On July 30, 2015, the US Treasury Department’s Office of Foreign Assets Control (“OFAC”) designated certain individuals and entities on the Specially Designated Nationals and Blocked Persons List (“SDN List”) and identified certain entities on the Sectoral Sanctions Identifications List (“SSI List”) pursuant to various Russia sanctions measures that have been imposed since last year. A complete list of parties that are newly designated on the SDN List and the SSI List is available here.
The new SDNs are primarily associated with existing SDNs or are accused of providing “material support” to existing SDNs. Other SDN designations are intended to align the SDN List with parties designated by US partners such as Canada and the European Union. With respect to the SSI List, OFAC designated a number of majority-owned subsidiaries of two parties already found on the SSI List. US persons should already have been treating these subsidiaries as subject to US sectoral sanctions because they are 50% or more owned by SSI List parties. A Treasury Department press release provides more background about these SDN List and SSI List designations.
On the same day, OFAC also issued a “Crimea Sanctions Advisory” (“Crimea Advisory”) on US comprehensive sanctions targeting Crimea (i) to highlight some of the practices that have been used to circumvent or evade such sanctions and (ii) to provide examples of steps that can be taken to mitigate the risk of processing transactions in apparent violation of OFAC sanctions against Crimea. Our previous blog posts about US sanctions targeting Crimea are available here, here, here, and here.
In the Crimea Advisory, OFAC said that it has become aware that certain parties have engaged in a pattern or practice of repeatedly omitting originator or beneficiary address information in Crimea-related financial transactions, which presents challenges to intermediary US banks’ efforts to accurately identify and interdict transactions involving Crimea. OFAC encourages US persons and persons conducting business in or through the United States to be cautious when processing payment instructions lacking complete address information when such transactions involve a party that has previously omitted partial or complete address information about Crimean individuals or entities.
In the context of international trade, OFAC said that it has become aware that references to Crimea have been obscured in transactional documents. In particular, because the United States does not recognize the legitimacy of Russia’s attempted annexation of Crimea, OFAC noted that certain parties have listed Crimean counterparties on relevant documents as being located in Russia rather than in Ukraine to evade US sanctions targeting Crimea.
In addition, the Crimea Advisory provides examples of suggested compliance measures from OFAC to address the above issues, including:
· Ensuring that company’s transaction monitoring systems include appropriate search terms corresponding to major geographic locations in Crimea and not simply references to Crimea.
· Requesting additional information from parties (including financial institutions, corporate entities, and individuals) that previously have violated or attempted to violate US sanctions targeting Crimea before processing relevant transactions.
· Clearly communicating US sanctions obligations to, and discussing OFAC sanctions compliance expectations with, correspondent banking and trade partners. Such communications should include, for example, a description of the US prohibition on the direct and indirect exportation or reexportation of goods, technology, and services (including financial services) from the United States to Crimea.
OFAC noted in the Crimea Advisory that the above are merely examples of steps that can be taken to mitigate compliance risks and companies should tailor specific compliance measures to their own risk profile.