The details behind the financial sanctions on the World and European Champions.
Just over a month ago Chelsea Football Club defeated Palmeiras to become World Champions. Nine months before that they beat Manchester City on the way to European glory. It’s been a momentous year for the West London club, one that has brought with it more reasons to celebrate than commiserate. Now, all of that is in the past as the club has fallen under the sanctions imposed on its owner, Roman Abramovich.
What are financial sanctions?
To set the scene, the UK government is responsible for its own sanctions. They are a political tool and consequently the legislation has been drafted to ensure flexibility. The expanded criteria are broad in order to encompass a wide array of potential targets. Any person that is ‘involved in or obtaining a benefit from or supporting the Government of Russia’ can be sanctioned and become a designated person. This is the position that Abramovich currently finds himself in.
What do the financial sanctions mean practically?
A large swathe of UK businesses have a responsibility to ensure that they are compliant with sanctions. Estate agents, financial institutions, auditors, lawyers, holders of casino licences, accountants and tax advisors – as well as others – are required to report an offence against financial sanctions by a designated person. On top of that the penalty for someone who has breached sanctions is a maximum of 7 years imprisonment. Civil penalties can also be imposed.
How will these sanctions affect UK businesses?
It’s important that those businesses know what to check for. The Office of Financial Sanctions Implementation (OFSI) is responsible for implementing, publishing, and enforcing financial sanctions. They also deal with licences for those sanctions. These allow for specific actions to carry on. For instance, Chelsea can continue footballing operations as well as paying their players and staff. The UK government may also allow a licence for the sale of the club provided that no funds reach the designated person, Abramovich. It’ll be interesting to see how this progresses over the next few weeks.
The OFSI list includes every designated person. Businesses are prohibited from dealing with, or making available, funds or economic resources of that person unless a licence states otherwise. In other words, any sort of financial dealings with a designated person, a designated entity or an entity controlled by a designated person are prohibited. This is where Chelsea enters the equation, as an entity controlled by Roman Abramovich.
Spotting an entity controlled by a designated individual is not always easy. Control is defined as direct or indirect ownership of more than 50% of shares; control of board appointments; majority voting rights; or the ability to direct the company even if, on the surface, the individual appears to have no control. It’s obvious that Chelsea falls within this definition in relation to Mr. Abramovich. There are however real-life situations where the answer isn’t as clear cut. It’s important for businesses to pay close attention to their clients as well as other parties they are involved with. Continuous monitoring and screening of parties is strongly advised to ensure compliance.
As a business owner, what do you do if you’re suspicious?
The first step is to stop what you’re doing. Then ensure that you freeze any transactions and seek advice. It’s also important that you don’t tip off the designated person during the process. No work should continue until you have considered the need for a licence. Even after you have established that a licence is needed, this first must be obtained.
What do these financial sanctions mean for Chelsea FC?
All that means that we can’t buy any more tickets to watch Chelsea. They are a designated entity under the sanctions. Nor can we purchase a shirt or even a key ring. As it stands, the club will continue to play but, as the sanctions may change, there is uncertainty at Stamford Bridge.
Will the sale of the Club go through? Will Chelsea be able to fund the remainder of their fixture schedule? Will Thomas Tuchel, the manager, still be there at the end of the season?
As a fan, I’m hopeful that the club can continue and prosper, separate from Abramovich. As a legal professional, I’m interested in seeing how this pans out. The seemingly unconnected worlds of professional sport, international politics and UK sanction law have converged on Chelsea Football Club and right now no one knows what is going to happen next.
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