Putin signs law on blocking funds of foreigners under sanctions

The law also regulates the list of organizations that are subject to the regime of restrictions in the form of special economic measures, and also expands the powers of the Central Bank against non-credit financial organizations that violate this law .

Russian President Vladimir Putin signed a law on the blocking of funds and property of legal entities controlled by foreign organizations and foreigners against whom Moscow applies restrictive measures. The document is published on the official portal of legal acts.

“Blocked persons are understood to be foreign states or organizations, <…> legal entities controlled by foreign states,” the document says. According to the law, economic measures can be aimed at prohibiting financial transactions.

So, after the introduction of sanctions by Russia against legal entities, their funds and property will be blocked. These restrictions can be applied in case of unfriendly actions of countries that threaten the national security of Russia.

At the same time, the blocked person remains entitled to receive funds to accounts in Russian banks, receive and spend pensions, scholarships, allowances, social benefits, and pay taxes. It will also be able to receive wages and spend it in the amount of up to 10 thousand rubles. per month for each family member.

In addition, the law regulates the list of organizations subject to the regime of restrictions in the form of special economic measures: pawnshops, credit cooperatives, microfinance organizations and others. Thus, a gambler who is subject to special economic measures will not be able to place bets or receive winnings at a bookmaker's office.

The powers of the Central Bank are expanding in relation to non-credit financial organizations that violate this law. The Bank of Russia will be able to impose restrictions on their activities for up to six months, including limiting the attraction of funds and the issuance of loans.

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The law comes into force 180 days after its official publication.

Kira Vinokurova, co-head of the sanctions law and compliance practice at Pen & Paper, explained to RBC that, according to the amendments, blocking is possible for two categories of subjects of law:

in relation to foreign states, organizations, citizens and stateless persons; legal entities controlled by foreign citizens and their structures, if they are subject to special economic measures.

Controlled organizations are understood as organizations in which foreigners directly or indirectly have the right to dispose of 50% of the votes in the supreme governing body.

“Thus, the new regulation may affect any foreign company or Russian company controlled by foreign persons if special economic measures are introduced against it by Russia,” Vinokurova specified.

If a foreign company falls into this category, then there are risks of blocking all its property, including securities. 

In April, Putin signed a decree according to which, when the property of Russia, Russian citizens or companies associated with such countries is confiscated in the United States and other countries that “joined them”, property in Russia is transferred to temporary management.

The list of such property now includes three items: a stake in the Unipro energy company (87.73%, owned by the German Uniper) and two stakes in the Finnish energy Fortum (69.8807 and 28.3488%, owned by Fortum Russia and " Fortum Holding).