On April 27, 2023, the US Department of State (“State”) designated Russia’s Federal Security Service (“FSB”) and Iran’s Islamic Revolutionary Guard Corps Intelligence Organization (“IRGC-IO”) pursuant to Executive Order (“EO”) 14078 (Bolstering Efforts To Bring Hostages and Wrongfully Detained United States Nationals Home), with the result that the IRGC-IO has been added to the Specially Designated Nationals and Blocked Persons List (“SDN List”). The IRGC as a whole and FSB were previously designated on the SDN List pursuant to a number of other sanctions authorities. On the same day, the US Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) designated four senior officials of the IRGC-IO to the SDN List pursuant to EO 14078, three of whom had not previously been listed.
While the designations are not expected to have significant practical impact from a sanctions compliance perspective given pre-existing restrictions on US person dealings with these SDNs, these designations are the first to be made pursuant EO 14078 and may signal future use of sanctions to target hostage-takers. EO 14078, issued on July 19, 2022, authorizes the imposition of sanctions on any non-US person determined to have engaged in or aided the hostage-taking or wrongful detention of a US national. State’s press release regarding the designations indicates the FSB has been “repeatedly” involved in the wrongful detention of US nationals in Russia. OFAC’s press release states that the IRGC-IO detains dissidents, including dual nationals, and holds detainees in Tehran’s Evin Prison.
Although the designations were likely in the works prior to his detention, the designations come one month after Wall Street Journal reporter Evan Gershkovich was detained in Russia on espionage charges. The US government is reportedly working intensely to secure his release.
The parties designated by State and OFAC to the SDN List are 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.
In conjunction with this most recent designation of the FSB, OFAC issued Cyber-related General License (“GL”) 1C (“Authorizing Certain Transactions with the Federal Security Service”), which replaces GL 1B, which was issued on March 2, 2021. GL 1C authorizes a limited scope of transactions with the FSB, specifically transactions that would otherwise be prohibited by the Cyber-Related Sanctions Regulations, 31 CFR part 578, the Weapons of Mass Destruction Proliferators Sanctions Regulations, 31 CFR part 544, or EO 14078 and that are ordinarily incident and necessary to:
- requesting, receiving, using, paying for, or dealing in licenses, permits, certifications, or notifications issued or registered by the FSB for the importation, distribution, or use of IT products in Russia, provided that:
- the provision of any goods or technology subject to the Export Administration Regulations is licensed or otherwise authorized by the US Department of Commerce; and
- the payment of fees to the FSB does not exceed $5,000 in any calendar year;
- complying with law enforcement or administrative actions or investigations involving the FSB; or
- complying with rules and regulations administered by the FSB.
Cyber-related GL 1C mirrors Russia-related GL 42, issued on June 28, 2022, which authorizes the same scope of transactions where they would otherwise be prohibited due to the FSB’s designation pursuant to EO 14024.
OFAC also issued amended versions of Cyber-related FAQs 501, 502, and 503, all of which previously addressed GL 1B and now address GL 1C.
FAQ 501 provides an overview of what GL 1C does and does not authorize.
FAQ 502 further clarifies that the transactions authorized by GL 1C are restricted to activities related to the FSB’s administrative and law enforcement capacities.
FAQ 503 confirms that GL 1C does not authorize the direct or indirect export of any goods, technology, or services to the FSB except for the limited purposes described in GL 1C.