This summary is an update to our prior client alert, in which we anticipated that
Prohibitions on Transactions with Certain Russian Financial Institutions
U.S. persons are prohibited from engaging in transactions involving theCentral Bank of theRussian Federation , theNational Wealth Fund of theRussian Federation , or the Ministry of Finance of theRussian Federation .-
Additionally,
U.S. financial institutions 1 are prohibited from participating in the secondary market for ruble or non-ruble denominated bonds issued by these Russian financial institutions afterMarch 1, 2022 .
Sanctions on
- The Public Joint Stock Company Sberbank of
Russia (Sberbank ) is barred from processing payments through theU.S. financial system. Within 30 days, allU.S. financial institutions must:-
close any
Sberbank correspondent or payable-through accounts; - deny any requests to open a correspondent or payable-through account; and
-
reject any future transactions involving the
Sberbank or its subsidiaries, for or on behalf of any foreign financial institution covered under these sanctions.
-
close any
The VTB Bank Public Joint Stock Company (VTB Bank ) is also barred from processing payments through theU.S. financial system and will be the subject of “full blocking” sanctions. These sanctions require the freezing of anyU.S. assets associated with theVTB Bank and prohibit anyU.S. persons or businesses from doing any transaction with or through the bank.
Designations of Russian Leadership and Related Entities
The Department of the Treasury's Office of Foreign Assets Control (OFAC) has designated a range of individuals in theRussian Federation's leadership, includingPresident Putin . OFAC has also designated a number of entities related toRussia , including Otkritie, Novikom, Sovcom, and theRussian Direct Investment Fund (RDIF). 2The United States has also sanctioned an array of Belarusian entities and individuals for their support of the Russian Invasion, including the Belinvestbank, the Bank Dabrabyt, and the Minsk Wheeled Tractor Plant.-
These designations will generally prohibit any
U.S. persons or those withinthe United States from providing or receiving any funds, goods, or services or generally dealing with those targeted.
Cryptocurrencies and Sanctions Evasion
- The
U.S. government has also issued public warnings and requests to companies operating in the cryptocurrency sector to be aware of efforts by sanctioned persons and entities to attempt to circumvent sanctions or other prohibitions. Accordingly, OFAC issued detailed regulations onMarch 1, 2022 , that elaborate on theApril 2021 Executive Order that allows for the designation of persons involved in Foreign Harmful Activities where they directly or indirectly engage or attempt to engage in an array of actions to benefit the Russian government, including: malicious cyber-enabled activities, transnational corruption, undermining the peace, or deploying deceptive or structured transactions or dealings to circumvent sanctions through physical or digital currencies and assets. - OFAC has previously sanctioned cryptocurrency exchanges, such as SUEX and CHATEX, primarily for their role in facilitating criminal activities. We would expect that OFAC would likely move to designate other exchanges that are known or have been identified as high-risk due to weak or non-existent money laundering/know-your-customer compliance program.
Sanctions on the
- In addition to the
Russia -focused sanctions, theWhite House also issued an Executive Order (EO) that institutes new operational prohibitions and authorizes a slate of sanctions meant to denyRussia any monetary gain for its actions in theDonetsk and Luhansk People's Republics (DNR and LNR) in easternUkraine . -
In general, these measures prohibit certain investments in the
DNR or LNR regions by anyU.S. person, and the exportation, re-exportation, sale, or supply, directly or indirectly, from or importation intothe United States or by aU.S. person of any goods, services, or technology to theDNR or LNR regions. In addition, the sanctions target any persons that operate or have operated in these regions sinceFebruary 21, 2022 . The Treasury Department has issued a limited set of general licenses 3 designed to provide a short-term period for organizations to wind down activities in the impacted regions. [4] Notably, these licenses will allow for the continued export of agricultural commodities, medicine, and medical devices, and international organizations are still permitted to provide aid to theDNR and LNR. Additionally, telecommunication, internet, and mail services are authorized to remain operational.
General Compliance Advice Going Forward
Given the complex and rapidly evolving humanitarian and military situation in the
Footnotes
1 A
2 This includes the
3 A general license authorizes certain types of transactions for a class of persons without the need to apply for a license.
[4] General license No. 17 extends the wind-down of specific operations until
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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