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Financial Services Law Insights and Observations

OFAC targets Russian wealth, imposes sanctions on Putin and Lavrov

Financial Crimes Of Interest to Non-US Persons Department of Treasury OFAC OFAC Sanctions OFAC Designations Russia Ukraine FINRA Ukraine Invasion

Financial Crimes

During February and March, as conflict continued to escalate in Ukraine, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) imposed significant new sanctions, including most recently designations targeting numerous Russian elites and their family members for continuing to provide direct and indirect support to the Russian government through their business empires, wealth, and other resources. (See also General License 15.) The sanctions also targeted six of the individuals companies, one of Russia’s largest privately-owned aircraft, and one of the world’s largest superyachts. The actions were taken in close coordination with the EU, UK, Canada, Japan, the ROK, and Australia as part of a “transatlantic effort to further deny Russian elites the benefits of their kleptocracy” and to ensure the effective implementation of recently announced financial sanctions. An additional 26 Russia- and Ukraine-based individuals and seven Russian entities connected with the Russian government’s efforts to promulgate disinformation and influence perceptions were also sanctioned by OFAC, while the Department of State imposed substantial costs on 22 Russian defense-related firms. OFAC also released three new Russian harmful foreign activities sanctions FAQs.

OFAC also imposed significant sanctions against the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, and the Ministry of Finance of the Russian Federation, as well as three entities that manage one of Russia’s key sovereign wealth funds: the Russian Direct Investment Fund, its management company, and one of the managing company’s subsidiaries. Sanctions were also imposed against Russian President Vladimir Putin and Minister of Foreign Affairs Sergei Lavrov, along with directors of the Foreign Intelligence Service, the Federal Security Service and the Federal Service of National Guard Troops, the interior minister, and other top government officials (see announcements here and here). As a result of the sanctions, all property and interests in property belonging to the sanctioned individuals and entities, and “any entities that are owned, directly or indirectly, 50 percent or more” by the blocked persons that are subject to U.S. jurisdiction are blocked and must be reported to OFAC. U.S. persons are prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons, unless exempt or authorized by a general or specific OFAC license. The Financial Industry Regulatory Authority also sent a regulatory notice alerting members of recent sanctions-related developments and advising members to continue to monitor OFAC’s website for relevant information.

OFAC also issued Directive 4 under Executive Order (E.O.) 14024, which prohibits related 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, unless otherwise authorized by OFAC. Entities subject to Directive 4 can be found in OFAC’s updated list of Specially Designated Nationals or on OFAC's Non-SDN Menu-Based Sanctions List. Additionally, OFAC issued Russia-related General License 8A to authorize certain energy transactions with specified entities through 12:01 a.m. eastern daylight time, June 24, 2022.

OFAC further announced that it is adding regulations to implement E.O. 14024 related to specified harmful foreign activities of the Russian government (covered by InfoBytes here). OFAC stated it plans to supplement these regulations with a more comprehensive set of regulations that may include additional interpretive guidance and definitions, general licenses, and other regulatory provisions.

Additionally, President Biden, along with leaders of the European Commission, France, Germany, Italy, the UK, and Canada, issued a joint statement imposing further restrictive economic measures to further isolate Russia from the international financial system. The leaders agreed to block certain Russian banks from accessing the SWIFT global messaging system in order to harm the banks’ ability to operate globally and announced their commitment to “restrictive measures” against the Russian Central Bank to prevent the deployment of its international reserves in a manner that undermines the impact of these sanctions. The announcement further noted that the leaders plan to launch a transatlantic task force to ensure financial sanctions are effectively implemented through the identification and freezing of assets belonging to sanctioned individuals and companies that exist within their countries’ jurisdictions. Actions will include “employing sanctions and other financial and enforcement measures on additional Russian officials and elites close to the Russian government, as well as their families, and their enablers.”

Find continuing InfoBytes coverage on the U.S. sanctions response to Russia’s invasion of Ukraine here.

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