Clarifications regarding sanctions against Russia
In a statement, the Cyprus Ministry of Finance proceeded recently with clarifications on the 5th package of EU restrictive measures against Russia and Belarus.
As stated in the announcement of the Ministry of Finance on 8 April 2022, the Council of the European Union decided to impose additional restrictive measures (5th package) against Russia and Belarus, which amends Regulation 833/2014 with Council Regulation (EU) 2022/576.
The new sanctions package also covers restrictive measures on trusts in relation to which there have been various questions from market participants.
Therefore, the Ministry of Finance clarifies the following in relation to Article 5(m) of the Regulation:
Under this Article, it is prohibited to register, provide a registered office, business or administrative address, as well as management services, in new trusts or in any similar new legal arrangement that has as trustees or beneficiaries:
(a) Russian nationals or natural persons residing in Russia;
(b) legal persons, entities or other forms of entities incorporated in Russia;
(c) legal persons, entities or other formations whose property rights are directly or indirectly held by more than 50 % of a natural or legal person, entity or body referred to in points (a) or (b);
(d) legal persons, entities, or bodies controlled by a natural or legal person, entity or body referred to in points (a), (b) or (c);
(e) a natural or legal person, entity, or body acting on behalf of or on behalf of a natural or legal person, entity or body referred to in points (a), (b), (c) or (d).
It is noted that these prohibitions do not concern companies but only trusts. These arrangements are similar to those of Article 5(b) of the same Regulation concerning deposits.
It is also noted that a reference to a “similar legal arrangement” is made in a relevant EU notification, which specifies that the term in relation to the legal framework of Cyprus, refers to trusts and international trusts.
As of May 10, 2022, it is prohibited to act or arrange for another person to act as an administrator, an authorized shareholder, a director, a secretary or similar office, for a new trust or a new similar legal arrangement.
In addition, under article 5(m)(4)(m), those prohibitions shall not apply where the trustee or beneficiary is a national of a Member State or a natural person holding a temporary or permanent residence permit in a Member State.
The above clarifications are provided on an informal basis. The Court of Justice of the European Union has the sole power to interpret European legal texts.
The European Commission has issued Q&A in relation to sanctions adopted which can be accessed here >
Since the sanctions against Russia are changing or modified as long as the conflict in Ukraine is still ongoing, we strongly advise that any sanctioned entity or person should seek specific professional advice according to their specific needs and circumstances in order to receive specific instructions and guidance.
Our firm remains at your disposal for assistance and if you as a person or your company fall under the scope of any sanctions you can contact us directly.