Russia Sanctions Act 2022

The Russia Sanctions Act 2022 enables New Zealand to impose sanctions in response to Russia's military actions and related assistance. It provides a legal framework for sanctions but does not itself list prohibited dealings or designated persons.

Sanctions are imposed through regulations made by the Governor-General on the Minister's recommendation. Designation notices may identify specific persons, assets, or services covered by the regulations.

Businesses must check the current regulations, designation notices, and the sanctions register before engaging in higher-risk dealings.

The Act allows regulations to apply to dealings inside New Zealand involving assets or services connected to persons or entities outside New Zealand. It also covers some dealings outside New Zealand by New Zealand citizens, residents, or entities.

This means businesses can be affected even without direct trade with Russia.

The Act defines assets broadly as anything capable of ownership, tangible or intangible, including cryptocurrency.

Dealing with assets includes activities such as using, receiving, providing, exchanging, trading, transferring, holding, lending, importing, exporting, paying for, buying, selling, gifting, disposing of, providing access to, or facilitating these dealings.

Services are also broadly defined and include advice, assistance, training, electronic services, communications, bunkering, carriage, financial, accounting, insurance, military activities, and services facilitating other activities.

The Governor-General makes sanctions regulations by Order in Council on the Minister's recommendation. Regulations must state their purpose, describe the persons, assets, or services covered, specify prohibitions or restrictions, and set out compliance duties.

The Secretary may issue designation notices to identify particular persons, assets, or services fitting the regulatory descriptions.

Regulations and designation notices have a fixed term, generally up to 3 years, unless extended.

Sanctions issues often arise during routine business activities, not only exports.

Common trigger points include onboarding new overseas customers or suppliers, processing payments involving multiple parties, arranging freight, providing remote software access, or managing assets held for others.

Because the Act includes facilitation in its definitions, intermediary roles can also be affected.

Section 15 imposes reporting duties on duty holders, which include AML/CFT reporting entities and others declared by regulation.

If a duty holder suspects on reasonable grounds that they possess or control designated assets or services, or assets or services owned or controlled by designated persons, they must report this to the Commissioner as soon as practicable and no later than 3 working days after forming the suspicion.

Urgent oral reports may be made first to a constable or Police employee but must be followed by a formal report within 3 working days.

The Act prevents contracting out of sanctions. Sanctions apply despite any contract or agreement.

Contract terms that require a person to breach a sanction or to not report as required have no effect.

This means a contract cannot override a sanction if the dealing is prohibited or restricted.

The Act provides for civil and criminal enforcement.

The Attorney-General may issue warnings, accept enforceable undertakings, seek court orders, or injunctions for breaches or likely breaches of sanctions.

Knowingly or recklessly breaching a sanction is a criminal offence. Individuals face up to 7 years imprisonment or fines up to $100,000, or both. Entities face fines up to $1 million.

Additional penalties may be imposed up to three times the value of any commercial gain from the offence.

Offences also cover false or misleading information in applications and reports, and failure to report as required.

The Act extends New Zealand's jurisdiction to offences committed wholly outside New Zealand if the person is a New Zealand citizen, ordinarily resident, or a New Zealand-incorporated or registered entity.

This means offshore dealings by New Zealand-linked persons or entities can still create New Zealand legal risk.