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OFAC issues FAQs related to securities investments in Chinese military companies
On June 1, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) published three new frequently asked questions related to the Chinese military-industrial complex sanctions. As previously covered by InfoBytes, Executive Order 13959, as amended, addressed threats from securities investments that finance Communist Chinese military companies. The FAQs address questions pertaining to (i) whether U.S. financial institutions are required to block the attempted purchase or sale of covered securities after the relevant 365-day divestment period; (ii) whether U.S. financial institutions are permitted to process transactions for holders of covered securities related to stock splits, cash dividends, or dividend reinvestments; and (iii) whether U.S. persons are required to divest their holdings of covered securities before the end of the relevant 365-day divestment period.
OFAC updates Syrian sanctions guidance; issues DPRK advisory on information technology workers
On May 12, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) amended a Frequently Asked Question (FAQ) and published a new General License (GL) regarding Syrian sanctions. Back in April (covered by InfoBytes here), OFAC published FAQ 884, which relates to non-U.S. persons’ (including nongovernmental organizations and foreign financial institutions) exposure to U.S. secondary sanctions under the Caesar Syrian Civilian Protection act of 2019 (Caesar Act). Specifically, FAQ 884 addresses sanctions exposure for activities authorized under the Syrian Sanctions Regulations. OFAC’s recent update of FAQ 884 clarifies that “OFAC will not consider transactions to be ‘significant’ for the purpose of a sanctions determination under the Caesar Act if U.S. persons would not require a specific license from OFAC to participate in such a transaction.” Additionally, GL 22 now authorizes “activities in certain economic sectors in non-regime held areas of Northeast and Northwest Syria.”
Later in the week, OFAC announced that Treasury, the Department of State, and the FBI issued an advisory regarding an attempt by the Democratic People’s Republic of Korea (DPRK) and DPRK information technology (IT) workers to obtain employment while posing as non-DPRK nationals. Among other things, the advisory provides information on how DPRK IT workers operate and identifies red flags for companies to avoid hiring DPRK freelance developers. A Fact Sheet was also published to provide information on the advisory.
SBA says nonprofit lenders are eligible for PPP loan forgiveness
On May 5, the SBA added question #70 to its Paycheck Protection Program (PPP) frequently asked questions explaining that 501(c)(3) nonprofit lenders are eligible for PPP loan forgiveness provided they have complied with all applicable PPP rules aside from 13 CFR 120.110(b). 13 CFR 120.110(b) provides that non-profit businesses and other financial businesses that are “primarily engaged in the business of lending” are ineligible for SBA business loans. While the CARES Act specifically allowed nonprofit organizations to be eligible for PPP loans, it did not mention financial businesses/lenders, which SBA interpreted as “allowing nonprofits to overcome the 13 CFR 120.110 restriction, but not lenders.” Following a review of the agency’s PPP loan records, SBA found that 501(c)(3) nonprofit lenders were confused as to whether they were eligible for PPP loans. In order to provide clarity, SBA “determined that 501(c)(3) nonprofit lender borrowers reasonably relied on the CARES Act’s nonprofit authority regarding their eligibility for a PPP loan. In addition, enforcing the Forgiveness and Loan Review IFR (86 FR 8283) that provides for denial of forgiveness to 501(c)(3) nonprofit lenders due to application of the PPP eligibility rule incorporating 13 CFR 120.110(b) will negatively affect the remaining small number of 501(c)(3) nonprofit lenders that have not yet received forgiveness.” As such, the SBA administrator has elected to exercise broad discretion “to decline to enforce the Forgiveness and Loan Review IFR rule providing for denial of forgiveness to ineligible borrowers for 501(c)(3) nonprofit lenders” and will allow such lenders to be eligible for forgiveness of their PPP loans.
DOJ seizes $300 million yacht as part of Task Force KleptoCapture; OFAC issues Russia-related general licenses and updated FAQs
On May 5, the DOJ executed a seizure warrant freezing a $300 million yacht owned by a sanctioned Russian oligarch, following a determination that the yacht is subject to forfeiture based on probable cause of violations of U.S. law, including the International Emergency Economic Powers Act, money laundering and conspiracy. The Russian oligarch was designated in 2018 by the U.S. Treasury Department’s Office of Foreign Assets Control pursuant to the Countering America’s Adversaries Through Sanctions Act and Executive Order (E.O.) 13582 (covered by InfoBytes here). According to the DOJ’s announcement, the sanctioned oligarch owned the yacht after his designation and “caused U.S. dollar transactions to be routed through U.S. financial institutions for the support and maintenance of the [yacht].” The seizure was coordinated through the DOJ’s Task Force KleptoCapture, which is “an interagency law enforcement task force dedicated to enforcing the sweeping sanctions, export controls, and economic countermeasures that the United States, along with its foreign allies and partners, have imposed in response to Russia’s unprovoked military invasion of Ukraine” (covered by InfoBytes here.)
The same day OFAC also issued several Russia-related general licenses (GL), including GL 7A, which authorizes “transactions ordinarily incident and necessary to the receipt of, and payment of charges for, services rendered in connection with overflights of the Russian Federation or emergency landings in the Russian Federation by aircraft registered in the United States or owned or controlled by, or chartered to, U.S. persons that are prohibited by the Russian Harmful Foreign Activities Sanctions Regulations”; GL 26A, which authorizes all transactions ordinarily incident and necessary to the wind down of transactions involving Joint Stock Company SB Sberbank Kazakhstan or Sberbank Europe AG, or any entity that Sberbank subsidiaries owns, through July 12, provided certain criteria are met; GL 31, which authorizes certain transactions related to patents, trademarks, copyrights, or other forms of intellectual property protections in the U.S. or Russia that would otherwise be prohibited; and GL 32, which authorizes the wind down of transactions involving Amsterdam Trade Bank NV that would ordinarily be prohibited by E.O. 14024 through July 12. Additionally, OFAC issued one new and one amended Russia-related frequently asked questions.
OFAC issues Russian sanctions, general licenses, and expanded E.O.s
On May 8, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced “sweeping” sanctions, which include the designations of board members from two of Russia’s most important banks, a Russian state-owned bank and 10 of its subsidiaries, a state-supported weapons manufacturer, and three of Russia’s state-controlled television stations that generate revenue for the state. OFAC also published a Determination Pursuant to Section 1(a)(i) of Executive Order (E.O.) 14024 and a Determination Pursuant To Section 1(a)(ii) Of E.O. 14071. According to OFAC's press release, the sanctions, issued pursuant to E.O. 14071, “cut off access to services that are used by the Russian Federation and Russian elites to evade sanctions.” OFAC identified accounting, trust and corporate formation, and management consulting as categories of services that are subject to a prohibition on the export, reexport, sale, or supply, directly or indirectly, from the U.S., or by a U.S. person, wherever located, to any person located in the Russian Federation. Additionally, OFAC determined that these same services sectors of the Russian Federation economy are subject to sanctions pursuant to E.O. 14024. OFAC also issued four Russia-related general licenses (GLs): (i) GL 25A authorizes transactions related to telecommunications and certain internet-based communications; GL 33 authorizes the wind down of operations or existing contracts involving certain blocked entities; GL 34 authorizes the wind down of accounting, trust and corporate formation, and management consulting services; and GL 35 authorizes transactions involving credit rating and auditing services. OFAC also issued a new frequently asked question clarifying transactions related to telecommunications and certain internet-based communications that involve Joint Stock Company Channel One Russia, Television Station Russia-1, or Joint Stock Company NTV Broadcasting Company authorized by Russia-related GL 25A.
OFAC also recently published amended Russia-related frequently asked questions 1034, 1035, and 1038 clarifying, among other things, (i) terms related to Executive Order (E.O.) 14071’s prohibition on certain accounting, trust and corporate formation, and management consulting services; (ii) what “credit rating services” and “auditing services” mean under General License 35; and (iii) certain activities related to products and services in or involving the Russian Federation in relation to E.O. 14024.
Find continuing InfoBytes coverage on the U.S. sanctions response to Russia’s invasion of Ukraine here.
OFAC amends and reissues the Ukraine-Related Sanctions Regulations
On April 29, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced that it amended and reissued the Ukraine-Related Sanctions Regulations, renaming them the Ukraine-/Russia-Related Sanctions Regulations. According to OFAC, this action replaces the regulations that were published in abbreviated form on May 8, 2014 with a more comprehensive set of regulations, including additional interpretive and definitional guidance, general licenses, and other regulatory provisions. OFAC also announced that it is revising several FAQs for the Ukraine-/Russia-Related Sanctions Regulations. OFAC also noted that “[t[he publication of this final rule has triggered an automatic administrative update to a number of sanctions entries. The unique identifier numbers (UIDs) for the affected entries are listed . . . as part of this administrative update.” The Ukraine-/Russia-Related Sanctions Regulations take effect May 2.
The same week, OFAC published Russia-related General License 30, “Authorizing Transactions Involving Gazprom Germania GmbH Prohibited by Directive 3 under Executive Order 14024,” which authorizes all transactions involving Gazprom Germania GmbH, or any entity in which Gazprom Germania GmbH owns, under certain criteria.
Find continuing InfoBytes coverage on the U.S. sanctions response to Russia’s invasion of Ukraine here.
FinCEN renews GTOs covering 12 metropolitan areas
On April 29, FinCEN reissued the renewal of its Geographic Targeting Orders (GTOs). The GTOs require U.S. title insurance companies to identify the natural persons behind shell companies that pay “all cash” (i.e., the transaction does not involve external financing) for residential real estate in the 12 major metropolitan areas covered by the orders. The renewed GTOs are identical to the October 2021 GTOs (covered by InfoBytes here). The purchase amount threshold for the beneficial ownership reporting requirement remains set at $300,000 for residential real estate purchased in the covered areas. The renewed GTOs take effect April 30 and end October 26, and cover certain counties within the following areas: Boston, Chicago, Dallas-Fort Worth, Honolulu, Las Vegas, Los Angeles, Miami, New York City, San Antonio, San Diego, San Francisco, and Seattle.
FinCEN FAQs regarding GTOs are available here.
OFAC issues new Ukraine-/Russia-related general licenses and updated FAQs
On April 25, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued Ukraine-/Russia-related General License (GL) 13R, “Authorizing the Wind Down of Certain Transactions Necessary to Divest or Transfer Debt, Equity, or Other Holdings in GAZ Group,” which authorizes all transactions ordinarily incident and necessary to the wind down of certain transactions by a non-U.S. person to another non-U.S. person through May 25, provided certain criteria are met. OFAC also issued GL 15L, “Authorizing the Wind Down of Transactions Involving GAZ Group,” which also authorizes certain transactions ordinarily incident and necessary to the wind down of transactions involving the GAZ Group, or any entity in which the GAZ Group owns, directly or indirectly, a 50 percent or greater interest. This wind down period also goes through May 25. Additionally, OFAC updated several related frequently asked questions about Ukraine-/Russia-related sanctions.
OFAC sanctions facilitators of Russian sanctions evasion
On April 20, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 14024 against several entities and numerous individuals for attempting to evade sanctions imposed by the U.S. and its international partners on Russia. Included in the designations are a Russian commercial bank, a global network comprised of more than 40 individuals and entities led by a previously designated Russian oligarch (“including organizations whose primary mission is to facilitate sanctions evasion for Russian entities”), and several companies operating in Russia’s virtual currency mining industry. According to OFAC, this is the first time a virtual currency mining company has been sanctioned. In coordination with OFAC’s sanctions, the Department of State took further action by imposing visa restrictions on 635 Russian nationals and three Russian Federation officials for their involvement in human rights abuses, as well as 17 individuals responsible for undermining democracy in Belarus.
As a result of the sanctions, all property and interests in property belonging to the sanctioned entities in the U.S. are blocked and must be reported to OFAC. Additionally, “any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons are also blocked.” OFAC noted that U.S. persons are prohibited from participating in transactions with the sanctioned persons unless authorized by a general or specific license.
On the same day, OFAC issued new frequently asked question guidance clarifying obligations for credit card operators with regard to payment cards issued by sanctioned Russian financial institutions. OFAC also published two Russia-related general licenses: (i) General License 28 authorizes certain transactions involving a public joint stock company that are “ultimately destined for or originating from Afghanistan”; and (ii) General License 29 authorizes the wind down of transactions involving the same public joint stock company.
Find continuing InfoBytes coverage on the U.S. sanctions response to Russia’s invasion of Ukraine here.
OFAC sanctions Russian defense companies, political leaders, and Sberbank CEO
On March 24, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced several new sanctions in response to Russia’s invasion of Ukraine. The new sanctions, issued pursuant to Executive Order (EO) 14024, target dozens of Russian defense companies, 328 members of the Russian State Duma, and the CEO of Sberbank, Russia’s largest financial institution. According to OFAC, the sanctions target “companies that are part of Russia’s defense-industrial base and that produce weapons that have been used in Russia’s assault against Ukraine’s people, infrastructure, and territory,” and are intended to prevent 48 companies from accessing western technological and financial resources. The sanctions imposed against the Russian Duma members (political and national security leaders who have supported Russia’s invasion of Ukraine) expand on previous sanctions taken against other Duma members (covered by InfoBytes here) and expand designations to now include the State Duma itself as an entity. OFAC further noted that the sanctioned CEO of Sberbank is a close Putin associate who oversees a large number of companies owned by Sberbank in other industries. As a result of the sanctions, all property and interests in property belonging to the sanctioned persons that are in the U.S. or in the possession or control of U.S. persons, and “any entities that are owned, directly or indirectly, 50 percent or more” by the targeted persons are blocked and must be reported to OFAC. Additionally, 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 same day, OFAC also published one new Frequently Asked Question clarifying the impact of EO 14024 and other Russia-related sanctions on gold-related transactions or persons participating in the gold market.
Find continuing InfoBytes coverage on the U.S. sanctions response to Russia’s invasion of Ukraine here.