April 17, 2024

EU publishes FAQs concerning sanctions against Russia and new reporting obligations

On April 12, 2024, the European Commission published Frequently Asked Questions on new reporting requirements related to EU sanctions against Russia and, in particular, Article 5r of Council Regulation 833/2014 concerning restrictive measures in view of Russia’s efforts to destabilize the situation in Ukraine.  According to the FAQs, Article 5r establishes new reporting requirements intended to provide national competent authorities (“NCAs”) with information on the flow of funds out of the European Union related to Russian-owned entities as opposed to entities that are partly Russian-owned and are legitimately operating in the European Union.  The reports are also intended to enable NCAs to better assess whether certain types of transfers pose a risk of violating Russia-related sanctions and to help determine the sources of Russia’s revenue.

The new measure applies to legal persons and entities established in the European Union whose proprietary rights are owned more than 40 percent by a Russian entity, Russian national, or natural person residing in Russia (“Obliged  Operators”).  The measure also applies to credit and financial institutions.  It covers all types of financial transfers out of the EU/Member States, including transfers for the purpose of profit repatriation.  The Commission emphasized in the FAQs that Article 5r was not established to stop profit repatriation but to enable authorities to identify the outward flow of certain funds.  The reporting obligations take effect on May 1, 2024 for Obliged Operators and on July 1, 2024 for credit and financial institutions.

The FAQs provide a comprehensive description of the types of funds that must be reported, regardless of the currency.  The FAQs also clarify several provisions in Article 5r, including the meanings of certain terms, minimum threshold amounts, and how often reports must be submitted to EU authorities.

European Commission Reporting Guidelines | FAQs – Reporting on outgoing transfers