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OFAC warns of possible evasion of Russian oil price cap
On April 17, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued an alert warning U.S. persons regarding the possible evasion of the price cap set on crude oil of Russian origin, particularly oil exported through the Eastern Siberia Pacific Ocean pipeline and ports on the eastern coast of Russia. OFAC reminded U.S. persons providing covered services that they “are required to reject participating in an evasive transaction or a transaction that violates the price cap determinations” and must report such transactions to OFAC. In the alert, OFAC referenced recently issued guidance on the implementation of the price cap policy for Russian crude oil and petroleum products for additional information (covered by InfoBytes here).
OFAC offers more guidance on price caps for Russian petroleum
On February 3, the U.S. Treasury Department’s Office of Foreign Assets Control published additional guidance on the implementation of the price cap policy for crude oil and petroleum products of Russian Federation origin. As previously covered by InfoBytes, last November, OFAC published a Determination Pursuant to Executive Order (E.O.) 14071 stating that the prohibitions of E.O. 14071 apply to U.S. persons providing covered services (including (i) trading/commodities brokering; (ii) financing; (iii) shipping; (iv) insurance, including reinsurance and protection and indemnity; (v) flagging; and (vi) customs brokering) as they relate to the maritime transport of Russian Federation crude oil, provided, however, that such covered services are authorized if the Russian oil is purchased at or below the price cap.
The new determination—published pursuant to section 1(a)(ii), 1(b), and 5 of E.O. 14071—establishes that, effective February 5, the price cap on discount to crude petroleum products of Russian Federation origin will be $45 per barrel, and the price cap on premium to crude petroleum products of Russian Federation origin will be $ 100 per barrel. OFAC also published another determination, which outlines prohibitions on certain categories of services as they relate to the maritime transportation of petroleum products of Russian Federation origin, including trading/commodities brokering, financing, shipping, insurance, flagging, and customs brokering. Specifically, unless authorized by law or licensed or otherwise authorized by OFAC, “the exportation, reexportation, sale, or supply, directly or indirectly, from the United States, or by a United States person, wherever located, of any of the Covered Services to any person located in the Russian Federation” are prohibited. These determinations do not authorize transactions otherwise prohibited by the Russian Harmful Foreign Activities Sanctions Regulations.
In conjunction with these determinations, OFAC also published additional guidance, as well as Russia-related General Licenses 56A and 57A.
Secretary of the Treasury Janet Yellen applauded the G7’s price cap announcement, stating that the agreement helps limit Russia’s key revenue generator for funding its war against Ukraine, while promoting stable global energy markets.
Warren, Wyden urge PCAOB to crack down on crypto auditors
On January 25, Senators Elizabeth Warren (D-MA) and Ron Wyden (D-OR) sent a letter to the chair of the Public Company Accounting Oversight Board (PCAOB) urging the board to make sure it was taking sufficient measures to hold registered audit firms accountable for their work with cryptocurrency clients. The letter highlighted the recent turmoil in the crypto market following the collapse of a major crypto exchange last November, and inquired about “the role that auditors may have played in misleading the public about the financial soundness and safety of crypto companies.” Referring to reports of “scandalous accounting practices” within the industry, the senators urged the PCAOB to take action to ensure accountability. “When PCAOB-registered auditors perform sham audits—even for firms that may lay outside of the PCAOB’s jurisdiction—they tarnish the credibility of the PCAOB and undermine confidence in the PCAOB-registered auditors that investors and the public rely on when making investment decisions,” the senators wrote, adding that “misleading financial reports shake our confidence in the entire auditing industry.”
The senators asked the PCAOB to respond to several questions concerning alleged misleading auditing practices related to the exchange’s collapse, including whether the PCAOB is taking steps to mitigate risks facing retail investors, whether it was aware of any potential conflicts of interest or other concerning behavior, and whether it has “the authority to strip auditors of their PCAOB-registered status if they provide services or engage in conduct that fall short of PCAOB standards and rules, even if those actions are taken in relation to private, non-SEC registered companies.” The senators also asked the PCAOB to describe the standards that auditors must comply with “when evaluating the risk of exposure to crypto firms or validating the valuation of crypto investments.”
OFAC issues preliminary guidance on price cap policy implementation
On December 30, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced preliminary guidance on the implementation of the price cap policy for petroleum products of Russian Federation origin. As previously covered by InfoBytes, in November, OFAC published a Determination Pursuant to Executive Order (E.O.) 14071 stating that the prohibitions of E.O. 14071 apply to U.S. persons providing covered services (including (i) trading/commodities brokering; (ii) financing; (iii) shipping; (iv) insurance, including reinsurance and protection and indemnity; (v) flagging; and (vi) customs brokering) as they relate to the maritime transport of Russian Federation crude oil, provided, however, that such covered services are authorized if the Russian oil is purchased at or below the price cap. OFAC also published guidance on the implementation of a policy for crude oil of Russian Federation origin to provide an overview of the determination and the price cap. OFAC noted that it anticipates publishing final, combined guidance for both Russian oil and Russian petroleum products before February 5.
OFAC designates sanctions evasion network connected to IRGC-QF
On December 8, the U.S. Treasury Department’s Office of Foreign Assets Control announced sanctions pursuant to Executive Order 13224 against a sanctions evasion network for facilitating and concealing the sale and shipment of hundreds of millions of dollars’ worth of oil for Iran’s Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF). According to OFAC, the designated individual’s companies “established international sales contracts for Iranian oil with foreign purchasers, arranged shipments of oil, and helped launder the proceeds, obscuring the oil’s Iranian origin and the IRGC-QF’s interest in the sales.” The action supplements designations announced in May, which targeted an element of this network responsible for facilitating millions of dollars’ worth of Iranian oil sales for both the IRGC-QF and Hizballah, backed by senior levels of the Russian Federation government and state-run entities (covered by InfoBytes here). As a result, all property, and interests in property of the designated individuals and entities, “and of any entities that are owned, directly or indirectly, 50 percent or more by them, individually, or with other blocked persons, that are in the United States or in the possession or control of U.S. persons, must be blocked and reported to OFAC.” U.S. persons are generally prohibited from engaging in transactions with the designated persons unless authorized by a general or specific OFAC license or are otherwise exempt. OFAC further warned that “engaging in certain transactions with the individuals and entities designated today entails risk of secondary sanctions.”
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 issues Venezuela-related general licenses
On November 26, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued Venezuela-related General License (GL) 41 following the resumption of talks in Mexico City to alleviate the suffering of Venezuelan people and restore democracy. GL 41 authorizes certain transactions related to the identified corporation and its subsidiaries’ joint ventures in Venezuela involving Petróleos de Venezuela, S.A (PdVSA) or any entity owned directly or indirectly, 50 percent or more, that would otherwise be prohibited by Executive Order (E.O.) 13850, as amended by E.O.s 13857 or 13884. OFAC noted that GL 41 prevents PdVSA from receiving profits from the oil sales by the identified corporation, and only authorizes certain specific activities. Other Venezuela-related sanctions and restrictions imposed by the U.S. remain in place. Concurrent with the issuance of GL 41, OFAC issued GL 8K, “Authorizing Transactions Involving Petróleos de Venezuela, S.A. (PdVSA) Necessary for the Limited Maintenance of Essential Operations in Venezuela or the Wind Down of Operations in Venezuela for Certain Entities,” as well as two new related FAQs. According to the announcement, “U.S. persons are authorized to provide goods and services for certain activities as specified in GL 41,” and “non-U.S. persons generally do not risk U.S. sanctions exposure for facilitating transactions that are authorized by GL 41.”
OFAC issues guidance on the Russian price cap policy for crude oil; issues Russia-related general licenses
On November 22, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) published a Determination Pursuant to Executive Order (E.O.) 14071 concerning the implementation of a price cap policy for crude oil of Russian Federation origin. The determination states that the prohibitions of E.O. 14071 apply to U.S. persons providing covered services (including (i) trading/commodities brokering; (ii) financing; (iii) shipping; (iv) insurance, including reinsurance and protection and indemnity; (v) flagging; and (vi) customs brokering) as they relate to the maritime transport of Russian Federation crude oil, provided, however, that such covered services are authorized if the Russian oil is purchased at or below the price cap. Additionally, OFAC published guidance on the implementation of a policy for crude oil of Russian Federation origin to provide an overview of the determination and the price cap. OFAC also issued Russia-related General License (GL) 55, GL 56, and GL 57. GL 55 authorizes certain services related to Sakhalin-2; GL 56 authorizes certain services with respect to the European Union; and GL 57 authorizes certain services related to vessel emergencies.
OFAC sanctions oil shipping network connected to IRGC-QF and Hizballah
On November 3, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13224 against members of an international oil smuggling network for allegedly facilitating oil trades and generating revenue for Hizballah and the Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF). Included are “several key individuals and numerous front companies and vessels involved in blending oil to conceal the Iranian origins of the shipments and exporting it around the world in support of Hizballah and the IRGC-QF.” According to Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson, the responsible individuals “use a web of shell companies and fraudulent tactics including document falsification to obfuscate the origins of Iranian oil, sell it on the international market, and evade sanctions” in order to generate revenue to enable Hizballah and IRGC-QF terrorist activities. The sanctions follow the designation of another Iranian oil smuggling network earlier in May (covered by InfoBytes here). As a result, all property, and interests in property of the designated persons, “and of any entities that are owned, directly or indirectly, 50 percent or more by them, individually, or with other blocked persons, that are in the United States or in the possession or control of U.S. persons, must be blocked and reported to OFAC.” Unless authorized by general or specific OFAC licenses or otherwise exempt, OFAC regulations generally prohibit all transactions by U.S. persons or within the United States (including transactions transiting the United States) that involve any property or interests in property of designated individuals. OFAC further warned that “engaging in certain transactions with the individuals and entities designated today entails risk of secondary sanctions.” Additionally, OFAC warned that a foreign financial institution that knowingly conducts or facilitates a significant transaction on behalf of a Specially Designated Global Terrorist could be subject to U.S. correspondent or payable-through account sanctions.
OFAC clarifies guidance on Russian oil price cap
On October 31, the U.S. Treasury Department’s Office of Foreign Assets Control published Russia-related frequently asked question 1094, to clarify when Russian Federation origin crude oil will be subject to a price cap announced earlier in September. As previously covered by InfoBytes, Treasury recently issued preliminary guidance on implementing a maritime services policy and related price exception for seaborne Russian oil, which is intended to establish a framework for Russian oil to be exported by sea under a capped price, as well as a ban on services for any shipments of seaborne Russian oil above the capped price. 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.