account?

Last update: 12 October 2022

If the profits generated from the collateral are held in the account with the intention of continuing to use them as collateral, they could fall within the exemption of the definition of deposits. If the intention is to accumulate them as regular deposits and not use them as collateral in the future, this should qualify as a regular deposit. So the holder of the collateral and the credit institution facilitating the account in which the collateral is held, should consider the intended use of the profits generated.

45. Can profits generated from collateral be remitted to credit institutions outside of the European Union?

Last update: 12 October 2022

In principle, there is no restriction on crediting profits to credit institutions outside the European Union. However, a case by case assessment is necessary to verify if the action qualifies as a scheme to circumvent sanctions. Circumvention can occur for instance if the operation is set up to carry out an operation that, apparently legitimate, it has the sole purpose of neutralizing the effect of sanctions.

6. CRYPTO-ASSETS

RELATED PROVISION: ARTICLE 5B OF COUNCIL REGULATION 833/2014; COUNCIL REGULATION 269/2014

1. Are crypto-assets and in particular cryptocurrencies covered by these sanctions?

Last update: 21 March 2023

In Council Regulation (EU) No 269/2014, the non-exhaustive definition of ‘funds’ covers crypto-assets, including cryptocurrencies, and the definition of ‘economic resources’ may also extend to certain crypto-assets. As such, crypto-assets are covered by the relevant provisions on the asset freeze and prohibition to make funds or economic resources available to listed persons. For its part, Council Regulation (EU) No 833/2014 clarifies that ‘transferable securities’ include crypto-assets, but it adds ‘with the exception of instruments of payment’. To summarise, all transactions prohibited in the Regulations are also prohibited if carried out in crypto-assets, and all transactions allowed in the Regulations remain allowed if carried out in crypto-assets. In addition, crypto-assets should not be used to circumvent any EU sanctions.

2. Article 5b(2) of Council Regulation (EU) No 833/2014 states that “It shall be prohibited to provide crypto-asset wallet, account or custody services to Russian nationals or natural persons residing in Russia, or legal persons, entities or bodies established in Russia”.” Does this mean that European operators are expected to close the crypto accounts of their Russian customers and return their digital assets, or the freezing of these assets?

Last update: 21 March 2023

The prohibition means that no new services and/or accounts are allowed and existing services and.or accounts must be closed. In the latter case assets on the accounts and/or in the services should be returned to the Russian customer, or be converted into fiat currency or another asset category that is not subject to sanctions.

The provisions should be read in conjunction with the limit on deposits laid on in Article 5b of Council Regulation (EU) No 833/2014. To this extent, the converting of crypto-assets in fiat deposits would permissible up to the amount allowed for deposits.

No freezing of assets is foreseen under this article.

7. CENTRAL SECURITIES DEPOSITORIES

RELATED PROVISION: ARTICLE 5e, ARTICLE 5f OF COUNCIL REGULATION 833/2014

1. A central securities depository (CSD) is contacted after 12 April 2022 by the issuer of a new security. That issuer submits a list of investors. In the process of verification of the issuance, the CSD determines that one or more of the investors is a person to whom the CSD is not allowed to provide services under the prohibition in Article 5e of Council Regulation (EU) no. 833/2014. In order to successfully register the entire issuance in the depository, the CSD would also have to enter all the securities, including the securities purchased by a person to whom it is are not allowed to provide the service. How should the CSD handle the situation in order to comply with Article 5e of Regulation (EU) no. 833/2014?

Last update: 26 April 2022

The CSD should coordinate with the issuer in order to ensure that it will not register the securities purchased by a person to whom it is not allowed to provide services.

2. Is this correct that the prohibition in Article 5e of Council Regulation (EU) no. 833/2014 does not apply to existing securities for which, until 12 April 2022, the central securities depository provided services to Russian citizens or natural persons residing in Russia or to all legal persons, entities or bodies established in Russia?

Last update: 26 April 2022

It is correct. The prohibition only applies in respect of transferable securities issued after 12 April 2022. The prohibitions set out in other articles of Council Regulation (EU) no. 833/2014 should however be considered on a case by case basis, for instance those in Articles 5 and 5b. Practical issues relating to the fungibility of securities which are outside the prohibition with securities subject to the prohibition may arise. Market participants bear the onus of ensuring that any trade they enter into do not involve the banned securities.

3. Is it correct that the prohibition in Article 5e of Council Regulation (EU) no. 833/2014 does not apply to a situation in which, after 12 April 2022, a Russian citizen or natural person residing in Russia or a legal person, entity or body established in Russia would request the CSD to provide new services for existing securities issued before 12 April 2022?

Last update: 26 April 2022

4. How can a CSD apply Article 5e of Council Regulation 833/2014 where the securities accounts opened with the CSD do not identify the underlying clients but only the custodian?

Last update: 26 April 2022

The CSDs shall use all relevant information that is available to them to ensure they can identify whether the underlying clients are Russian nationals or natural persons residing in Russia or legal persons, entities or bodies established in Russia. To the extent possible, CSDs shall also cooperate with their participants in that respect.

5. On what basis should CSDs performing initial recording of securities (notary service) verify on whose behalf the securities were issued? Can CSDs base their verification on the issuer’s declaration/statement?

Last update: 26 April 2022

6. For CSDs with end-investor accounts, i.e., where the beneficial holder of securities may hold securities account directly with the CSD, will the restrictive measures apply to the CSDs provision of services to such securities account holders even though they are not participants?

Last update: 26 April 2022

Yes, the restrictive measures will apply. Article 5e does not limit to the provision of services to participants.

7. For CSDs with end-investor accounts, will the restrictive measures prohibit the CSD from opening a new beneficial holder securities account after 12 April 2022 in respect of a person or entity covered by the prohibition laid down in Article 5e of Council Regulation 833/2014?

Last update: 26 April 2022

Yes, since this would amount to providing a service mentioned in the Annex of Regulation (EU) No 909/2014 to a person covered by the prohibition laid down in Article 5e of Council Regulation 833/2014.

8. For CSDs with end-investor accounts, will the restrictive measures prohibit the CSD from opening a new nominee (omnibus) securities account after 12 April 2022 in respect of a person covered by the prohibition laid down in Article 5e of Council Regulation 833/2014?

Last update: 26 April 2022

9. Does the term "any services" in Article 5e of Council Regulation 833/2014 relate to core services only or also to ancillary services? Does Article 5e of Council Regulation 833/2014 also apply to ancillary services provided by CSDs under separate Regulations, for instance as trade repositories under Regulation (EU) No 648/2012 or Regulation (EU) 2015/2365, providing services as an ARM or issuing LEI codes?

Last update: 26 April 2022

As long as the service is defined in the Annex of Regulation (EU) No 909/2014, it falls under the prohibition laid down in Article 5e of Council Regulation 833/2014. This may go beyond 'core services'.

10. May CSDs provide services to persons covered by the restrictions laid down in Article 5e of Council Regulation 833/2014 in respect of corporate actions, such as the issuance of new shares in a security that was issued in the CSD before 12 April 2022?

Last update: 26 April 2022

Providing services related to the issuance of new shares would amount to providing services in respect of new transferable securities. After 12 April 2022, CSDs shall not provide such services.

11. Does Article 5e of Council Regulation 833/2014 prohibit the CSD from granting access to a new participant, if this participant is a person or entity covered by the prohibition laid down in Article 5e of Council Regulation 833/2014?

Last update: 26 April 2022

Article 5e does not per se prohibit this to the extent that the CSD provides services only in respect of transferable securities issued before 12 April 2022. However, note that Article 5 of Council Regulation (EU) No 833/2014 may prohibit this in respect of certain designated persons and entities in Annexes III, V, VI, XII, XIII. By granting access to a new participant, a CSD would indeed be considered as, directly or indirectly, providing investment services for or assistance in the issuance of, or otherwise deal with transferable securities.

12. Do the restrictive measures in Article 5e of Council Regulation 833/2014 apply to nationals of a member state having a temporary or permanent residence permit in Russia?

Last update: 26 April 2022

No, they do not. Paragraph 2 of Article 5e expressly provides that paragraph 1 shall not apply to nationals of a Member State.

13. Do the restrictive measures in Article 5e of Council Regulation 833/2014 apply to nationals of a member state having a temporary or permanent residence permit in Russia?

Last update: 16 June 2022

The National Settlement Depository has been included in the list of entities which need to have their funds and economic resources frozen, in Annex I of Council Regulation 269/2014.

14. Should we apply a different approach to instructions to transfer securities with no cash exchange (i.e. free of payment) compared to instructions to transfer securities against payment? Would there be a difference if the Russian party would be receiving securities or cash (depending on whether the instructions is to buy or to sell securities)?

Last update: 26 April 2022

The only difference regarding instructions to transfer securities with no cash exchange (i.e. free of payment) compared to instructions to transfer securities against payment is the application of Article 5b of Council Regulation (EU) No 833/2014 in the context of instructions to transfer securities against payment.

However, payments made by participants to a CSD for the settlement of transactions that are not affected by the restrictive measures laid down in Council Regulation (EU) No 833/2014 should be considered as benefiting from the exemption set out in Article 5b(3). If the counterparty to the transition who receives the cash payment is a Russian national or natural persons residing in Russia, or legal persons, entities or bodies established in Russia, the provision in Article 5b of Council Regulation (EU) No 833/2014 shall apply to any transfer of the cash out of the account where it was credited further to the settlement of the transaction.

15. Is the acceptance of deposits from Russian nationals or natural persons residing in Russia, or legal persons, entities or bodies established in Russia allowed for CSDs, if the total value of deposits of the natural or legal person, entity or body receiving the deposit exceed exceeds 100 000 EUR per credit institution (Article 5b)? Does the prohibition in Article 5b of Council Regulation 833/2014 cover income payments linked to non-sanctioned securities above the value of EUR 100 000 collected/received on behalf of sanctioned customers?

Last update: 26 April 2022

The prohibition laid down in Article 5b applies to CSDs as well. If the counterparty to the transaction is a Russian national or natural persons residing in Russia, or legal persons, entities or bodies established in Russia, Article 5b shall apply to any transfer of the cash out of the account where it was credited further to the settlement of the transaction. Note that payments made by participants to a CSD for the settlement of non-prohibited cross-border trade in goods and services under Council Regulation (EU) No 833/2014 should nonetheless be considered as benefiting from the exemption laid down in Article 5b(3).

The prohibition also covers income-payment linked to non-sanctioned securities like dividends.

16. Is the settlement of transactions executed on securities targeted by Articles 5(1) to 5(4) of Council Regulation (EU) No 833/2014 allowed? Are securities that have been issued between the 1st of August 2014 and 12 of April 2022 covered?

Last update: 26 April 2022

CSDs must comply with the restrictions laid down in Articles 5(1) to 5(4). The settlement of securities issued before 26 February 2022 is prohibited for securities issued by entities listed in the Annexes, when they have a maturity exceeding 90 days and were issued between 1 August 2014 and 12 September 2014, as well as for securities with a maturity exceeding 30 days if issued between 12 September 2014 and 12 April 2022. The settlement of these transactions would indeed constitute investment services.

17. Does Article 5e of Council Regulation (EU) No 833/2014 only cover transactions on the primary market or also on the secondary market?

Last update: 26 April 2022

Transactions on both the primary and secondary markets are covered by Article 5e.

18. While the prohibition on listing in Article 5(5) of Council Regulation (EU) No 833/2014 apply in respect of any legal person, entity or body established in Russia and with over 50 % public ownership, Article 5(e) on the provision of services by Union central securities depositories apply in respect of any issuer who is a Russian national or natural person residing in Russia or any legal person, entity or body established in Russia. A practical consequence is that while nonstate-owned Russian companies could apply for being listed on a trading venue as per Article 5(5), this is in fact rendered impossible by the fact that they may not have their securities registered in a CSD. Is this is a correct interpretation?

Last update: 26 April 2022

The prohibition in Article 5e indeed applies to services provided by CSDs to any Russian national or natural person residing in Russia or any legal person, entity or body established in Russia in relation to transferable securities issued after 12 April 2022.

CSDs are therefore prohibited from providing services to Russian issuers in relation to securities issued after 12 April 2022. This limits de facto the possibility for Russian issuers to proceed with the initial recording of securities in the EU.

19. Under Article 5e of Regulation 833/2014, is our understanding correct that an EU person majority owned or controlled by a person incorporated in Russia is not subject to a general restriction on services by central securities depositaries (CSDs) in relation to any transferable securities issued after 12 April 2022? More specifically, would a special purpose vehicle (SPV) established in an EU Member State but owned by a Russian corporate be subject to the restriction under Article 5e?

Last update: 26 April 2022

Strictly speaking, EU persons are indeed not the target of the prohibition to provide CSD services under Article 5e of Council Regulation 833/2014. However, in the present case, it is highly likely that the provision of services by the CSD would in fact benefit the Russian entity, as it owns the SPV established in the EU. This would be the case for instance if the SPV would issue securities on behalf of its Russian parent. As a result, such a scheme would have the effect of circumventing the restriction under Article 5e, something that it is prohibited under Article 12 of Council Regulation 833/2014.

20. In a situation where a European investment firm owns equities of non- Russian issuers that are currently held in the Russian National Securities Depository (NSD), is the transfer of such equities from the NSD to an EU-based central securities depository allowed under Council Regulation 833/2014?

Last update: 30 June 2023

According to Articles 5e and 5f, it is prohibited for EU CSDs to provide any services for transferable securities issued after 12 April 2022, to sell transferable securities denominated in any official currency of a Member State issued after 12 April 2022, or denominated in any other currency issued after 6 August 2023, or units in collective investment undertakings providing exposure to such securities, to any Russian national or natural person residing in Russia or any legal person, entity or body established in Russia.

With Article 5e applying to all transferable securities issued after 12 April 2022 and Article 5f applying to all transferable securities denominated in any official currency of a Member State issued after 12 April 2022, or denominated in any other currency issued after 6 August 2023 ,the fact that the equities at stake are issued by non-Russian nationals does not affect the application of these Articles.

However, EU CSDs should assess if, in practice, the transfer of such equities would characterise the provision of CSD services (either core or ancillary) or the sale of transferable securities to Russian national or natural person residing in Russia or any legal person, entity or body established in Russia. In particular, EU CSDs must assess if the NSD is only acting as a custodian in respect of these securities, or if it is providing some services like central maintenance services or operating securities accounts in relation to the settlement service, as mentioned in Sections A and B of the Annex to CSDR, which could imply that after the transfer, EU CSDs would also provide such services to the clients.

In that case, EU CSDs must use all relevant information that is available to them to ensure they can identify whether the underlying clients are Russian nationals or natural persons residing in Russia or legal persons, entities or bodies established in Russia. To the extent possible, CSDs must also cooperate with their participants in that respect.

In parallel, NSD is subject to an asset freeze and a prohibition to make funds or economic resources available to it or for its benefit, under Council Regulation (EU) 269/2014. Therefore, please also refer to FAQ 21.

Please also note that Article 5b, prohibiting to accept any deposits exceeding EUR 100 000 from Russian nationals or natural persons residing in Russia, or legal persons, entities or bodies established in Russia or legal persons, entities or bodies established outside the Union and whose proprietary rights are directly or indirectly owned for more than 50 % by Russian nationals or natural persons residing in Russia, is not applicable in that situation because Article 1k excludes securities from the definition of deposits.

21. Is it possible to make a transaction through the Russian National Securities Depository (NSD)?

Last update: 12 August 2022

The inclusion of the NSD in Annex I to Council Regulation (EU) No 269/2014, coupled with Article 2(2) of that legal act, implies it is not possible anymore to instruct any transaction which may, directly or indirectly, result in any charge payable to the NSD or any other funds or economic resources to or for the benefit of NSD. Therefore, all activities which involve, directly or indirectly, to pay a fee to NSD or to make available to or for its benefit any other funds or economic resources, are prohibited. Under Article 2(2) of Council Regulation (EU) No 269/2014, activities may continue that are not otherwise subject to sanctions and where NSD does not receive or benefit from fees or other funds or economic resources as a direct or indirect consequence. Note that ‘funds’ and ‘economic resources’ are defined broadly in Council Regulation (EU) No 269/2014.

In parallel, all assets belonging to, owned, held or controlled by NSD must be frozen, as per Article 2(1) of Council Regulation (EU) No 269/2014. That includes funds as well as economic resources coming from it. See in this regard the Commission opinion of 4 July 2019 which states, in a similar scenario, that funds of a non-listed person that are deposited in or even just transferred to a listed bank can be considered to be “held”, albeit temporarily, by the listed bank in question. Article 2(1) does not require a minimum duration for the possession of the funds by the listed entity. This means that, in respect of incoming transfers from NSD, it will be possible to request from the relevant national competent authority an authorisation to release of those funds, under such conditions as they deem appropriate, under the derogation envisaged in Article 6 of Council Regulation (EU) No 269/2014 concerning a payment by a listed person under a contract concluded before the date on which that person was listed.

22. Is it possible to convert Depositary Receipts (DR) of Russian issuers into the underlying shares?

Last update: 24 July 2024

The Commission is aware that Russia is likely to require the termination of DR programs and the conversion of DRs. Such conversion implies that DR holders are required to become the direct holders of the underlying stock, thus forcing direct participation of foreign investors in the Russian market and exposing them to the application of Russian law. The conversion is automatic if the DRs are held in Russian custodians, and forced as of 24 November 2022 if the DRs are held in non-Russian custodians.

The conversion of DRs would likely involve NSD, an entity listed in Annex I to Council Regulation (EU) No 269/2014. As a result of this listing, all funds and economic resources belonging to, owned, held or controlled by NSD must be frozen, and no funds or economic resources can be made available to it, whether directly or indirectly. See also FAQ 21.

When NSD is involved in the conversion of DRs, even if certain fees are formally waived, it is possible that the conversion results in directly or indirectly making available funds and economic resources to or for the benefit of NSD (e.g. from settlement fees charged to third parties) – which is prohibited.

Nevertheless, it should be noted that Article 6b(5) of Council Regulation (EU) No 269/2014 enables NCAs to authorise the release of certain frozen funds belonging to NSD, or the making available of certain funds or economic resources to NSD, if these funds or economic resources are necessary for the wind-down by 7 January 2023 of operations involving NSD.

Either way, for conversion to take place, Russian law requires the opening of a bank account in Russia. Even if Russian banks accept this operation, the funds would likely remain blocked on a type C account. At the same time, a number of Russian banks are listed in Annex I to Council Regulation (EU) No 269/2014, or affected by the measures in Council Regulation (EU) No 833/2014. Altogether, this means that in practice it might be impossible for EU investors to comply with Russian requirements for conversion and subsequently access their securities.

23. Under the derogation provided for in Article 6(b)5aa of Council Regulation (EU) No 269/2014, is it possible to convert Depositary Receipts on the basis of an authorisation granted by the national competent authorities of the Member States after 25 December 2023?

Last update: 24 July 2024

Yes. Article 6(b)5aa of Council Regulation (EU) No 269/2014 enabled NCAs to grant an authorisation by 25 December 2023 to allow the conversion by nationals or residents of a Member State, or an entity established in the Union, of a depositary receipt with Russian underlying security held with the NSD for the purpose of selling the underlying security, and the making available of funds linked to the conversion of the depositary receipt and to the sale of the underlying security directly or indirectly to that entity in Russia.

For applications submitted before 25 September 2023 and authorised by the national competent authorities of the Member States before 25 December 2023, conversion of depository receipts may take place after 25 December 2023.

24. Is it allowed to perform a ‘free-of-payment’ transfer of Russian shares not targeted by sanctions between two sub-accounts opened within the same EU financial institutions or within the same central securities depositary ?

Last update: 24 July 2024

Yes, under certain conditions. The ‘free-of-payment’ transfer of a Russian security not targeted by sanctions between two counterparts with sub-accounts opened within the same financial institution or within the same central securities depository is not prohibited, provided that:

- there is no designated person involved in the transaction;

- there is no restriction regarding the trading of the Russian security concerned ;

- the transaction does not involve the payment of any fee to the NSD

In such case, no funds would be made available to NSD and no specific instruction nor information would be sent to NSD, therefore the operation is not prohibited.

25. Is it allowed to transfer or sell DRs with Russian underlying securities on the secondary market without conversion?

Last update: 24 July 2024

Yes, under certain conditions. The transfer or sale of depositary receipts with Russian underlying securities held with NSD on the secondary market is not prohibited, provided that the transaction does not involve or benefit any person or entity listed under Annex I of Council Regulation (EU) No 269/2014.

Under such condition, the transaction does not trigger any movement on the books of NSD nor does it result in making funds available to the NSD, therefore the operation is not prohibited.

26. Is it possible for EU persons and entities to participate in an ‘asset swap’ scheme that would be implemented within the framework of Russian Presidential decree 844?

Last update: 24 July 2024

No. It would be prohibited for EU persons and entities to participate in an “asset swap” scheme due to the involvement of the NSD, an entity listed in Annex I to Council Regulation (EU) No 269/2014. As a result of this listing, all funds and economic resources belonging to, owned, held or controlled by NSD must be frozen, and no funds or economic resources can be made available to it, whether directly or indirectly. See also FAQ 21.

For background, the Commission is aware that on 22 March 2024 Russia started the implementation of an “asset swap” scheme within the framework of Presidential decree 844. This scheme will allow Russian retail investors to submit offers to swap western securities, which are currently frozen in the NSD accounts in EU central securities depositories (CSDs), in exchange of “unfriendly” investors’ funds that are blocked in Russia on C-type accounts.

8. SALE OF SECURITIES

RELATED PROVISION: ARTICLE 5f OF COUNCIL REGULATION 833/2014

1. Does the prohibition in Article 5f of Council Regulation 833/2014 apply to transferable securities issued by private companies as well or should it should be interpreted as only referring to transferable securities issued by public companies?

Last update: 30 June 2023

The prohibition laid down in Article 5f of Council Regulation 833/2014 applies to transferable securities issued by both public and private companies. The purpose of this provision is to avoid the circumvention of other refinancing prohibitions laid down in the Regulation by limiting the access of any natural or legal person, entity or body in Russia to securities denominated in the official currency of a Member State.

2. Does the prohibition in Article 5f of Council Regulation 833/2014 cover the sale of transferable securities to non-Russian entities that are owned by a Russian national or natural person residing in Russia?

Last update: 2 May 2022

The prohibition in Article 5f only applies to the sale of transferable securities to Russian nationals or natural person residing in Russia or any legal person, entity or body established in Russia. Strictly speaking, it does not apply to entities owned by Russian nationals or natural persons residing in Russia when the entities are registered in a country other than Russia. However, the provision should be read in conjunction with Article 12 of Council Regulation 833/2014 which prohibits to participate knowingly and intentionally in activities the object or effect of which is to circumvent prohibitions in the Regulation. EU operators should therefore exert enhanced due diligence to make sure that they are not selling securities denominated in the official currency of a Member State to an entity owned by a Russian national or a natural person residing in Russia.

3. Does the prohibition in Article 5b of Council Regulation 833/2014 apply to the sale of units in collective investment undertakings whose portfolio includes, after 12 April 2022, newly issued transferable securities denominated in an official currency of a Member State, regardless of the percentage they represent of the fund's assets?

Last update: 2 May 2022

This prohibition applies irrespective of the percentage of transferable securities issued after 12 April 2022 denominated in an official currency of a Member State. In other terms, any ownership, investment or "exposure" to transferable securities issued after 12 April 2022 by units in collective investment undertakings brings such units in collective investment undertakings within the scope of the prohibition.

4. Where a unit-holder owns units in a collective investment undertaking with exposure to transferable securities within the scope of Article 5f(1), does the prohibition in Article 5f(1) cover the situation where the unit-holder sells its units to persons in scope of the prohibition, i.e. where the units are already pre-existing?

Last update: 2 May 2022

Yes, it covers this situation, if the units provide exposure to transferable securities denominated in any official currency of a Member State issued after 12 April 2022.

5. Does the prohibition in Article 5f(1) also cover the sale of shares of collective investment undertakings, which could be the case for alternative investment funds?

Last update: 2 May 2022

Yes, it does.

6. Is the allocation of free shares by EU banks to their Russian employees as part of variable remuneration schemes prohibited under Article 5f of Council Regulation 833/2014?

Last update: 2 May 2022

As part of a compensation scheme, the transaction does not amount to a sale of the securities. As such, it would not fall within the scope of Article 5f.

7. Do members’ shares of mutualist or cooperative banks fall under the scope of Article 5f of Council Regulation 833/2014?

Last update: 2 May 2022

Insofar as members’ shares of mutualist or cooperative banks are not negotiable on capital markets, they do not qualify as ‘transferable securities’ in the meaning of Article 1(f) of 833/2014. Therefore, they are not within the scope of Article 5f of Council Regulation 833/2014.

8. Is there sufficient legal basis for refusing to approve a prospectus if an NCA discovers a prohibited relationship and suspects a possible infringement of the sanctions’ legislation?

Last update: 23 May 2022

Issuing a prospectus is a way of making funds and economic resources available. It is considered that an infringement of EU sanctions, in particular pursuant to Council Regulation (EU) No 833/2014, Council Regulation (EC) No 765/2006 and Council Regulation (EU) No 269/2014, can constitute sufficient legal basis for the relevant national competent authority to refuse the approval of a prospectus. It is for the national competent authority, as enforcement authority, to decide whether that decision is appropriate in order to implement the regulations on sanctions.

In the event of a suspicion of infringement, it is considered that the relevant national competent authority should request further information from and ask written confirmation by the issuer of the securities, which are the subject matter of the prospectus, that no infringement of the sanctions’ legislation is taking place, in order to be satisfied that it can approve the prospectus.

9. To what extent are NCAs required to supervise sanctions relating to the indirect flow of funds to sanctioned entities and persons arising from transactions involving an approved prospectus?

Last update: 23 May 2022

The Council Decision is binding on all Member States and the Council Regulations on sanctions are directly binding in their entirety and directly applicable in all Member States. They apply to all persons subject to the jurisdiction of a Member State. That includes individuals, legal persons incorporated under the law of a Member State, and persons doing business in the EU.

The Council Regulations give effect in EU law to the measures laid down in the Decision. Pursuant to Articles 8 and 9 of Regulation 833/2014, Articles 9 and 9a of Council Regulation (EC) No 765/2006 and of Council Regulation (EU) No 269/2014, Member States shall lay down the rules on penalties applicable to infringements of the provisions of those Regulations, take all measures necessary to ensure that they are implemented and designate the competent authorities for the purposes of those Regulations.

It is therefore considered that where the relevant competent authorities believe that any infringement or circumvention of the sanctions occurs, they should take appropriate action.

10. In case of factoring financing, is a bank that bought a business invoice from a listed person (the creditor) allowed to receive the payment of the invoice from the EU debtor?

Last update: 14 June 2022

In case of factoring financing, there are 3 potential scenarios to consider:

• The EU bank bought the invoices before the listing: it is possibly acting in good faith, but national competent authorities shall pay attention to a possible risk of circumvention, which is prohibited according to Article 9 of Council Regulation 269/2014 and Article 12 of Council Regulation 833/2014. That would be the case if the bank bought the invoices acting knowingly and intentionally, in tandem with the listed person. Also, if not all formalities of the factoring transaction were concluded before the listing, the EU bank would be prevented from concluding the remaining formalities and consequently from recovering from the debtor

• The EU bank bought the invoices after the listing: there is then a direct breach of Article 2(2) of Council Regulation 269/2014 by the bank and, when it comes to the EU debtor, a higher likelihood of breach (indirectly making funds available to the listed person) or circumvention.

• The Non-EU bank bought the invoices before or after the listing: there is no jurisdiction against the bank if it is not subject to EU sanctions (see jurisdiction clauses). However, where the invoices were bought by the non-EU bank after the listing, the EU debtor would be prevented from paying the non-EU bank if that would make available, directly or indirectly, funds to the listed person.

9. SPECIALISED FINANCIAL MESSAGING SERVICES

RELATED PROVISION: ARTICLE 5h OF COUNCIL REGULATION 833/2014

1. What are the banks subject to the prohibition to provide specialized financial messaging services ?

Last update: 28 February 2023

Article 5h of Council Regulation 833/2014 prohibits the provision of specialised financial messaging services, which are used to exchange financial data, to the legal persons, entities or bodies listed in Annex XIV or to any legal person, entity or body established in Russia whose proprietary rights are directly or indirectly owned for more than 50 % by an entity listed in Annex XIV.

2. Some Russian banks are prohibited from using specialized financial messaging services of EU providers (also mentioned as ‘the SWIFT prohibition’). Would it qualify as a breach or circumvention of that prohibition if these banks resort to other means of communication to compensate for their decoupling from specialized messaging services network, such as the ‘SWIFT’ network?

Last update: 28 February 2023

Prohibitions contained in EU sanctions Regulations must be complied with by EU operators – both within and outside of the territory of the Union – or by any operator for any business done in whole or in part within the Union. In this particular case, the direct prohibition to provide financial messaging services to those banks is on EU financial messaging service providers or providers operating in the EU, such as S.W.I.F.T. SC (SWIFT), and not on the decoupled Russian banks. This means that transactions for non-sanctioned trade are still allowed with banks disconnected from the SWIFT network (‘de-SWIFTed’), not subject to the asset freeze under Council Regulation (EU) 269/2014, if they are relying on other means (i.e. non specialized financial messaging service), such as paper, fax and email, for confirming payment orders.

However, pursuant to Article 12 of Council Regulation 833/2014 any financial messaging service provider required to comply with EU sanctions cannot circumvent this prohibition, (i.e. setting up a system that, under the cover of a formal appearance of legality, enables the relevant bank to avoid the elements of an infringement of the restriction at hand).

3. Does the prohibition to provide specialised financial messaging services to certain Russian banks also extend to subsidiaries and branches of those banks located outside Russia?

Last update: 28 February 2023

Therefore, banks in Russia whose proprietary rights are directly or indirectly owned for more than 50 % by an entity listed in Annex XIV are also covered by this prohibition.

Subsidiaries of those banks in the EU or in other countries outside Russia have separate legal personality from the Russian parent company. Those subsidiaries are considered established under the law of the relevant Member State or third country. Hence they are not subject to the restriction.

Branches of a Russian parent company do not have legal personality on its own and are considered as entities established in Russia. Hence, the prohibition applies to branches of the credit institutions listed in Annex XIV that are located outside Russia. Providers required to comply with EU sanctions should therefore not offer specialised financial messaging service to them.

4. Are margin calls exempted from the prohibition to provide specialised financial messaging services ?

Last update: 28 February 2023

No, there are no exemptions from the prohibition to provide specialised financial messaging services. It is therefore also prohibited to use it for margin call messages exchanged with the Russian banks subject to this prohibition.

10. BANKNOTES

RELATED PROVISION: ARTICLE 5i OF COUNCIL REGULATION 833/2014

1. Does the ban on supplying banknotes denominated in any official currency of a Member State relate to physical notes only or does it also include transfers via bank accounts?

Last update: 20 April 2022

The restrictions introduced on banknotes denominated in any official currency of a Member State concern physical banknotes and do not extend to transfers via bank accounts, as long as these do not fall under other restrictions (e.g. transfers to listed persons or transfers through a listed bank).

2. How should the exception for personal use from the prohibition to export banknotes denominated in any official currency of a Member State to Russia be interpreted?

Last update: 20 April 2022

For the consideration of the term “personal use” as provided in Article 5i, the determining factor is the non-commercial nature. The objective of the prohibition to export banknotes denominated in any official currency of a Member State to Russia is to prevent the Russian Government, its Central Bank and natural or legal persons in Russia to get access to banknotes denominated in any official currency of a Member State. The exception built in the provision, which allows the supply of banknotes denominated in any official currency of a Member State for personal use of natural persons travelling to Russia or members of their immediate families travelling to them, should be interpreted in narrow terms.

The exception should not be used for commercial purposes or reflect a commercial interest. This includes cases where Russian companies are closing down and returning to Russia with cash belonging to the company. As regards employees of companies closing down who return and take their savings with them, there is no reason to allow Russians to repatriate their savings in Russia. It should be underlined that the measure is temporary and linked to the aggression of Ukraine by Russia.

Furthermore, the exception cannot be used to bring cash to acquaintances, friends or parents, because the exception is limited to those travelling. It should cover the necessities of natural persons of members of their family during their trip.

3. “Are gold, currencies other than any official currency of a Member State, traveller cheques and bank cheques covered by the prohibition in Article 5i?”

Last update: 20 April 2022

The measure only concern banknotes denominated in any official currency of a Member State.

Therefore, none of the above are concerned.

4. Are financial institutions expected to monitor ATM usage, limit increases in card caps for cash withdrawals or restrict card usage?

Last update: 20 April 2022

Financial institutions are not expected to change their practices, but to heighten their vigilance and be able to detect sudden increases of banknotes withdrawal/requests.

5. Does the prohibition to sell, supply, transfer or export banknotes denominated in any official currency of a Member State to Russia only apply to Russian nationals and natural persons with a residence in Russia?

Last update: 20 April 2022

No, the prohibition must be complied with by everybody who would be delivering banknotes to Russia or for use in Russia.

6. Is it necessary to prohibit the withdrawal of banknotes from bank accounts of Russian clients as well as any transactions of cash exchange/sale of banknotes to Russian nationals?

Last update: 20 April 2022

No, the prohibition in Article 5i should not be interpreted as prohibiting any withdrawal of banknotes of a Member State from the bank accounts of Russian client, or any transaction of cash exchange/sale of banknotes to Russian nationals. The prohibition shall be assessed on a case-by-case basis, including by taking into account the exemptions as provided for under Article 5i(2) of Council Regulation 833/2014.

Last update: 20 April 2022

The prohibition covers subsidiaries of Russian entities to the extent that there are grounds to believe that the banknotes would reach the parent companies or other Russian entities. In complying with the prohibition, EU operators have an obligation of result.

The prohibition in principle covers entities such as Russian embassies in Europe, but Article 5i(b) sets out an exception for the official purposes of these missions.

11. CREDIT RATING

RELATED PROVISION: ARTICLE 5j OF COUNCIL REGULATION 833/2014

1. Does “credit rating services” cover all type of ratings (including unsolicited and sovereign ratings)?

Last update: 28 April 2022

Article 5j(1) of Council Regulation (EU) No 833/2014 as amended by Council Regulation (EU) 2022/428 stipulates that ‘it shall be prohibited as of 15 April 2022 to provide credit rating services to any Russian national or natural person residing in Russia or any legal person, entity or body established in Russia’. There is no distinction between different types of ratings. Moreover, Council Decision (CFSP) 2022/430 underlines the prohibition of ‘the provision of any credit rating services as well as access to subscription services in relation to credit rating activities, to any Russian person or entity’.

According to Regulation (EC) No 1060/2009 (CRA Regulation) ‘unsolicited credit ratings’ are credit ratings assigned by a credit rating agency other than upon request.

Article 3(1)(v) of the CRA Regulation stipulates that a ‘‘sovereign rating’ means: (i) a credit rating where the entity rated is a State or a regional or local authority of a State; (ii) a credit rating where the issuer of the debt or financial obligation, debt security or other financial instrument is a State or a regional or local authority of a State, or a special purpose vehicle of a State or of a regional or local authority.’ Given that the Russian sovereigns covered in the definition have legal personality, they are covered by the prohibition.

The key element for the scope of the sanctions is whether a credit rating service is provided to any Russian national or natural person residing in Russia or any legal person, entity or body established in Russia. Whether this criterion is met requires a factual assessment of the situation, which should take into account Article 12 of Council Regulation (EU) No 833/2014, which provides that it is prohibited to participate, knowingly and intentionally, in activities the object or effect of which is to circumvent prohibitions in the Regulation.

2. Does “credit rating services” cover both surveillance and new issuance activities? Does “credit rating services” cover other non-rating services, i.e. is it more than “credit rating activities” as defined by the CRA Regulation?

Last update: 28 April 2022

Article 3(1)(o) of the CRA Regulation provides that ‘‘credit rating activities’ means data and information analysis and the evaluation, approval, issuing and review of credit ratings’.

In accordance with Annex 1, section B, paragraph 4 of the CRA Regulation, 'a credit rating agency may provide services other than issue of credit ratings (ancillary services). Ancillary services are not part of credit rating activities; they comprise market forecasts, estimates of economic trends, pricing analysis and other general data analysis as well as related distribution services’.

Credit rating services are therefore a broader concept than credit rating activities. The former also encompass ancillary services on top of data and information analysis and the evaluation, approval, issuing and review of credit ratings. Given that surveillance and review activities can lead to maintaining, changing or withdrawing a credit rating, they are covered by the concept of credit rating services.

Therefore, also any service encompassing market forecasts, estimates of economic trends, pricing analysis and other general data analysis as well as related distribution services to any Russian national or natural person residing in Russia or any legal person, entity or body established in Russia is prohibited.

3. Does “access to any subscription services in relation to credit rating activities” refer to activities of affiliates, e.g. distribution of ratings?

Last update: 28 April 2022

Article 2(1) of the CRA Regulation underlines that the CRA Regulation ‘applies to credit ratings issued by credit rating agencies registered in the Union and which are disclosed publicly or distributed by subscription.’ Therefore, subscription is one manner of distributing credit ratings.

Article 5j(2) of Council Regulation (EU) No 833/2014 as amended by Council Regulation (EU) 2022/428 stipulates that ‘it shall be prohibited as of 15 April 2022 to provide access to any subscription services in relation to credit rating activities to any Russian national or natural person residing in Russia or any legal person, entity or body established in Russia.’

Therefore, it is prohibited to give to Russian nationals, to natural persons residing in Russia or to any legal person, entity, body established in Russia, access via subscription to data and information analysis and to the evaluation, approval, issuing and review of credit ratings.

As the scope of the prohibition is not limited to the CRA Regulation, it is applicable to subscription services provided by any legal or natural person and not only persons subject to the CRA Regulation. This therefore not only includes CRAs and their affiliates, but any entity providing access to subscription services in relation to credit rating activities.

4. Do the sanctions apply to endorsed ratings? If yes, does it mean that the CRA cannot issue a rating from a non-EU entity or that they cannot endorse the rating (i.e. the “endorsement” service is forbidden)?

Last update: 28 April 2022

Council Regulation (EU) No 833/2014, as amended by Council Regulation (EU) 2022/428, does not make a distinction between different ratings and Council Decision (CFSP) 2022/430 underlines the prohibition of ‘the provision of any credit rating services as well as access to subscription services in relation to credit rating activities, to any Russian person or entity’.

Moreover, Article 4(4) of the CRA Regulation underlines that a credit rating endorsed in accordance with paragraph 3 shall be considered to be a credit rating issued by a credit rating agency established in the Union and registered in accordance with that Regulation.

5. What entities are covered by the prohibition? Are non-regulated affiliates of CRAs also affected?

Last update: 28 April 2022

The scope of Council Regulation (EU) No 833/2014, as amended by Council Regulation (EU) 2022/428, is not limited to credit rating agencies, but instead focuses on the services to be delivered or the activities to be performed. Therefore, any entities delivering those services or performing the activities are covered, beyond CRAs and their affiliates.

6. Article 5j of regulation 833/2014 does not distinguish between intra group and extra-group rating services. Could the rating services provided within a group (i.e. Mother Company in the European Union providing rating models for its subsidiary in Russia) fall under the restrictions?

Last update: 31 May 2022

IRB models which fall within the scope of models as defined under Article 142 of Regulation (EU) No 575/2013 (Capital Requirements Regulation) and which are shared intragroup are out of scope of Article 5j prohibition as they do not consist of a provision of a rating service.

7. Does the reference in Article 5j to credit rating services cover the provision of services such as scoring services? Example: a credit reference agency or credit bureau that generates a score about a Russian national or natural person.

Last update: 1 June 2022

The scope of Council Regulation (EU) No 833/2014 as amended by Council Regulation (EU) 2022/428 does not mention credit rating agencies, but focuses on the services to be delivered or the activities to be performed.

Article 3(1)(a) of the CRA Regulation defines ‘credit rating’ as an opinion regarding the creditworthiness of an entity, a debt or financial obligation, debt security, preferred share or other financial instrument, or of an issuer of such a debt or financial obligation, debt security, preferred share or other financial instrument, issued using an established and defined ranking system of rating categories.

Article 3(1)(y) of the CRA Regulation defines credit score as ‘a measure of creditworthiness derived from summarising and expressing data based only on a pre-established statistical system or model, without any additional substantial rating-specific analytical input from a rating analyst’.

Therefore, any entity delivering those services or performing the activities is covered. In turn, that means the provision of such a service or the performance of such activity to any Russian national or natural person residing in Russia or any legal person, entity or body established in Russia within the meaning of Council Regulation (EU) No 833/2014 as amended by Council Regulation (EU) 2022/428 is covered.

Whether the scoring services as to the creditworthiness or financial standing of Russian nationals or natural persons residing in Russia or legal persons, entities or bodies established in Russia are credit rating services or subscription services in relation to credit rating activities is a factual question. The reply must take into account Article 12 of Council Regulation (EU) No 833/2014 as amended by Council Regulation (EU) 2022/428, which provides that it is prohibited to participate, knowingly and intentionally, in activities the object or effect of which is to circumvent prohibitions in the Regulation.

8. Does the reference in Article 5j to credit rating services provided to any Russian national or natural person or any legal person, entity or body established in Russia include when the rating is performed on (as opposed to directly provided to) those subjects?

Last update: 1 June 2022

Article 5j(1) of Council Regulation (EU) No 833/2014 as amended by Council Regulation (EU) 2022/428 stipulates that ‘it shall be prohibited as of 15 April 2022 to provide credit rating services to any Russian national or natural person residing in Russia or any legal person, entity or body established in Russia’. In addition, Council Decision (CFSP) 2022/430 underlines the prohibition ‘of the provision of any credit rating services as well as access to subscription services in relation to credit rating activities, to any Russian person or entity’.

Credit rating services should be understood as including credit rating activities. Article 3(1)(o) of the CRA Regulation provides that ‘‘credit rating activities’ means data and information analysis and the evaluation, approval, issuing and review of credit ratings;’.

Thus, providing ratings on Russian nationals or natural persons residing in Russia or legal persons, entities or bodies established in Russia involves the analysis, evaluation, approval and issuing of a credit rating and falls within the scope of Council Regulation (EU) No 833/2014 as amended by Council Regulation (EU) 2022/428 and therefore is prohibited.

9. Does the reference in Article 5j to credit rating services provided to any Russian national or natural person or any legal person, entity or body established in Russia include when the rating is performed on those subjects and the service is then provided to a third party (e.g., a bank)? Example: a credit reference agency that generates a score about a Russian national or natural person, which is delivered to a bank in the context of a contractual relationship so that the said bank can better assess the creditworthiness of the Russian national or natural person.

Last update: 1 June 2022

The scope of Council Regulation (EU) No 833/2014 as amended by Council Regulation (EU) 2022/428 focuses on the services to be delivered or the activities to be performed. Therefore, any entities delivering those services or performing the activities are covered, regardless of who they are provided to.

10. Does the reference in Article 5j to a Russian national or natural person residing in Russia include where the said person is availing of a temporary residence permit outside of Russia (e.g., in an EU Member State) or simply has property in a Member State where he/she resides for a limited period of time? Example: Russian students, foreign workers, and tourists with temporary residence outside of Russia or Russians taking their vacations at their homes at an EU Member State.

Last update: 1 June 2022

In accordance with Article 5j(3), prohibitions related to credit rating services and related subscription services do not apply to nationals of a Member State or natural persons having a temporary or permanent residence permit in a Member State.

12. INSURANCE AND REINSURANCE

RELATED PROVISION: ARTICLE 3c; ARTICLE 3m; ARTICLE 3n OF COUNCIL REGULATION 833/2014

1. A Russian insurance company insures an aircraft or an engine of an EU policy holder and gets reinsurance from an EU reinsurer. Is the reinsurance provided by the EU reinsurer to the Russian insurer prohibited under Article 3c(2)?

Last update: 3 May 2022

Articles 3c(2) prohibits an EU reinsurance company to provide its services to a Russian person or entity. The EU operators affected must take the necessary measures in light of this situation.

2. Do the prohibitions in Article 3c(2) extend to the provision of insurance and reinsurance in respect of coverage of a non-Russian airline which conducts flights into and out of Russia?

Last update: 3 May 2022

Article 3(c)(2) contains a specific prohibition to provide re/insurance in relation to an aircraft. This is different from the prohibitions on financial assistance in Article 3c(4) as well as Articles 2 and 2a. Insurance in relation to a sale, supply, transfer or export is covered under the prohibition in article 3c(4), since insurance/re-insurance are part of the notion of “financing and financial assistance” as per Art 1(o).

The provision of re/insurance in the context of an international flight in and out of Russia by a non-Russian airline which does not have a Russian re/insurance is not covered by the prohibition as it is not for ‘use in Russia’ but part of the normal international services provided by an airline. The wording ‘for use in Russia’ is a standard formulation used to avoid the circumvention of the measures as it ensures that products and services sold/supplied/provided to third country persons, but to be used in the country subject to sanctions, are also prohibited.

3. Can these prohibitions affect the provision of insurance and reinsurance by EU insurers/reinsurers to the benefit of other EU parties?

Last update: 3 May 2022

Nothing in Council Regulation 833/2014 prohibits the provision of insurance and reinsurance by EU insurers/reinsurers to the benefit of other EU parties, even after 26 February 2022, as long as the goods and technology in Annex XI under insurance/reinsurance are not intended for a person in Russia or for use in Russia.

4. When items listed under Annex XI of Council Regulation 833/2014 are being retained in Russia against the will of their non-Russian owner, is it prohibited to provide insurance and reinsurance for them, or to execute an insurance settlement with Russian insurers?

Last update: 21 December 2022

Insurance and reinsurance of the goods and technology in Annex XI are not “for a person in Russia or for use in Russia”, where it is provided for the benefit of the non-Russian owner of those goods and not for the benefit of the actual user or operator of the goods. This applies also when the items remain in Russia against the will of their non-Russian owner and despite the latter’s demand for their return (including ‘lost aircraft’).

In such case, it is not prohibited for the non-Russian owner of the items listed in Annex XI to execute an insurance settlement with a Russian entity leading to the payment of the market value of the lost aircraft by the latter, provided that: (i) the lost aircraft were in Russia before the entry into force of Article 3c of Council Regulation 833/2014, on the basis of a contract predating such entry into force; (ii) the subscription of the applicable insurance policy predates such entry into force; (iii) the owner promptly requested the return of the items after the entry into force of Article 3c and did anything reasonably possible to repossess the relevant items but was unsuccessful; (iv) no additional goods prohibited by Article 3c or any other sanctions provisions will be made available to a natural or legal person, entity or body in Russia or for use in Russia; and (v) no sanctioned person is involved in, or may draw any benefit from, the execution of the settlement.

5. Do these prohibitions extend to the provision of insurance or reinsurance of any parts or components for the purposes of conducting repairs to an aircraft, which conducts flights, if such repair takes place in Russia?

Last update: 3 May 2022

Where the prohibitions applies to the re/insurance of goods and technology, this includes parts or components that fall under the scope of Annex XI.

The provision of re/insurance in the context of an international flight in and out of Russia by a non-Russian airline which does not have a Russian re/insurance is not covered by the prohibition as it is not for ‘use in Russia’ but part of the normal international services provided by an airline. This is true also for the re/insurance of any parts or components for the purposes of conducting repairs to an aircraft, where a non-Russian airline conducts flights into and out of Russia.

6. Do these prohibitions extend to an EU company sending an EU vessel to load licit cargo into a Russian port (e.g., normal goods, humanitarian goods, food)?

Last update: 3 May 2022

The prohibitions in Article 3c apply to insurance and reinsurance related to aircrafts (see Annex XI). The prohibitions in Articles 2 and 2a do not prevent airplanes, vessels and trucks from leaving or returning to the Union as part of normal commercial activities, as such movement does not constitute a “sale, supply, transfer or export”. The prohibition on financing and financial assistance in Articles 2 and 2a cover insurance activities (see Article 1(o)) but only in so far as they relate to the sale, supply, transfer or export of the listed goods.

7. Do the prohibitions in Article 3c also apply to the insurance of transhipments of aircrafts and aircraft parts in EU territorial waters and airspace?

Last update: 3 May 2022

Insurance in relation to a sale, supply, transfer or export is covered under the prohibition in Article 3c(4), since insurance/re-insurance are part of the notion of “financing and financial assistance” as per Article 1(o). “Transfer” is a broader concept than “transport”, covering a wide range of operations, not only the movement of goods through customs controls, but also the transport of goods, including the loading, transport, and trans-shipment of goods. Accordingly, the insurance of a transit via the EU territory of goods subject to sanctions is not allowed.

8. How does the wind down period in Article 3c paragraph 5 pertain to insurance services?

Last update: 3 May 2022

The wind down provision applies to subsections 1 and 4 only. Provided an insurance contract was concluded before 26 February 2022, insurance services for the sale, supply, transfer or export of goods and technologies listed in Annex XI are not subject to restrictions until 28 March 2022. On the other hand, the prohibition of insurance and reinsurance in subsection 2 applies as from 26 February 2022.

9. Council Regulation (EU) 2022/328 amended Regulation (EU) 833/2014 and provided a definition of “financial assistance” in Article 1(o), does this apply to all measures in respect to insurance?

Last update: 3 May 2022

Yes, the definition of “financing or financial assistance” contained in Article 1(o) applies throughout Regulation (EU) 833/2014.

10. Article 2 prohibits the provision of financial assistance for the sale, supply, transfer or export of dual-use goods and technology, unless authorised by the national competent authority. By whom the authorisation should be requested: the exporter (i.e. the insured), the insurer or both?

Last update: 3 May 2022

The authorisation should be requested by the insurer after consulting the exporter.

For more information, you can consult the dedicated frequently asked questions on financial assistance and exports related matters.

11. Council Regulation (EU) 269/2014 contains individual financial measures against a number of persons and entities. Should EU re/insurance operators cease to provide insurance services to these persons and entities? How should they proceed?

Last update: 26 August 2022

Persons and entities listed under Regulation 269/2014 are subject to financial sanctions that consist of an asset freeze and a prohibition to make funds and economic resources available to them. They are listed in Annex I to the Regulation. These sanctions come into force from the date the person or entity is listed. This is distinct from the sectorial measures provided for in Regulation (EU) 833/2014, which contains certain prohibitions regarding insurance.

The prohibition to make funds and economic resources available to a listed person or entity means that an EU operator cannot put any funds or economic resources at the disposal of a listed person, directly or indirectly, whether by gift, sale, barter or any other means, including the return of the listed person’s own resources. The consequence of a listing is that the provision of services to the listed person, including insurance, should cease. It is up to the EU operator to take the measures most appropriate in light of the situation.

Exceptionally, an EU operator could proceed with a payment to the frozen account of a listed person provided such funds are also frozen and provided the payment is due under a contract concluded before the date at which the person was listed (See Article 7).

It should also be noted that, as a derogation from the restrictive measures, Article 4(1)(a) of Regulation 269/2014 enables the NCA to allow the release of frozen funds, or the making available of certain funds or economic resources to the listed person, if these funds/resources are necessary to satisfy the basic needs of listed persons, including insurance premiums.

12. Is it allowed to reinsure the export receivables on the basis of export/insurance contracts, concluded before 26 February 2022 with large companies?

Last update: 1 June 2022

Article 2e paragraph 1(a) exempts all binding financial or financial assistance commitments established prior to 26 February 2022. Provided that the binding commitment has been established prior to that date, it is allowed to provide public financing or financial assistance for trade with, or investment in, Russia, irrespective of the dimension of the company.

13. Can an EU insurer continue to provide insurance to a vessel carrying Russian oil?

Last update: 30 June 2023

After 5 December 2022 for crude oil and after 5 February 2023 for petroleum products, EU operators can only provide insurance for the maritime transport of goods set out in Annex XXV to third countries, if such goods were purchased at or below the price cap, as set out in Article 3n.

14. Does the prohibition to provide technical assistance, financing and financial assistance above the price cap set out in Article 3n apply to all modes of transport of oil to third states?

Last update: 30 June 2023

No, it only applies to maritime transport and does not extend to pipeline transport. This intention is clear from recital 15 of Council Regulation (EU) 2022/879 and the reference to the prohibition to provide maritime transport, including through ship-to-ship transfers, insurance or financing or financial assistance to such transport if carried out above the price cap, is included in paragraph 1 and 4 of Article 3n.

15. Can an EU entity provide insurance or reinsurance for a non-EU or EU vessel carrying Russian oil? I.e. could an Indian ship carrying crude from Russia to India get insurance from an EU firm?

Last update: 30 June 2023

After 5 December 2022 for crude oil and after 5 February 2023 for petroleum products, EU insurers or reinsurers can provide services in such a situation only if such goods were purchased at or below the price cap.

16. Are there any notification requirements which apply to insurers or reinsurers under Article 3m and 3n?

Last update: 30 June 2023

No, the notification requirements, which are set out in Article 3m do not apply to insurers/reinsurers. There are no notification requirements which apply to insurers or reinsurers in Article 3n.

13. REPORTING ON OUTGOING TRANSFERS

RELATED ARTICLE: ARTICLE 5r OF COUNCIL REGULATION 833/2014

1. What is the purpose of this measure?

Last update: 12 April 2024

The new requirement will give national competent authorities (NCAs) better visibility on the flow of funds related to Russian-owned entities out of the EU, without jeopardising the activities of entities that are (partly) Russian-owned and operating legitimately in the EU. This will allow NCAs to assess better whether certain types of transfers pose a risk of violation of Russia-related sanctions and contribute to mapping out Russia’s sources of revenue.

This measure sets out a reporting obligation that applies to:

• [Paragraph 1:] legal persons, entities and bodies established in the Union whose proprietary rights are directly or indirectly owned for more than 40 % by a legal person, entity or body established in Russia; a Russian national; or a natural person residing in Russia.

• [Paragraph 2:] credit and financial institutions.

2. Does Article 5r cover only profit repatriation, or all types of transfers? Does it block/prevent profit repatriation?

Last update: 12 April 2024

The new measure covers all types of transfers leaving the EU/Member States’ jurisdiction to go outside of it, made by the relevant Russian-owned companies, including for the purpose of profit repatriation. It is not meant to stop profit repatriation but to identify flows of funds, including profit repatriation.

3. Does Article 5r concern all types of funds?

Last update: 12 April 2024

The measure includes all types of funds, regardless of the currency. In accordance with Article 1(zd), “funds” means financial assets and benefits of every kind, including, but not limited to:

(i) cash, cheques, claims on money, drafts, money orders and other payment instruments;

(ii) deposits with financial institutions or other entities, balances on accounts, debts and debt obligations;

(iii) publicly- and privately-traded securities and debt instruments, including stocks and shares, certificates representing securities, bonds, notes, warrants, debentures and derivatives contracts;

(iv) interest, dividends or other income on or value accruing from or generated by assets;

(v) credit, right of set-off, guarantees, performance bonds or other financial commitments;

(vi) letters of credit, bills of lading, bills of sale; and

(vii) documents showing evidence of an interest in funds or financial resources.

4. Does Article 5r cover transfers of funds held in a branch of an EU credit or financial institution or an EU operator located outside the EU?

Last update: 12 April 2024

Yes, Article 5r covers transfers of funds held in a branch of an EU credit or financial institution or an EU operator located outside the EU. The reporting obligations in Article 5r are binding on every legal person, entity or body falling under the scope of Article 13 of Council Regulation 833/2014 (EU operator). First and foremost, this obligation will be relevant for entities incorporated under the law of a Member State and also located in a Member State. However, branches of such entities and institutions do not have a separate legal personality of their own, and thus the responsibility for their actions falls onto their EU main entity or institution. In addition, from an accounting consolidation perspective, the funds ‘held’ by the third country branch are generally considered to be part of the balance sheet of the main credit or financial institution or operator in the EU.

5. Does Article 5r cover transfers of funds held in a subsidiary of an EU bank or an EU operator located outside the EU?

Last update: 12 April 2024

No, Article 5r would not cover transfers of funds held in a subsidiary of an EU credit or financial institution or an EU operator located outside the EU. However, Article 12 on circumvention will be relevant where subsidiaries outside of the EU are used by the EU entities referred to in Article 5r, including banking and financial institutions, to avoid the application of that Article, for example where the consolidation of accounts mentioned in Question 4 or of other elements allowing to conclude that the subsidiary acts “as one” with the parent EU entity.

6. What does the term “indirect transfer of funds out of the EU” mean?

Last update: 12 April 2024

A direct transfer of funds goes from an entity established in the EU to a recipient outside the EU. An indirect transfer of funds would go, for instance, from an entity established in the EU, through one or several intermediaries within the EU, and then to a recipient outside the EU.

7. Is there a minimum threshold amount that should be considered when cumulative operations are involved?

Last update: 12 April 2024

The obligation to report applies for transfers of an amount exceeding, in sum, 100 000 EUR or more made in one or several operations by the same party subject to the relevant reporting requirement. There is no minimum threshold for individual operations that are part of the sum total of all relevant transfers. The cumulative amount of 100 000 EUR applies within the reporting period, which is each quarter, as indicated in paragraph 1 and each semester as indicated in paragraph 2.

8. Which period should the first reporting cover? When should the reports be submitted?

Last update: 12 April 2024

The first reporting by the obliged operators under paragraph 1 of Article 5r, should cover the period between 1 January and 31 March 2024. The obligation to submit it, however, does not kick in until 1 May 2024. This way, the Regulation allows more time to obliged entities to make this first reporting, to facilitate compliance with this new obligation. Starting with the second quarter (Q2) of 2024, reporting should be done two weeks after the end of each quarter, eg for Q2 by 15 July; for Q3 by 15 October; for Q4 by 15 January 2025, and for Q1 2025 by 15 April 2025.

The obligation to report for credit and financial institutions initiating the funds transfers subject to paragraph 2 of Article 5r kicks in on 1 July, hence the day after the end of the first semester. Therefore, the first report should be submitted by 15 July 2024; and for S2 by 15 January 2025.

9. Should reporting under Article 5r take into account aggregate ownership?

Last update: 12 April 2024

Yes, reporting should take aggregate ownership into account. The purpose of Article 5r is to capture entities that are owned to more than 40% by Russian persons. Article 5r paragraph 1(a)-

(c) a natural person residing in Russia.” This should be read as a cumulative ‘or’, since the provision does not indicate that it should be the ownership of a single legal person etc.

10. Which criteria should be applied to determine indirect ownership? Does this include control?

Last update: 12 April 2024

Indirect ownership can be understood as not having nominal ownership over the entity, but rather via a chain of intermediaries.

Indirect ownership should not be confused with control, which is established as a result of a factual assessment, taking into account all relevant circumstances. Therefore, EU legal entities, which meet one or more of the three 40% direct / indirect ownership criteria, fall within the scope of application of Article 5r. The criterion of control is not relevant for the purposes of Article 5r.

11. Do associations and foundations fall within the scope of Article 5r?

Last update: 12 April 2024

The obligation applies to legal persons, entities and bodies. NCAs should apply the usual definition they apply to these terms. If more than 40% of an entity’s property rights are ultimately owned by persons falling under Article 5r paragraph 1 (a)–(c), the relevant entity and the relevant institution must report.

12. How shall credit and financial institutions identify a legal person, entity or body referred to in Article 5r paragraph 1 which is owned (for more than 40%) by the relevant Russian party?

Last update: 12 April 2024

Credit and financial institutions can use for this purpose the client data they have stored in accordance with general legal KYC requirements. If those requirements do not include all of the information referred to in Article 5r para. 1 yet, such information needs to be collected on the basis of the relevant institutions' regular client review.

13. Does Article 5r paragraph 1 (b) of Council Regulation 833/2014 cover also Russian nationals with a dual citizenship (including EU citizens)?

Last update: 12 April 2024

Yes, it does.

14. Will the Commission clarify the expected content of the reporting?

Last update: 12 April 2024

The Commission has published a reporting template to be used by the entities concerned and by EU banks. The template can be accessed here. This template is a recommendation, the entities concerned and EU banks are not obliged to use this specific template.

15. Who must report – on Group level or per EU legal entity?

Last update: 12 April 2024

The reporting obligation under Article 5r paragraph 2 is on those credit and financial institutions that have initiated the relevant transfers for the legal persons entities and bodies referred to in paragraph 1. At the same time, the reporting needs to be addressed to the competent authority of the Member State where the institution is located. In other words, the reporting has to be performed on the legal entity level.

16. Do credit and financial institutions referred to in Article 5r paragraph 2 need to report transfers covered by this measure if the entity referred to in Article 5r paragraph 1 has already reported?

Last update: 12 April 2024

Yes, they do.