On the 18th March 2022, the Malta Sanctions Monitoring Board issued a guidance note on the interpretation of Article 5b of Council Regulation 2022/328 regarding the sanctions on Russia following its invasion of Ukraine.
Following amendments on the 1st March 2022 to Article 5h of Council Regulation 833/2014, it is stated that as from the 12th March 2022, it is prohibited to provide specialised financial messaging services which are used to exchange financial data to:
- any legal persons, entities or bodies listed under Annex XIV; and
- any legal persons, entities or bodies established in Russia and whose proprietary rights are directly or indirectly owned for more than 50% by an entity listed in Annex XIV.
This means that only subsidiaries of the seven credit institutions listed in Annex XIV established in Russia are covered by this prohibition.
In light of this, Article 5b prohibits acceptance of any deposits from Russian nationals or natural persons residing in Russia and legal persons, entities or bodies established in Russia, if the total value of deposits per credit institutions exceeds EUR 100,000. This restriction also applies to Russian nationals who have accounts in banks outside of Russia.
For this reason, EU operators must monitor the deposits and gather information per customer and per financial institution to determine from where these funds are generated, as long as they do not exceed EUR 100,000. Hence, a Russian natural or legal person, entity or body can transfer money from a Russian bank to a Maltese bank if the deposit does not exceed EUR 100,000. Otherwise, it will be rejected.
How does all this affect existing deposits in Maltese banks that exceed EUR 100,000 by the persons mentioned above? Regarding this, on the day of entry into force of Council Regulation 2022/328 of the 25th of February 2022, the said deposit is ‘grandfathered’. This means that the relevant person may keep and use the money, including withdrawals, but the balance cannot be increased in a way that it exceeds EUR 100,000.
It is important to note that companies who are registered and incorporated outside Russia (hence outside the EU), who have a Russian national, natural or legal person, entity or body as the Ultimate Beneficial Owner (“UBO”) are not expected to comply with the Regulation. However, EU operators must ensure that such non-EU entities are not used by a UBO who is a relevant person as mentioned above for the purposes of evading the sanctions.
For more information and assistance on the above do not hesitate to contact us.