EU answers FAQs on impact of Russian sanctions on financial services firms

The FAQs focus on a range of individual topics and sub-sectors, including investment funds, insurance and reinsurance, deposits and trading. They form part of a wider piece of work from the EU supporting organisations grappling with the impact of sanctions introduced following Russia’s invasion of Ukraine at the end of February 2022.

The FAQs deal with common questions relating to the EU’s own sanctions against Russia. For example, in the investment funds FAQ (5 page / 113KB PDF), the EU clarifies that sanctions are applicable to a fund and the unit-holders and shareholders of the fund if their activities fall within the scope of the sanctions.

It also clarifies that sanctions apply to both primary and secondary markets and prohibit dealing with indirect investments falling in scope of the sanctions, among other issues.

Investment funds expert Gayle Bowen of Pinsent Masons said: “The implementation of the Russian sanctions in such a short time frame has presented difficulties for Irish funds and their managers in terms of how they should be applied.”

“Having a dedicated FAQ for funds and asset managers is useful in addressing some, although admittedly, not all of the various queries they have in terms of how these new rules should be imposed. We expect the number of issues addressed in these FAQs to expand over time,” Bowen said.

“In addition to these EU-level FAQs, Irish Funds – the industry body – has also prepared an FAQ document specifically for managers with Irish funds, addressing some queries that arise in relation to how to implement the Russian sanctions. We also understand that Irish Funds is updating its FAQ in light of the new EU FAQs document, and will prepare a more detailed FAQ addressing more queries that have arisen since its first publication,” she said.

The guidance focused on the insurance sector answers FAQs such as whether coverage is permitted for aircraft owned by non-Russian airlines flying in and out of Russia, wind-down provisions, and whether insurance of a transit via the EU of goods subject to sanctions is allowed.

The EU has also provided answers to general questions (7 page / 618KB PDF) on the sanctions, explaining why they are being imposed and what they mean for ordinary EU citizens, as well as the approach smaller businesses should take to payments to and from Russia.

The EU said it would continue to update the guidance to facilitate compliance with sanctions.