On December 15, 2022, the United States Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) added Public Joint Stock Company Rosbank (“Rosbank”) and 17 subsidiaries of VTB Bank Public Joint Stock Company (“VTB Bank”) to the Specially Designated Nationals and Blocked Persons List (“SDN List”). The United States Department of State (“State Department”) designated Vladimir Potanin, three members of his family, and his company Interros, pursuant to Executive Order 14024, with the result that Potanin and related parties have also been added to the SDN List. Potanin, who is a close associate of Russian President Vladimir Putin, acquired Rosbank earlier this year. The State Department designated a number of other parties, including 29 regional Russian officials and five individuals on the Board of Directors of Russian Railways.
In conjunction with the designations, OFAC reissued one Russia-related General License in order to cover Rosbank, issued two new Russia-related General Licenses related to transactions with Rosbank, and issued two new Frequently Asked Questions regarding the designations (“FAQs”).
New SDN List Additions
The parties designated by OFAC and the State Department have been added to the SDN List and are therefore subject to full blocking sanctions. US Persons are generally prohibited from dealing, directly or indirectly, with SDNs, entities that are owned 50% or more by one or more SDNs, and their property or property interests. Non-US Persons can be held liable for “causing” violations by US Persons involving transactions with SDNs and can also be subject to secondary sanctions risks for providing “material support” to SDNs. Secondary sanctions risks include the risk of being designated as an SDN.
The United States first added VTB Bank to the SDN List in February 2022, along with 20 of VTB Bank’s other subsidiaries. See our prior blog post here. The United Kingdom and Canada imposed sanctions on Rosbank earlier this year.
New and Amended Russia-Related General Licenses
OFAC amended and reissued Russia-related General License 8E, “Authorizing Transactions Related to Energy,” to add Rosbank to the list of financial institutions with whom transactions “related to energy,” as defined in General License 8E, are authorized through 12:01 a.m. eastern daylight time, May 16, 2023.
OFAC also issued two new General Licenses:
- General License 58, “Authorizing the Wind Down and Rejection of Transactions Involving Public Joint Stock Company Rosbank,” authorizes, subject to conditions, US Persons to engage in transactions ordinarily incident and necessary to the wind down of activities involving Rosbank, or any entity in which Rosbank, directly or indirectly, holds a 50 percent or greater interest, through 12:01 a.m. eastern daylight time, March 15, 2023. This General License also authorizes US Persons to reject, rather than block, transactions involving one or more Rosbank entities as an originating, intermediary, or beneficiary financial institution, through 12:01 a.m. eastern daylight time on March 15, 2023.
- General License 59, “Authorizing Transactions Related to Debt or Equity of, or Derivative Contracts Involving, Public Joint Stock Company Rosbank,” authorizes US Persons to divest or transfer holdings in securities of Rosbank, or any entity in which Rosbank owns, directly or indirectly, a 50 percent or greater interest, to non-US Persons. This General License also authorizes the wind down of certain derivative contracts. Transactions ordinarily incident and necessary to facilitating, clearing, and settling trades of covered debt or equity that were placed prior to 4:00 p.m. eastern standard time on December 15, 2022, are also authorized by this General License. These transactions, subject to certain conditions, are authorized through 12:01 a.m. eastern daylight time on March 15, 2023.
New Frequently Asked Questions
- FAQ 1,103 reiterates the wind-down periods for General Licences 58 and 59 as well as the transactions these General Licenses cover. It also clarifies that wind-down activities covered by General License 58 do not include the continued processing of funds transfers, securities trades, or other transactions that involve a Rosbank entity that were part of ongoing business activities prior to the imposition of sanctions, unless separately authorized.
- FAQ 1,104 clarifies that OFAC has not designated the mining company Norilsk Nickel as a result of the designation of Vladimir Potanin. Based on information currently available, Norilsk Nickel is not owned 50% or more by blocked persons.
The authors acknowledge the assistance of Ryan Orange with the preparation of this blog post.