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FAFT restricts Russia’s membership, takes action on corruption and drug trafficking
On October 20, the U.S. Treasury Department announced that the Financial Action Task Force (FATF) concluded its first plenary of the Singaporean presidency, in which it, among other things, took steps to combat corruption and illegal fentanyl trafficking and enhance financial transparency. During the meeting, FATF agreed to seek public input on draft guidance for implementing the FATF standard on beneficial ownership transparency for legal persons. The efforts to improve transparency in beneficial ownership “seek to improve the ability of law enforcement to trace, report, and seize illicit proceeds, and to make it harder for criminals and others to exploit opaque legal structures such as shell companies to hide and launder the proceeds of their crimes.” FATF also adopted a U.S.-led report on money laundering related to the illicit trafficking of synthetic opioids, including fentanyl, which provides information and best practices so that law enforcement and financial investigators around the world can expand their work on complex, cross-border money laundering investigations involving the proceeds of drug trafficking. The FATF also agreed to additional restrictions on the membership rights of the Russian Federation due to its war against Ukraine, including by barring them from participating in current and future FATF project teams.
OFAC sanctions Russian military technology procurement network
On October 19, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 14024 against a Russian military technology procurement network for allegedly procuring military and sensitive dual-use technologies from U.S. manufacturers and supplying them to Russian end-users. The individual and his two companies are designated as part of a joint action with the DOJ and FBI and highlights the U.S. government’s on-going “efforts to hinder Russia’s ability to wage its war of aggression in Ukraine, including by holding accountable those who support Russia’s military by disrupting its illicit defense and technology procurement networks around the world.” The action builds upon an October 14 alert issued by OFAC and the Department of Commerce’s Bureau of Industry and Security and the Department of State, which details the impact of international sanctions and export controls (covered by InfoBytes here). The alert followed the convergence of top officials representing ministries of finance and other government agencies from 33 countries who met to discuss the effects of international sanctions and export controls on Russia’s military-industrial complex and critical defense supply chains.
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 are blocked and must be reported to OFAC. Further, “any entities that are owned, directly or indirectly, 50 percent or more in the aggregate by one or more of such persons are also blocked.” 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, the DOJ (with the support of the Department’s Task Force KleptoCapture) unsealed indictments against nearly a dozen individuals and several entities, including the sanctioned Russian national and his two companies, accused of scheming to export military technologies to Russia.
OFAC updates Russia-related general license
On October 17, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued Russia-related General License (GL) 28A, which authorizes certain transactions through January 18, 2023, involving a public joint stock company that are “ultimately destined for or originating from Afghanistan” and that are normally prohibited by Executive Order 14024. OFAC explained that U.S. financial institutions are authorized to operate correspondent accounts on behalf of the company, “or any entity in which [the company] owns, directly or indirectly, a 50 percent or greater interest, provided such accounts are used solely to effect transactions” as authorized by GLA 28A’s specifications. GL 28A replaces and supersedes GL 28 (covered by InfoBytes here).
OFAC issues Russian sanctions alert
On October 14, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) published a Russia-related alert, Impact of Sanctions and Export Controls on Russia’s Military-Industrial Complex. The alert, issued by OFAC, the Department of Commerce’s Bureau of Industry and Security, and the Department of State, is intended to inform the public of the impact of sanctions and export control restrictions targeting Russia’s defense capabilities and warn of the risks of supporting Russia’s military-industrial complex. The alert also, among other things, outlined efforts taken by OFAC and the State Department involving Russia since February 2022, such as issuing approximately 1,500 new and 750 amended sanctions listings. The alert also described the strategic intent and impact of actions, highlighting efforts “to degrade Russia’s ability to wage its unjust war against Ukraine and prevent Russia from projecting military force beyond its borders.” OFAC also published new Russia-related Frequently Asked Question (FAQ) 1092, which clarifies that “non-U.S. companies risk exposure to sanctions for providing ammunition or other military goods to Russia or for supporting Russia’s military-industrial complex.”
OFAC announces Russian sanctions, REPO provides update
On September 30, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), together with the Departments of Commerce and State, announced sanctions against 14 persons in Russia’s military-industrial complex, including two international suppliers, three key leaders of Russia’s financial infrastructure, and immediate family members of certain senior Russian officials, as well as 278 members of Russia’s legislature, for enabling Russia’s referenda and effort to annex Ukraine. As a result of the sanctions, all property and interests in property belonging to the sanctioned targets that are in the U.S. or in the possession or control of U.S. persons are blocked and must be reported to OFAC. Further, “any entities that are owned 50 percent or more by one or more designated persons” are blocked. 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. Additionally, OFAC issued FAQ 1091 to provide new guidance warning of the heightened sanctions risk that international actors outside of Russia would face for providing political or economic support to Russia as a result of its illegal attempts to change the status of Ukrainian territory. According to OFAC, the FAQ emphasizes that the U.S. “is prepared to more aggressively use its existing sanctions authorities, including E.O. 13660, E.O. 14024, and E.O. 14065, to target persons—inside or outside Russia—whose activities may constitute material assistance, sponsorship, or provision of financial, material, or technological support for, or goods or services (together ‘material support’) to or in support of persons sanctioned pursuant to those Executive orders, or sanctionable activity related to Russia’s sham referenda, purported annexation, and continued occupation of the Kherson, Zaporizhzhya, Donetsk, and Luhansk regions of Ukraine.” OFAC noted, however, that it “will generally not impose sanctions on non-U.S. persons that engage in transactions that would be authorized for U.S. persons, such as certain energy-related transactions.”
The same day, Treasury and the DOJ announced that the Russian Elites, Proxies, and Oligarchs (REPO) Task Force Deputies convened to accelerate oligarch asset forfeiture efforts in response to Russia’s war in Ukraine. As previously covered by InfoBytes, REPO is a multilateral task force that was formed in February 2022 and is “committed to using their respective authorities in concert with other appropriate ministries to collect and share information to take concrete actions, including sanctions, asset freezing, and civil and criminal asset seizure, and criminal prosecution.” Representatives from Australia, Canada, Germany, France, Italy, Japan, the UK, the European Commission, and the U.S. discussed continuing initiatives “to tailor already robust asset forfeiture tools and maximize the impact of our joint work on Russian elites and their cronies” for their involvement with the war in Ukraine. REPO further noted that their steps “immobilized Russian assets as one of several means to induce Russia to come into compliance with its international law obligations, including the obligation to pay reparations.”
Treasury official discusses U.S. efforts in response to Russian invasion of Ukraine
On September 20, Assistant Secretary for Terrorist Financing and Financial Crimes Elizabeth Rosenberg delivered prepared remarks before a Senate Committee on Banking, Housing, and Urban Affairs hearing, in which she provided an overview of recent efforts taken by the U.S. Treasury Department to hold Russia accountable for its invasion of Ukraine. Rosenberg explained that these measures are intended to “squeeze Russia’s access to finance and technology for strategic sectors of its economy and degrade its industrial capacity for years to come” and highlighted sanctions imposed against hundreds of Russian individuals and entities, including Russia’s largest financial institutions and key nodes in the country’s military-industrial supply chains, to cut them off from the U.S. financial system. She noted that Treasury has also implemented restrictions on dealings in Russian sovereign debt and has “prohibited economic dealings with the so-called Donetsk People’s Republic and Luhansk People’s Republic regions of Ukraine” as well as new investments in the Russian Federation. Rosenberg added that Treasury has “also imposed prohibitions on importing certain commodities from Russia into the United States, including oil and natural gas, and similarly imposed prohibitions on exporting certain items like luxury goods and dollar-denominated banknotes.” Additionally, Rosenberg discussed international efforts, including “implementing the largest sanctions regime in modern history[,]” and working with allies to facilitate information sharing, law enforcement data, and relevant financial records. She emphasized that “Treasury has mounted an aggressive campaign to close the global financial policy and regulatory loopholes across jurisdictions that Russian aiders and abettors of this war, and other criminals, use to perpetuate their illicit activity[,]” and stated that Treasury remains focused on denying funds to Russia through its oil exports.
Find continuing InfoBytes coverage on the U.S. sanctions response to Russia’s invasion of Ukraine here.
Treasury applauds deferral of Ukrainian debt payments through 2023
On September 14, U.S. Treasury Secretary Janet Yellen announced that the Group of Creditors of Ukraine, which includes the U.S., concluded a Memorandum of Understanding to implement Ukraine’s request for a coordinated suspension of debt service through the end of 2023. According to Yellen, easing liquidity pressures will allow the Ukrainian government to direct additional spending towards its domestic needs and the welfare of its people. Yellen urged other official bilateral creditors, including private creditors, to support Ukraine as it defends itself from Russia’s invasion. The Group of Creditors of Ukraine issued a statement applauding measures taken by the Ukrainian government to address the economic and financial consequences of the war, and welcoming the conclusion of an agreement with bondholders and warrantholders to defer debt payments for two years.
OFAC issues sanctions, general licenses, and FAQs on Russia’s invasion of Ukraine
On September 15, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), in coordination with the Departments of Commerce and State, announced sanctions against 22 individuals and two entities connected to Russia’s invasion of Ukraine. According to OFAC, the designated persons include multiple individuals who have furthered the Government of the Russian Federation’s objectives in Ukraine, both prior to and during Russia’s invasion of Ukraine in 2022. Also included among those designated is a neo-Nazi paramilitary group that has aided Russia’s military in Ukraine, and two of the group’s senior leaders. As a result of the sanctions, all property and interests in property belonging to the sanctioned individuals and entities subject to U.S. jurisdiction 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 further noted that “transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of designated or blocked persons are prohibited unless authorized by a general or specific license issued by OFAC, or exempt,” which “include the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any blocked person and the receipt of any contribution or provision of funds, goods, or services from any such person.”
The same day, OFAC issued Russia-related General License (GL) 51, authorizing the wind down of transactions involving the Limited Liability Company Group of Companies Akvarius, and GL 52, which relates to journalistic activities and the establishment of news bureaus. According to the GL 51, “all transactions ordinarily incident and necessary to the wind down of any transaction involving Limited Liability Company Group of Companies Akvarius (Aquarius), or any entity in which Aquarius owns, directly or indirectly, a 50 percent or greater interest, that are prohibited by Executive Order (E.O.) 14024,” are authorized as of October 15, subject to certain qualifications. According to GL 52, “news reporting organizations that are U.S. persons, and individual U.S. persons who are journalists or broadcast or technical personnel, are authorized to engage in certain transactions where such transactions are ordinarily incident and necessary to such U.S. persons’ journalistic activities or to the establishment or operation of a news bureau and are prohibited” by E.O. 14024, subject to certain qualifications.
Additionally, OFAC published several frequently asked questions clarifying “Russian Harmful Foreign Activities Sanctions,” which include guidance on the use of the National Payment Card System (NSPK) or the Mir National Payment System given the broad sanctions imposed on Russia’s financial system this year.
OFAC sanctions Iranians involved in production of UAVs to Russia
On September 8, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Orders 13382 and 14024 against an Iran-based air transportation service provider, as well as three companies and one individual involved in the research, development, production, and procurement of Iranian unmanned aerial vehicles (UAVs) and UAV components. Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson reiterated that the U.S. “is committed to strictly enforcing our sanctions against both Russia and Iran and holding accountable Iran and those supporting Russia’s war of aggression against Ukraine,” and stressed that the U.S. will “not hesitate to target producers and procurers who contribute to Iran and its IRGC’s UAV program, further demonstrating [the U.S.’s] resolve to continue going after terrorist proxies that destabilize the Middle East.” The sanctions follow designations implemented by OFAC last year against members of a network of companies and individuals that provided critical support to Iran’s Islamic Revolutionary Guard Corps Qods Force’s use of UAVs (previously covered by InfoBytes here).
As a result of the sanctions, all property and interests in property belonging to the sanctioned individuals and entities subject to U.S. jurisdiction are blocked and must be reported to OFAC. U.S. persons are also generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons. Additionally, OFAC warned that “any foreign financial institution that knowingly facilitates a significant transaction or provides significant financial services for any of the individuals or entities designated today could be subject to U.S. correspondent or payable-through account sanctions.”
Treasury issues guidance on Russian oil sales cap
On September 9, the U.S. Treasury Department announced preliminary guidance on implementing a maritime services policy and related price exception for seaborne Russian oil. As previously covered by InfoBytes, OFAC recently announced that it planned to publish preliminary guidance on implementing the price cap to provide a high-level overview of the directive, including how U.S. persons can comply in advance of formal guidance and legal implementation. According to the preliminary guidance, the policy is intended to establish a framework for Russian oil to be exported by sea under a capped price, and establish a ban on services for any shipments of seaborne Russian oil above the capped price. Objectives of the guidance include: (i) maintaining a reliable supply of seaborne Russian oil to the global market; (ii) reducing upward pressure on energy prices; and (iii) reducing the revenues the Russian Federation earns from oil after its own war of choice in Ukraine has inflated global energy prices. The policy contains an exception, which applies to “jurisdictions or actors that purchase seaborne Russian oil at or below a price cap to be established by the coalition (the “price exception”).” The policy, which relates to a broad range of services in connection with the maritime transportation of Russian Federation origin crude oil and petroleum products, will become effective December 5, 2022 for the maritime transportation of crude oil and on February 5, 2023 for the maritime transportation of petroleum products.