Australia: Russian Sanctions and Fund Managers

By: Jim Bulling and Kithmin Ranamukhaarachchi

As Russia’s invasion of Ukraine continues, global economic sanctions have evolved into a complex web of restrictions and prohibitions with limited exceptions. As a result, asset managers have more layers of regulation to navigate in relation to current holdings and future investments in virtually all markets directly or indirectly connected to Russia, Belarus and Ukraine (Region).

The Australian Minister for Foreign Affairs was granted stronger powers to designate individuals and entities for targeted financial sanctions if they are of strategic significance to Russia’s campaign. The designated individuals list now includes those involved in spreading propaganda, oligarchs, military commanders, Duma members, and certain Belarusian figures. As for designated entities, the list spans critical sectors of oil, mining, military, media and finance.

Despite the internationally unified message to exit Russian markets, Australian sanctions generally prohibit any sort of dealing with (including divesting) assets or financial instruments connected to designated individuals and entities. On the global stage, it seems that Australia (and Canada)­­ imposes more proscriptive measures on financial markets in the Region, relative to the USA, EU and UK. That being said, in light of recent developments, we are closely watching USA’s possible application of rarely used and far-reaching “secondary sanctions”.

This web of sanctions has highlighted the intricately interconnected world of asset management and investment. With funds exposed from sporting and media to mining and oil exploration, fund managers must be aware that providing financial or investment services to any person or entity connected to the critical sectors in the Region could breach sanctions laws. In Australia, this includes the provision of financial services, which is a broad term encompassing advice, brokering, insurance and other financial assistance that supports sanctioned sectors.

For a detailed breakdown, as relevant to fund managers, click the link to see our note on Australian Sanctions.