On June 9, 2022, the US Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) issued eleven new Frequently Asked Questions (“FAQs”) (FAQs 1058 – 1068) to provide further guidance on the prohibition on the export of certain services pursuant to Section (1)(a)(ii) of Executive Order (“EO”) 14071 and the Determination Pursuant to Section 1(a)(ii) of Executive Order 14071 (“OFAC Service Ban”). As detailed in our previous blog post here, the OFAC Service Ban applies to certain accounting, trust and corporate formation, and management consulting services. Below we summarize a few key FAQs; for the full texts of these FAQs, please visit here.
- FAQ 1058 clarifies that the term “person located in the Russian Federation” includes (i) persons in the Russian Federation, (ii) individuals ordinarily resident in the Russian Federation, and (iii) entities incorporated or organized under the laws of the Russian Federation or any jurisdiction within the Russian Federation.
- FAQ 1059 clarifies that US Persons are not prohibited from providing services to persons located outside of the Russian Federation that are owned or controlled by persons located in the Russian Federation, provided that the provision of services is not an indirect export to a person located in the Russian Federation. OFAC interprets the “indirect” provision of the prohibited services to include when the benefit of the services is ultimately received by a “person located in the Russian Federation.”
- FAQ 1061 clarifies that while US Persons are prohibited from exporting, reexporting, selling, or supplying, directly or indirectly, management consulting, trust and corporate formation services, and accounting services to persons located in the Russian Federation in their capacity as employees, US Persons are not prohibited from providing other services not covered by the OFAC Service Ban as part of their employment by Russian companies.
- FAQ 1062 clarifies that the OFAC Service Ban applies to services provided to a company located in the Russian Federation by any US Person, including the Russian company’s US subsidiary.
- FAQ 1063 clarifies that US Persons are prohibited from providing trust and corporate formation services to persons located in the Russian Federation, regardless of whether the services are performed as part of the formation of a new trust or company, or as part of the administration or maintenance of an existing trust or company.
- FAQ 1064 clarifies that the prohibitions on management consulting services include executive search and vetting services. OFAC interprets management consulting services to include services related to strategic business advice; organizational and systems planning, evaluation, and selection; development or evaluation of marketing programs or implementation; mergers, acquisitions, and organizational structure; staff augmentation and human resources policies and practices; and brand management.
The authors acknowledge the assistance of Ryan Orange in the preparation of this blog post.