Sanctions Tracker – Further U.S. Responses to the Conflict in Ukraine

We previously discussed Russia-related sanctions measures imposed by the United States on April 11, April 7, March 25, March 15, March 14, March 9, March 8, March 3, February 28, February 25, February 23, and February 4.  We also discussed recent sanctions measures related to the Russian energy sector in a podcast episode.

This post provides an update regarding further Russia-related sanctions measures in the United States.

New Fact Sheet on Food and Humanitarian Sanctions Authorizations

On April 19, 2022, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) issued a “Fact Sheet” entitled “Preserving Agricultural Trade, Access to Communication, and Other Support to Those Impacted by Russia’s War Against Ukraine.”  According to OFAC, the intent behind the Fact Sheet is to “make clear that U.S. sanctions issued in response to Russia’s further invasion of Ukraine do not stand in the way of, agricultural and medical exports, nongovernmental organization (‘NGO’) activities, Coronavirus Disease 2019 (COVID-19) relief, the free flow of information, humanitarian assistance, and other support to people impacted by Russia’s war.”  The Fact Sheet consolidates the current general licenses and other guidance issued by OFAC pursuant to its Russia and Ukraine-related sanctions programs, with respect to the aforementioned food and humanitarian issues.  The OFAC press release is available here.

New General License

On the same day, OFAC issued General License (“GL”) 27, authorizing all transactions ordinarily incident and necessary to the following activities by NGOs, provided that the only involvement of blocked persons is the processing of funds by financial institutions blocked pursuant to Executive Order (“E.O.”) 14024:

• Activities to support humanitarian projects to meet basic human needs in Ukraine or Russia;
• Activities to support democracy building in Ukraine or Russia;
• Activities to support education in Ukraine or Russia;
• Activities to support non-commercial development projects directly benefiting the people of Ukraine or Russia; and
• Activities to support environmental and natural resource protection in Ukraine or Russia.

Designation of Transkapitalbank as an SDN

On April 20, 2022, OFAC designated Public Joint Stock Company Transkapitalbank (“TKB”) on its Specially Designated Nationals and Blocked Persons (“SDN”) List.

This means that all property and interests in property of TKB that are in the U.S. or in the possession or control of U.S. persons are blocked.  In addition, any entities that are owned, directly or indirectly, 50% or more by TKB are also blocked.  Furthermore, all transactions by U.S. persons or within (or transiting) the U.S. that involve any property or interests in property of TKB are prohibited unless authorized by a general or specific license issued by OFAC.

New General Licenses Related to Designation of TKB

Concurrent with its designation of TKB, OFAC issued the following new GLs:

• GL 28 authorizes all transactions involving TKB, or any entity owned 50% or more by it, that are ultimately destined for or originating from Afghanistan, until October 20, 2022. It also authorizes U.S. financial institutions to operate correspondent accounts on behalf of TKB, or any entity owned 50% or more by it, provided such accounts are used solely to effect such transactions.
• GL 29 authorizes a wind-down period for certain transactions involving TKB, or any entity owned 50% or more by it, until May 20, 2022.
• Notably, GL 28 and 29 do not authorize transactions that violate Directive 2 or Directive 4 (issued pursuant to E.O. 14024).

 Additional SDN Designations

In addition to TKB, OFAC designated “a global network of more than 40 individuals and entities led by U.S.-designated Russian oligarch Konstantin Malofeyev, including organizations whose primary mission is to facilitate sanctions evasion for Russian entities.”  OFAC also designated a number of companies operating in Russia’s virtual currency mining industry, reportedly the third largest in the world.  OFAC explained that “Russia has a comparative advantage in crypto mining due to energy resources and a cold climate,” and “[b]y operating vast server farms that sell virtual currency mining capacity internationally,” the designated companies “help Russia monetize its natural resources.”

The OFAC press release is available here.

New Frequently Asked Question

Finally, OFAC also issued Frequently Asked Question 1030, which provides that, under the Russia and Belarus sanctions programs, U.S. persons, including U.S. operators of credit cards and U.S. acquirers, are prohibited from processing transactions involving certain sanctioned foreign financial institutions, unless exempt or authorized by OFAC, and that non-U.S. operators of credit card systems whose payment cards are issued by sanctioned foreign financial institutions may also be in violation of OFAC-administered sanctions regulations if they allow those cards to be used in the United States.

OFAC encouraged U.S. persons, including U.S. operators of credit card systems and U.S. acquirers, to exercise caution and due diligence in dealing with non-U.S. operators of credit card systems that are known to host payment cards issued by sanctioned foreign financial institutions and whose payment cards are accepted in the United States.

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We will continue to monitor developments in this area and encourage you to subscribe to be kept informed of latest developments.  Please contact the authors or your usual Herbert Smith Freehills contacts for more information.