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Treasury official warns Turkish companies on engaging with Russian entities
On February 3, Under Secretary of the Treasury for Terrorism and Financial Intelligence, Brian E. Nelson, met with the Banks Association of Turkey to discuss international sanctions actions against Russia for its war against Ukraine. Nelson highlighted global illicit finance challenges and stressed the importance of addressing weaknesses within the financial system “to root out financial crime, shine light on the financial shadows that illicit actors exploit, and work toward a more equitable and inclusive global economy.” Nelson commented on potential areas for cooperation between Turkish banks and the broader international finance community, pointing to opportunities for the U.S. and Turkey to work together to mitigate anti-money laundering vulnerabilities in the real estate sector. He also focused on Russia’s “abuse of the global financial system to fund” its war in Ukraine as a main factor in international cooperation for preventing Russia from circumventing sanctions and financial controls “in dozens of countries, including [Turkey].” While Nelson recognized Turkey’s reliance on Russian energy and agriculture, he said that “the marked rise over the past year in non-essential Turkish exports or re-exports to Russia makes the Turkish private sector particularly vulnerable to reputational and sanctions risks.” Engaging with sanctioned Russian entities puts Turkish banks and businesses “at risk of sanctions and a potential loss of access to G7 markets and correspondent relationships,” Nelson stressed, calling upon Turkish financial institutions to conduct “enhanced due diligence” in all transactions with Russian entities and individuals—especially within vulnerable sectors.
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.
OFAC sanctions senior executives of Iranian UAV manufacturer
On February 3, the U.S. Treasury Department’s Office of Foreign Assets Control announced sanctions pursuant to Executive Order 13382 against eight senior executives of an Iran-based firm that was previously sanctioned by the U.S. and EU for manufacturing unmanned aerial vehicles (UAVs) for Iran’s Islamic Revolutionary Guard Corps (IRGC) Aerospace Force. OFAC also designated two Islamic Republic of Iran Navy vessels as property in which the Government of Iran has an interest. “Iranian entities continue to produce UAVs for Iran’s IRGC and military. More broadly, Iran is supplying UAVs for Russia’s combat operations to target critical infrastructure in Ukraine,” Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson said in the announcement. “The United States will continue to aggressively target all elements of Iran’s UAV program.”
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 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.”
OFAC sanctions evasion network supporting Russia’s military-industrial complex
On February 1, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced it is imposing “full blocking sanctions against 22 individuals and entities across multiple countries related to a sanctions evasion network supporting Russia’s military-industrial complex.” The sanctions, taken pursuant to Executive Order 14024, are part of the United States’ strategy to target sanctions evasion efforts around the globe, shut down key backfilling channels, expose facilitators and enablers, and limit Russia’s access to revenue to fund its war against Ukraine. “Targeting proxies is one of many steps that Treasury and our coalition of partners have taken, and continue to take, to tighten sanctions enforcement against Russia’s defense sector, its benefactors, and its supporters,” Deputy Secretary of the Treasury Wally Adeyemo said. The sanctions are part of Treasury’s ongoing commitment to the Russian Elites, Proxies, and Oligarchs Task Force, which identifies, freezes, and seizes assets of sanctioned Russians around the world, and leverages information sharing between international partners as well as key data from the Financial Crimes Enforcement Network.
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. Prohibitions “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.”
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.”
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.”