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President Biden issues executive order blocking certain Russian pipelines
On August 20, President Biden signed Executive Order (E.O.) Blocking Property with Respect to Certain Russian Energy Expert Pipelines to take additional steps with respect to the national emergency declared in E.O. 14024 (covered by InfoBytes here) related to specific harmful foreign activities by the Russian government. The new E.O. prohibits, among other things, (i) “the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any person whose property and interests in property are blocked pursuant to this order”; and (ii) “the receipt of any contribution or provision of funds, goods, or services from any such person.” Concurrently, OFAC issued Russia-related General License (GL) 1A, as well as several new and updated FAQs related to the updated designations (see FAQs 894, 919, 920, and 921). Specifically, GL 1A authorizes certain activities involving the Federal State Budgetary Institution Marine Rescue Service (MRS) (“or any entity in which MRS owns, directly or indirectly, a 50 percent or greater interest”) that are not related to the construction of specified pipeline projects. Several individuals and entities have also been added to OFAC’s Specially Designated Nationals List.
OFAC sanctions Russian officials
On August 20, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) and the Department of State joined the United Kingdom in announcing sanctions pursuant to Executive Order 13382 against nine Russian individuals and two Russian entities in connection with poisoning or Russia’s chemical weapons program under a Russian opposition leader. According to OFAC, this is the third time Treasury has used discretionary authority to respond to Russia’s use of a chemical agent against its own citizens (covered by InfoBytes here). The Department of State also designated several entities and persons pursuant to E.O. 13382 for “having engaged, or attempted to engage, in activities or transactions that have materially contributed to, or pose a risk of materially contributing to, the proliferation of weapons of mass destruction or their means of delivery” by Russia. As a result of the sanctions, all of the property and interests in property of the designated persons that are in the U.S. or in the possession or control of U.S. persons, as well as any entities that are owned 50 percent or more by the designated persons, are blocked and must be reported to OFAC. Additionally, OFAC regulations generally prohibit U.S. persons from participating in transactions with the designated persons unless exempt or otherwise authorized by an OFAC general or specific license. OFAC further warned that “any foreign person who knowingly facilitates a significant transaction or transactions for or on behalf of one of these persons risks being sanctioned.”
OFAC authorizes certain PEESA transactions and activities
On May 21, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued Protecting Europe’s Energy Security Act of 2019 (PEESA) General License (GL) 1, which authorizes certain activities otherwise prohibited involving the Federal State Budgetary Institution Marine Rescue Service (MRS). However, GL 1 does not authorize any transactions or activities involving any vessels identified on OFAC’s Non-SDN Menu-Based Sanctions List “as blocked property of MRS or of any entity in which MRS owns, directly or indirectly, a 50 percent or greater interest,” or any PEESA prohibited transactions or activities. OFAC also issued related FAQs 894 and 895 and added entities and vessels to its Non-SDN Menu-Based Sanctions List. Furthermore, OFAC added two vessels to the Specially Designated National List, and reiterated in FAQ 895 that “property and interests in property of persons on the SDN List are blocked and any entity owned 50 percent or more, individually or in the aggregate, directly or indirectly, by one or more blocked persons is itself blocked.”
Biden order authorizes sanctions authority covering Russian activities
On April 15, the Biden administration announced several actions intended to block property with respect to specified harmful foreign activities by the Russian government, including the issuance of Executive Order (E.O.) Blocking Property With Respect To Specified Harmful Foreign Activities Of The Government Of The Russian Federation. Specifically Directive 1 to the E.O. provides that, at the determination of the acting director of the Office of Foreign Assets Control (OFAC) and in consultation with the State Department, U.S. financial institutions are prohibited from:
- Participating “in the primary market for ruble or non-ruble denominated bonds issued after June 14, 2021 by the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation”; and
- “Lending ruble or non-ruble denominated funds to the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation.”
These actions are prohibited as of June 14, 2021, “except to the extent provided by law or unless licensed or otherwise authorized by [OFAC].” For purposes of the Directive, a “U.S. financial institution” is defined as “any U.S. entity (including its foreign branches) that is engaged in the business of accepting deposits, making, granting, transferring, holding, or brokering loans or other extensions of credit, or purchasing or selling foreign exchange, securities, commodity futures or options, or procuring purchasers and sellers thereof, as principal or agent.” This term also includes branches, offices, and agencies of foreign financial institutions located in the U.S., but does not include such institutions’ foreign branches, offices, or agencies.
In conjunction with the issuance of the new E.O., OFAC also published several new and updated FAQs and added several individuals and entities to OFAC’s list of Specially Designated Nationals. The new additions include sanctions taken against (i) several Russian technology companies that support the Russian Intelligence Services, which OFAC stated are responsible for having “executed some of the most dangerous and disruptive cyber attacks in recent history”; (ii) five individuals and three entities related to Russia’s occupation of the Crimea region of Ukraine pursuant to E.O.s 13660 and 13685; and (iii) 16 entities and 16 individuals that attempted to influence the 2020 U.S. presidential election at the direction of Russian government leadership.
As a result of the sanctions, all of the property and interests in property of the designated persons that are in the United States or in the possession or control of U.S. persons, as well as any entities that are owned 50 percent or more by the designated persons, are blocked and must be reported to OFAC. Additionally, OFAC regulations generally prohibit U.S. persons from participating in transactions with the designated persons unless exempt or otherwise authorized by an OFAC general or specific license. In its announcement, OFAC further warned that “foreign persons that knowingly engage in a significant transaction or transactions with the persons designated today may themselves face the risk of designation,” and emphasized that “financial institutions and other persons that engage in certain transactions or activities with the sanctioned entities and individuals may expose themselves to secondary sanctions or be subject to an enforcement action.”
OFAC sanctions Russian officials
On March 2, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order (E.O.) 13661 against seven Russian government officials in connection with the “poisoning and subsequent imprisonment of [a] Russian opposition figure.” One of the designated individuals is also being sanctioned pursuant to E.O. 13382 “for acting or purporting to act for or on behalf of, directly or indirectly, the Federal Security Service.” In conjunction with OFAC’s sanctions, the Department of State also designated several entities and persons pursuant to E.O. 13882 for “having engaged, or attempted to engage, in activities or transactions that have materially contributed to, or pose a risk of materially contributing to, the proliferation of weapons of mass destruction or their means of delivery” by Russia. As a result of the sanctions, all of the property and interests in property of the designated persons that are in the United States or in the possession or control of U.S. persons, as well as any entities that are owned 50 percent or more by the designated persons, are blocked and must be reported to OFAC. Additionally, OFAC regulations generally prohibit U.S. persons from participating in transactions with the designated persons unless exempt or otherwise authorized by an OFAC general or specific license. OFAC further warned that “any foreign person who knowingly facilitates a significant transaction or transactions for or on behalf of one of these persons risks being sanctioned.”
OFAC updates SDN List
On February 22, the U.S. Treasury Department’s Office of Foreign Assets Control added two entities to its Specially Designated National List pursuant to the Countering America’s Adversaries Through Sanctions Act (CAATSA). One of the added entities has been designated pursuant to CAATSA Section 235, which provides the president with the authority to, among other things, “prohibit any transfers of credit or payments between financial institutions or by, through, or to any financial institution, to the extent that such transfers or payments are subject to the jurisdiction of the United States and involve any interest of the sanctioned person” or “prohibit any United States person from investing in or purchasing significant amounts of equity or debt instruments of the sanctioned person.”
OFAC issues counter terrorism general licenses and related FAQs, updates SDN List
On January 19, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued four General Licenses in conjunction with State Department designations against a foreign terrorist organization: General License 9, “Official Business of the United States Government,” General License 10, “Official Activities of Certain International Organizations,” General License 11, “Certain Transactions in Support of Nongovernmental Organizations’ Activities in Yemen,” and General License 12, “Transactions Related to the Exportation or Reexportation of Agricultural Commodities, Medicine, Medical Devices, Replacement Parts and Components or Software Updates.” The general licenses authorize certain transactions ordinarily prohibited by the Global Terrorism Sanctions Regulations, Foreign Terrorist Organizations Sanctions Regulations, and Executive Order 13224, including actions “to help facilitate the uninterrupted flow of humanitarian assistance, including COVID-19-related assistance, and certain other critical commodities to the people of Yemen that would otherwise be prohibited pursuant to authorities administered by OFAC.” OFAC also published related FAQs 875, 876, and 877.
OFAC also updated its Specially Designated Nationals and Blocked Persons List to add individuals and entities associated with Venezuela, Russia, and Yemen designations.
OFAC sanctions individuals and entities for Russian-linked election interference
On January 11, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against seven individuals and four entities that are allegedly part of a Russia-linked foreign influence network associated with a Russian agent previously designated for his attempt to influence the 2020 U.S. presidential election. The individuals and entities associated with the Russian agent are now being similarly designated pursuant to Executive Order 13848 for “having directly or indirectly engaged in, sponsored, concealed, or otherwise been complicit in foreign influence in a United States election.” As a result, all property and interests in property belonging to, or owned by, the identified individuals and entities subject to U.S. jurisdiction are blocked, and “any entities that are owned, directly or indirectly, 50 percent or more by the designated entities, are also blocked.” U.S. persons are generally prohibited from dealing with any property or interests in property of blocked or designated persons.
OFAC releases new Non-SDN sanctions reference tool
On December 14, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) published a new reference tool, the Non-SDN Menu Based Sanctions List (NS-MBS List), which “identities persons subject to certain non-blocking menu-based sanctions that have been imposed under statutory or other authorities, including certain sanctions described in Section 235 of the Countering America’s Adversaries Through Sanctions Act (CAATSA), as implemented by Executive Order 13849, and the Ukraine Freedom Support Act of 2014, as amended by CAATSA.” OFAC noted that the NS-MBS List is distinct from its List of Foreign Financial Institutions Subject to Correspondent Account or Payable-Through Account Sanctions, which identifies foreign financial institutions subject to correspondent or payable-through account sanctions.
OFAC warns of sanctions risks for high-value artwork
On October 30, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued an art advisory highlighting characteristics and vulnerabilities in the high-value artwork market that pose sanctions risks. The advisory advises “art galleries, museums, private art collectors, auction companies, agents, brokers, and other participants in the art market” of the importance of maintaining risk-based compliance programs to mitigate exposure to sanctions-related violations. The advisory further emphasizes that the “Berman Amendment” to the International Emergency Economic Powers Act and the Trading with the Enemy Act “does not categorically exempt all dealings in artwork from OFAC regulation and enforcement.” According to OFAC, shell companies and intermediaries are often used to remit and receive payments for high-value artwork. The anonymity that these channels provide, OFAC cautions, allows blocked and other illicit persons to cloak their true identities and helps conceal prohibited conduct from law enforcement and regulators.
The report references previously issued OFAC guidance and discusses a report issued by the U.S. Senate Permanent Subcommittee on Investigations in July (covered by InfoBytes here), which details findings from a two-year investigation related to how Russian oligarchs appear to have used the art industry to evade U.S. sanctions. According to the report, while the art industry is largely unregulated, and, unlike financial institutions, is not subject to the Bank Secrecy Act (BSA) and is not required to maintain anti-money laundering (AML) and anti-terrorism financing controls, sanctions imposed by OFAC do apply to the industry, and U.S. persons are not permitted to conduct business with sanctioned individuals or entities.