January 18, 2023

OFAC issues three Russia-related general licenses and updates FAQs related to Russian debt or equity securities

On January 17, 2023, the US Department of the Treasury’s Office of Foreign Assets Control updated three general licenses issued pursuant to Russian Harmful Foreign Activities Sanctions Regulations (“RuHSR”), 31 CFR part 587.  OFAC also updated Frequently Asked Questions 982, 1054, 1055, and 1059 to clarify the prohibitions related to the purchase or sale of debt or equity securities issued by blocked Russian financial institutions or entities located in Russia.

General License 6C authorizes transactions related to 1) agricultural commodities, medicine, medical devices as well as replacement parts or related software updates; 2) the prevention, diagnosis or treatment of COVID-19; or 3) clinical trials and other medical research-related activities.  In GL 6C, OFAC specifies that it does not authorize transactions prohibited by EO 14066, EO 14068 or EO 14071, except for transactions prohibited solely by the determination made pursuant to section 1(a)(ii) of EO 14071, “Prohibitions Related to Certain Accounting, Trust and Corporate Formation, and Management Consulting Services.  GL 6C effectively replaces and supersedes GL 6B in its entirety.

General License 54A authorizes certain transactions related to the purchase or receipt of debt or equity securities involving VEON Ltd. that would otherwise be prohibited by section 1(a)(i) of the EO 14071, if the debt or equity securities were issued prior to June 6, 2022.  GL 54B extends these authorizations to debt or equity securities involving VEON Holdings BV.  GL 54B effectively replaces and supersedes GL 54 in its entirety.

General License 28B authorizes wind down transactions involving Public Joint Stock Company Transkapitalbank (“TKB”) or any entity in which TKB owns a 50 percent or greater interest that is ultimately destined for or originating from Afghanistan until March 18, 2023.  The amended general license specifies that these transactions are authorized as long as the payments made to any TKB entity are made into a blocked account in accordance with RuHSR.  GL 28B also enables US persons to reject, rather than block, transactions authorized by this license.  GL 28B effectively replaces and supersedes GL 28A in its entirety.

OFAC also updated several FAQs, including FAQ 982, which provides that US persons are not permitted to buy or sell debt or equity of Russian financial institutions blocked under EO 14024.  FAQ 982 also provides that US funds are not permitted to buy, sell, or otherwise engage in transactions related to these Russian financial institutions and must block such holdings unless they are otherwise exempt or authorized by OFAC.  FAQ 982, as updated, provides that US funds containing blocked holdings are not considered to be blocked unless the blocked holdings represent 50 percent or more of the value of the fund.  Furthermore, while EO 14066, EO 14068, and EO 14071 (“the respective EOs”) prohibit US persons from purchasing new and existing debt and equity securities issued by Russian entities, FAQ 1054 provides that US persons are permitted to sell or divest such securities but are not required to do so.  FAQ 1054, as updated, also clarifies that the purchase of shares in a US fund is not considered to be a prohibited “new investment” under the respective EOs unless the fund contains blocked holdings that represent 50 percent or more of the value of the fund.

OFAC also updated FAQ 1055, which provides that the respective EOs do not prohibit US persons from lending funds to, or purchasing debt or equity interest in, entities located outside of Russia, provided that the funds are not specifically intended for new projects in Russia, or if the entity located outside of Russia derives less than 50 percent of its revenues from investments in Russia.  The update offers guidance on how to determine from publicly available information whether the percentage of revenue from Russian investments is less than 50 percent.  The update also includes examples of transactions that OFAC considers to be prohibited “new investment” under the respective EOs, and examples of transactions that would not be considered a “new investment.”

OFAC also made minor updates to FAQ 1059, which provides that the determinations made pursuant to EO 14071 on May 8, 2022 and September 15, 2022, do not prohibit US persons from providing services to persons located outside of Russia that are owned or controlled by persons in Russia, provided that the service is not provided to indirectly benefit a person located in Russia.  The FAQ also provides examples of scenarios that would be prohibited under the determination as well as examples of scenarios that would permitted.

General License 6C | General License 54A | General License 28B | Updated FAQs