On June 12, 2024, the United States Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), in coordination with the U.S. Department of State, announced a new wave of Russia sanctions that significantly expand the secondary sanctions exposure for foreign financial institutions that have dealings with Russia.
Previously, on December 22, 2023, President Biden authorized OFAC to impose sanctions on foreign financial institutions that conduct or facilitate significant transactions or provide services involving Russia’s military-industrial base. The new sanctions announced on June 12, 2024 broadened the definition of Russia’s military-industrial base to include all persons blocked pursuant to Executive Order 14024.
Therefore, under OFAC’s expanded definition, foreign financial institutions face the risk of sanctions if they conduct or facilitate significant transactions for or provide any services to Russia’s designated banks.
To help clarify the risks for foreign financial institutions, OFAC published an updated Sanctions Advisory for foreign financial institutions and updated the Specially Designated Nationals and Blocked Persons List (“SDN List”) to include the addresses and aliases of foreign locations of designated Russian financial institutions, including for VTB Bank Public Joint Stock Company, Public Joint Stock Company Sberbank of Russia, Promsvyazbank Public Joint Stock Company, State Corporation Bank for Development and Foreign Economic Affairs Vnesheconombank, and VTB Capital Holdings Closed Joint Stock Company.
OFAC has authority to impose full blocking sanctions on, or prohibit or restrict the maintenance of correspondent accounts in the United States for, foreign financial institutions who commit violations of these new sanctions. Foreign financial institutions should conduct a thorough review of their businesses for potential sanctions risks as well as their compliance policies and controls in light of these new authorities.
OFAC also announced the imposition of sanctions on over 300 individuals and entities worldwide that have helped sustain Russia’s war effort and evade sanctions. The new sanctions included designations targeting Russia’s financial infrastructure, including the Moscow Exchange, National Clearing Center, and the Non-Bank Credit Institution Joint Stock Company National Settlement Depository and entities involved in Russia’s liquified natural gas industry.
OFAC also issued a new determination under Executive Order 14071 which prohibits the supply of (i) IT consultancy and design services, and (ii) IT support services and cloud-based services for enterprise management software and design and manufacturing software to any persons in the Russian Federation.
We will continue to closely monitor developments in this space.
