In further US developments against Russia, (1) on April 19 and 20, 2022, the US Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) targeted sanctions evaders, including by adding two Russian banks – Public Joint Stock Company Transkapitalbank (“TKB”) and its subsidiary, Joint Stock Company Investtradebank (“Investtradebank”) – and the virtual currency mining company, Bitriver AG and its subsidiaries, to the Specially Designated Nationals and Blocked Persons List (“SDN List”) for attempts to evade sanctions and issued three new Russia-related General Licenses (“GLs”), (2) OFAC also issued a Fact Sheet for “Preserving Agricultural Trade, Access to Communication, and Other Support to Those Impacted by Russia’s War Against Ukraine” and (3) on April 21, 2022, President Biden issued a proclamation prohibiting Russian-affiliated vessels from entering US ports.
New SDN Designations and Related GLs
OFAC added several parties to the SDN List pursuant to EO 14024, with notable inclusions being TKB and Investtradebank, both large private banks operating in Russia. Neither TKB or Investtradebank were previously subject to any US sanctions restrictions. Per Treasury’s press release, TKB reportedly offered its clients the ability to process US dollar payments for sanctioned clients via a proprietary alternative to SWIFT. OFAC also designated Bitriver AG, a Swiss-based virtual currency mining company and its Russian subsidiaries, in a stated efforts to constrain Russia’s use of virtual currencies to offset the impact of sanctions. This is the first time OFAC has targeted a virtual currency mining company. OFAC also designated under EO 14024 another Russian oligarch and his related sanctions evasion network, for “disrupting worldwide sanctions evasion and malign influence” in line with Western allies.
As a result of these designations, 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 (which would include, in particular, the risk of designation as an SDN themselves) for providing “material support” to SDNs. In conjunction with these SDN designations, OFAC issued two GLs:
- GL 28 authorizes, subject to conditions, US persons to engage in transactions involving TKB, or any entity in which TKB, directly or indirectly, holds a 50% or greater interest, that are ultimately destined for or originating from Afghanistan and prohibited by Executive Order 14024, through 12:01 am ET, on October 20, 2022. GL 28 also authorizes US financial institutions to operate correspondent accounts on behalf of TKB and their subsidiaries, for eligible Afghanistan-related transactions.
- GL 29 authorizes, subject to conditions, all transactions ordinarily incident and necessary to the wind down of transactions involving TKB, or any entity in which TKB owns, directly or indirectly, a 50 % or greater interest, that are prohibited by Executive Order 14024, through 12:01 a.m. ET, on May 20, 2022.
New NGO GL 27
On April 19, OFAC issued GL 27, which authorizes certain activities of nongovernmental organizations (“NGO”) in Ukraine and Russia. Eligible NGO activities under GL 27 include humanitarian projects to meet basic human needs (including providing drought and flood relief, food, nutrition, and medicine distribution, the provision of health services, assistance for vulnerable or displaced populations, including individuals with disabilities and the elderly, and environmental programs) as well as support of democracy, education, non-commercial projects, and environmental and natural resource protection. SDN financial institutions blocked pursuant to Executive Order 14024 may be involved in the processing of funds for NGOs to engage in activities described in GL 27.
New Fact Sheet on Preserving Agricultural Trade, Access to Communications, and Other Support
OFAC has issued a Fact Sheet to provide guidance on agricultural and medical exports, NGO activities, Coronavirus Disease 2019 (COVID-19) relief, the free flow of information through telecommunications and internet services, humanitarian assistance, and other types of transactions to support areas impacted by the war in Ukraine. The Fact Sheet provides an overview of relevant GLs and Frequently Asked Questions for various types of authorized transactions. The Fact Sheet also clarifies that the activities referenced throughout the guidance are not the target of US sanctions efforts, and US and non-US persons can avail themselves of the authorizations, exemptions, and public guidance that OFAC has issued as they continue to engage in these activities in relation to Ukraine and Russia.
New Proclamation Targeting Russian-Affiliated Vessels
On April 21, President Biden issued this proclamation prohibiting Russian-affiliated vessels from entering US ports. This prohibition applies to vessels that are Russian-registered (i.e., sailing under the Russian flag) and vessels that are Russian-owned or operated. Russian-affiliated vessels used to transport specific materials as outlined in the proclamation, or requesting only to enter US ports due to force majeure (solely to allow seafarers of any nationality to disembark or embark for purposes of conducting crew changes, emergency medical care, or for other humanitarian need) are exempt from this prohibition. The prohibition is effective beginning on April 28, 2022.
The authors acknowledge the assistance of Ryan Orange in the preparation of this blog post.