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Financial Services Law Insights and Observations

OFAC, DOJ measures aim for stronger compliance with Russian sanctions

Financial Crimes Digital Assets Of Interest to Non-US Persons Department of Treasury OFAC OFAC Sanctions OFAC Designations Russia Ukraine Ukraine Invasion DOJ Cryptocurrency

Financial Crimes

On March 2, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) and the DOJ announced new measures to strengthen compliance with Russia-related sanctions in response to the situation in Ukraine. OFAC observed that in the past few days, Russia has taken measures “to use exporters to act as their agents and help them raise resources to prop up their currency and fund their priorities.” In response, OFAC reiterated that such actions taken on behalf of Russia’s Central Bank are prohibited. Newly issued and updated frequently asked questions address enhanced sanctions compliance measures and further explain recent sanctions, including prohibitions imposed pursuant to Directive 4 under Executive Order (E.O.) 14024, “Prohibitions Related to Transactions Involving the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, and the Ministry of Finance of the Russian Federation.” (Covered by InfoBytes here.) Additionally, the updated FAQs clarify, among other things, that energy payments can and should continue. As explained in OFAC’s announcement, General License (GL) 8A permits “U-turn transactions” so that energy payments may be processed through non-sanctioned, third-country financial institutions to allow the continuation of transactions that support the flow of energy to the market. OFAC also issued new FAQs and general licenses (see GLs 9A, 10A, 13, and 14) related to E.O. 14065, “Blocking Property of Certain Persons and Prohibiting Certain Transactions With Respect to Continued Russian Efforts to Undermine the Sovereignty and Territorial Integrity of Ukraine” to further clarify the stipulated prohibitions.

The same day, the DOJ launched Task Force KleptoCapture, “an interagency law enforcement task force dedicated to enforcing the sweeping sanctions, export restrictions, and economic countermeasures that the United States has imposed, along with allies and partners,” in order to “isolate Russia from global markets.” “The Justice Department will use all of its authorities to seize the assets of individuals and entities who violate these sanctions,” Attorney General Merrick B. Garland stated. The Task Force will be staffed with DOJ prosecutors, agents, analysts, and professional staff with expertise in sanctions and export control enforcement, anticorruption, asset forfeiture, anti-money laundering, tax enforcement, national security investigations, and foreign evidence collection. According to the announcement, the Task Force will use data analytics, cryptocurrency tracing, foreign intelligence sources, and information from financial regulators and private sector partners to investigate and prosecute violations of new and future sanctions (both those related to the Ukraine invasion as well as those imposed for prior instances of Russian aggression and corruption), and “combat[] unlawful efforts to undermine restrictions taken against Russian financial institutions,” including prosecuting persons who attempt to evade know-your-customer and anti-money laundering measures. The Task Force will also target efforts to use cryptocurrency to launder foreign corruption proceeds and sanctions evasion and “us[e] civil and criminal asset forfeiture authorities to seize assets belonging to sanctioned individuals or assets identified as the proceeds of unlawful conduct.”

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