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OFAC sanctions Russians individuals and entities
On January 26, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against six individuals and 12 entities connected to the Russian Federation. OFAC noted that the designations, which are concurrent with additional sanctions actions by the Department of State, target the infrastructure that supports battlefield operations in Ukraine, including producers of Russia’s weapons and those administering Russian-occupied areas of Ukraine. OFAC also noted that the action includes the designation of persons that support Russian defense-related entities. As a result of the sanctions, all property and interests in property belonging to the sanctioned individuals and entities 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 by one or more blocked persons are also blocked.” U.S. persons are generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons unless authorized by a general or specific license from OFAC.
OFAC sanctions suppliers of Iranian UAVs used in Russia’s war against Ukraine
On January 6, the U.S. Treasury Department’s Office of Foreign Assets Control announced sanctions pursuant to Executive Order 13382 against six executives and board members of a U.S.-designated Iranian defense manufacturer allegedly responsible for designing and producing unmanned aerial vehicles (UAVs) that are being transferred by Iran for use in Russia’s war against Ukraine. The director of a key organization responsible for overseeing Iran’s ballistic missile programs has also been sanctioned. OFAC further announced that it is updating the defense manufacturer’s entry on the Specially Designated Nationals and Blocked Persons List to include its new alias. As a result of the sanctions, all property and interests in property belonging to the sanctioned individuals and entities 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 by one or more blocked persons are also blocked.” U.S. persons are generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons. Persons that engage in certain transactions with the designated individuals or entities may themselves be exposed to sanctions, and “any foreign financial institution that knowingly facilitates a significant transaction or provides significant financial services for any of the individuals or entities designated today pursuant to E.O. 13382 could be subject to U.S. sanctions.”
FinCEN data reveals Russian oligarchs’ financial activity
On December 22, the Financial Crimes Enforcement Network (FinCEN) issued a Financial Trend Analysis on the financial activity of Russian oligarchs. In the analysis, FinCEN examined Bank Secrecy Act (BSA) reports from March 2022 to October 2022 involving Russian oligarchs, high-ranking officials, and sanctioned individuals. FinCEN identified 454 reports detailing suspicious activity and reported that some of the trends in the data by Russian oligarchs included: (i) the movement of funds around the start of the invasion of Ukraine in February 2022; (ii) the purchase of high-value goods or property in 2022; and (iii) based on the movement of funds from accounts in Russia to other countries, an indication of potential changes in longstanding oligarch-linked financial flows related to U.S. properties and companies. FinCEN noted that 78 percent of the 454 BSA reports were filed by U.S.-based depository institutions. Other types of financial institutions—such as holding companies or financial technology companies—submitted roughly 19 percent of reports, mainly on suspicious electronic funds transfers or wire transfers and suspicions concerning the source of funds.
OFAC announces Russia-related sanctions
On December 9, the U.S. Treasury Department’s Office of Foreign Assets Control announced sanctions against 18 entities related to the Russian Federation’s financial services sector. According to OFAC, the sanctions are taken in conjunction with the Department of State, which is concurrently designating a prominent oligarch in Russia, his network, and more than 40 additional persons linked to the Russian government as part of the U.S. government’s efforts to further limit Russia's ability to fund its war against Ukraine. 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 by one or more blocked 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.
Treasury official flags “de-risking” as a concern in combating illicit financial risks
On December 5, Assistant Secretary for Terrorist Financing and Financial Crimes at the U.S. Department of Treasury Elizabeth Rosenberg outlined key illicit finance risks impacting the broader financial system during the ABA/ABA Financial Crimes Enforcement Conference. Rosenberg noted that for many nations, the illicit finance threat posed by Russia related to its invasion into Ukraine is a top priority. She commented that more than 30 countries immediately implemented sanctions or other economic measures against Russia, and that since then, the U.S. and other countries have created an expansive, multilateral web of restrictions targeting Russia’s ability to fund its war. Rosenberg also recognized that by reassessing their understanding of Russian illicit financial risks and implementing adaptive measures, companies and financial institutions play an important role in providing critical insight into emerging threats. Rosenberg also discussed Treasury’s risk-based approach to crafting policy responses, including those related to beneficial ownership transparency, investment adviser misuse, and the use of residential and commercial real estate to hide and grow illicit funds.
Rosenberg warned, however, that there are challenges in implementing a truly risk-based approach. She pointed to observations made by the Financial Action Task Force, which showed that while many countries and their financial institutions “are keenly aware of where enhanced due diligence is needed,” many “often can not readily identify the inverse: places where simplified due diligence should be expected and permitted.” She cautioned that focusing on high-risk areas rather than lower-risk parts “is not without costs,” and illustrated a common form of de-risking that occurs “when financial institutions categorically cut off relationships or services to avoid perceived risks—for example, certain geographic regions—rather than applying a nuanced, risk-based approach.” Doing so can lead to “deleterious effects,” she warned, such as excluding businesses based on their location or status, or impacting emerging markets that could serve underbanked populations. Rosenberg said Treasury intends to study these concerns through the Anti-Money Laundering Act of 2020, and will develop a strategy for addressing de-risking, including recommendations on ways to improve public-private engagement on the issue, regulatory guidance and adjustments, and international supervision.
Treasury announces price cap on Russian crude oil
On December 2, the U.S. Treasury Department announced an agreement entered into by the 27 member states of the European Union and the members of the G7 (collectively, the “Price Cap Coalition”), which adopts a price cap on seaborne Russian crude oil in an effort to restrict Russian revenue streams for its war in Ukraine. According to the announcement, beginning next week, the Price Cap Coalition will impose a ban on a range of services, including maritime insurance and trade finance, related to the maritime transport of Russian crude oil unless purchasers buy the oil at or below the $60/barrel cap. Starting February 5, 2023, this ban will also extend to the maritime transport of Russian-origin petroleum products unless they are sold at or below a yet-to-be-announced price cap. As previously covered by InfoBytes, last month OFAC published guidance on the price cap policy for Russian crude oil. According to Treasury’s announcement, the guidance clarifies that the price cap policy’s “‘safe harbor’ for service providers through the recordkeeping and attestation process is designed to shield such service providers from strict liability for breach of sanctions in cases where service providers inadvertently deal in the purchase of Russian oil sold above the price cap owing to falsified or erroneous records provided by those who act in bad faith or make material misrepresentations.” OFAC also published a Determination Pursuant to Executive Order 14071 officially announcing the price cap on December 5.
OFAC sanctions firms for aiding Russia’s acquisition of UAVs
On November 15, the U.S. Treasury Department’s Office of Foreign Assets Control announced sanctions pursuant to Executive Orders (E.O.) 13382 and 14024 against several firms responsible for the production and transfer of Iranian unmanned aerial vehicles (UAVs) to Russia for use in the country’s war against Ukraine. OFAC also designated two individuals who facilitated the acquisition of UAVs for a previously State Department-designated company. According to the announcement, the designations “implement commitments to target international actors involved in supporting Russia’s war machine, as highlighted by OFAC FAQs 1091 and 1092 and reinforced by an October 14, 2022 meeting of senior officials in Washington representing ministries of finance and other government agencies from 33 countries, in which the participants acknowledged the significance of sanction actions taken so far and discussed additional steps to further impair Russia’s military-industrial complex and critical defense supply chains.” The sanctions follow OFAC’s September designations against several persons involved in the shipment, production, and procurement of UAVs for Russia’s benefit. (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, persons that engage in certain transactions with the sanctions individuals or entities may themselves be exposed to sanctions. OFAC further 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 pursuant to E.O. 13382 could be subject to U.S. sanctions.”
The same day, the Departments of Treasury, Commerce, and State issued a joint alert detailing the impact of international sanctions and export controls on Russia’s military-industrial complex to date.
OFAC sanctions individuals and networks supporting Russia’s invasion
On November 14, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order (E.O.) 14024 against a total of 14 individuals and 28 entities, including a transnational network that procures technology in support of Russia’s military-industrial complex, and “a global network of financial facilitators, enablers, and others associated with two key Kremlin-linked elites whose fortunes are intertwined with the West.” OFAC also identified eight aircrafts as blocked property. “The United States will continue to expose and disrupt the Kremlin’s military supply chains and deny Russia the equipment and technology it needs to wage its illegal war against Ukraine,” Treasury Secretary Janet L. Yellen said in the announcement. “Together with our broad coalition of partners, we will continue to use our sanctions and export controls to weaken Russia’s military on the battlefield and cut into the revenue Putin is using to fund his brutal invasion.” 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 by one or more blocked 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.
In conjunction with the sanctions, OFAC issued Russia-related General License (GL) 40C related to civil aviation safety. GL 40C authorizes certain transactions normally prohibited by E.O. 14024 that are “ordinarily incident and necessary to the provision, exportation, or reexportation of goods, technology, or services to ensure the safety of civil aviation involving one or more of the blocked entities” provided the “aircraft is registered in a jurisdiction solely outside of the Russian Federation.”
Treasury official discusses cyber threats to financial sector
On November 1, Deputy Secretary of the Treasury Wally Adeyemo provided an update during the semi-annual joint session of the Financial and Banking Information Infrastructure Committee (FBIIC) and the Financial Services Sector Coordinating Council (FSSCC) on Treasury’s efforts to protect the agency and the financial sector from cyber threats. Adeyemo noted that actions taken to safeguard national security include “modernizing Treasury’s IT systems with an elevated cybersecurity threat focus, as well as ramping up partnerships with the financial and regulatory sectors far ahead of Russia’s unprovoked invasion of Ukraine to ensure swift, coordinated responses to thwart cyber attacks.” He further stressed the importance of fortifying these partnerships and remaining vigilant to heightened threats. Adeyemo also discussed how Russia’s invasion of Ukraine demonstrated the interconnectedness of the global financial sector and why enhancing operational resilience in major global banking hubs and vulnerable regions is a top priority for the Department. He called on FBIIC senior leaders to continue to drive Treasury’s “successful cloud and data protection workstreams forward,” while also building new initiatives focusing on other urgent, systemic risk issues that include the participation of FSSCC partners. “Reporting cybersecurity issues and vulnerabilities early and often enables us to better protect the broader financial sector,” Adeyemo said.
OFAC sanctions individuals and entities connected to Russia’s corruption in Moldova
On October 26, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Orders 13818 and 14024 against nine individuals and 12 entities in an attempt to counter the Russian Federation’s “persistent malign influence campaigns and systemic corruption in Moldova.” Included among the sanctioned persons are “oligarchs widely recognized for capturing and corrupting Moldova’s political and economic institutions and those acting as instruments of Russia’s global influence campaign, which seeks to manipulate the United States and its allies and partners, including Moldova and Ukraine,” OFAC said in the announcement. Notably, the designations also include a former Moldovan government official “who engaged in state capture by exerting control over and manipulating key sectors of Moldova’s government, including the law enforcement, electoral, and judicial sectors.” 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, individually or in the aggregate, 50 percent or more by one or more blocked 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. Additionally, OFAC warned that financial institutions and other persons that engage in certain transactions or activities with the sanctioned persons may themselves be exposed to sanctions or be subject to an enforcement action.