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Special Alert: Russian invasion of Ukraine triggers significant sanctions

Buckley Special Alert

On February 21 and 22, following weeks of clear signals that sanctions would be imposed in response to military activity, the Biden administration issued significant new sanctions in response to the Russian Federation’s recognition of separatist regions of Ukraine and incursions of Russian troops. The new measures impose property-blocking sanctions on two state-owned banks (including their subsidiaries), target secondary market dealings in Russian debt, and impose a near complete prohibition on dealings with the separatist regions of Ukraine. Additionally, the Department of the Treasury took steps that enable it to impose sanctions on any person determined to be operating in Russia’s financial services sector. This appears to be an initial phase of sanctions activity and should military activity continue or escalate, it is likely that sanctions would similarly increase in stringency.

The evolving nature of the U.S. sanctions response is evidenced by a recent announcement that the Biden administration will soon impose sanctions targeting Nord Stream 2 AG, the company behind the $11.3 billion pipeline project that was intended to carry gas from Russia to Germany. Buckley will continue to monitor the situation and provide updates.

As widely reported, these U.S. sanctions are being issued in close coordination with EU and UK authorities, and institutions with cross-border business will need to take the U.S., UK and EU measures into account when conducting Russia-related business. For detailed coverage of UK and EU sanctions developments, please see updates from David Savage, Head of Financial Crime at Stewarts Law. 

Embargoes on the Donetsk People’s Republic or Luhansk People’s Republic Regions

On February 21, President Biden issued an executive order barring most dealings subject to U.S. jurisdiction that involve the so-called Donetsk People’s Republic or Luhansk People’s Republic regions of Ukraine (together, the “Covered Regions”). The prohibitions include:

  • New investments in the Covered Regions, or any other regions of Ukraine determined by the Secretary of the Treasury, in consultation with the Secretary of State
  • The importation into the United States of any goods services or technology from the Covered Regions
  • The exportation from the United States or by a U.S. person of any goods, services or technology to the Covered Regions
  • Facilitation of any of the above by U.S. person

Because this approach has similarities to the 2014 sanctions that targeted the Crimea region of Ukraine, banks and other institutions may wish to consult OFAC’s 2014 Crimea Sanctions Advisory, which set out OFAC’s expectations for ensuring that transaction monitoring systems include appropriate search terms corresponding to major geographic locations in Crimea region, when implementing compliance controls intended to interdict transactions involving the Covered Regions.

In conjunction with the order, OFAC issued a number of general licenses, or exceptions, that, among other things, provide slightly more than a month to wind down existing business in the Covered Regions. The executive order also authorized the secretary of the Treasury to impose property blocking sanctions on persons determined to operate in the Covered Regions after February 21.

Sovereign debt restrictions

On February 22, OFAC imposed new restrictions on dealings in Russian debt. In April 2021, OFAC prohibited U.S. financial institutions from participating in the primary market for 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 from lending ruble or non-ruble denominated funds to those same institutions. Under the revised sanctions, U.S. financial institutions will also be prohibited from conducting secondary market dealings in bond instruments issued by the same institutions on or after March 1, 2022.

Russian financial sector sanctions

Additionally, the Biden administration utilized previously available authorities to target Russia’s financial sector. Executive Order 14024 of April 15, 2021 had previously authorized sanctions to be imposed on persons operating in any sector of the Russian economy as determined by the Department of the Treasury, in consultation with the Department of State. On February 22, the Department of the Treasury determined that the financial services sector of the Russian economy falls within the scope of Executive Order 14024, which in turn enables the imposition of sanctions on any determined to operate in Russia’s financial services sector.

Under this new authority, OFAC imposed property blocking sanctions on Corporation Bank for Development and Foreign Economic Affairs Vnesheconombank (VEB) and Promsvyazbank Public Joint Stock Company (PSB), along with 42 of their subsidiaries. All assets of the designated entities that are in the United States or within the possession or control of a U.S. person must be frozen, and U.S. persons are prohibited from transacting with the designated entities unless otherwise authorized by OFAC. Additionally, all entities owned 50 percent or more, directly or indirectly, by VEB, PSB or of the listed subsidiaries are also subject to blocking sanctions, even if not identified as blocked by OFAC.

In conjunction with imposing blocking sanctions on VEB and PSB, OFAC issued a frequently asked question clarifying it has not yet prohibited dealings with the entirety of Russia’s financial services sector.

Other blocking sanctions

Finally, OFAC imposed blocking sanctions on a number of Kremlin-connected individuals. In its related press release, the Department of Treasury alleged that newly-targeted individuals have assisted other sanctions targets to hide their wealth or otherwise evade U.S. sanctions.

In announcing the new sanctions, President Biden stated that they were in response to “the beginning of a Russian invasion” and promised to expand the measures if Russia continued its invasion of Ukraine. Given the multiple authorities that prohibit a broad range of financial sanctions against Russia, including the Treasury’s move to enable it to impose sanctions on any person determined to be operating in Russia’s financial services sector, the Biden administration will be able to move swiftly in this regard.


If you have any questions regarding the sanctions, please visit our Bank Secrecy Act/Anti-Money Laundering & Sanctions page or contact a Buckley attorney with whom you have worked in the past.

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