June 17, 2024

U.S. issues more than 300 new designations and new general licenses and FAQs targeting Russia’s financial infrastructure, sanctions evasion networks and military-industrial base

On January 12, 2024, the U.S. Departments of Treasury and State issued more than 300 new sanctions to persons inside and outside of Russia – including individuals and entities in Asia, the Middle East, Europe and Africa – that have allegedly provided services and products to Russia and helped facilitate its war against Ukraine.  Of the more than 300 designations, the State Department targeted more than 100 individuals and entities that reportedly support Russia’s sanctions evasion efforts, the Russian military-industrial base, Russia’s future energy projects, and those involved in the forced transfer and deportation of Ukrainian children.  The sweeping new measures, which are line with G7 commitments to intensify pressure on Russia for its war against Ukraine, were issued just as President Biden was preparing to meet with G7 leaders in Italy.

In line with G7 commitments, OFAC issued a new determination under Executive Order 14071 to prevent Russia’s military-industrial base from benefitting from U.S. software and information technology (“IT”) services.  The determination, which will take effect on September 12, 2024, prohibits the following services to persons in Russia: 1) IT-consultancy and design services and 2) IT support and cloud-based services for enterprise management software and design and manufacturing software.

The new OFAC designations target several areas of the Russian economy.  They increase the risk of secondary sanctions against foreign financial institutions that support Russia’s war economy by broadening the definition of Russia’s military-industrial base to include person’s blocked under Executive Order 14024, and updating the designations of five previously-sanctioned Russian financial institutions to include the addresses and aliases of their foreign locations.  The measures also target Russia’s financial infrastructure by designating, among other groups, the Moscow Stock Exchange (“MOEX”) that has allegedly been used to fuel the Kremlin’s war machine.   OFAC also sanctioned individuals and entities involved in several transnational supply networks that have allegedly been been used to enable Russia to evade sanctions, obtain goods and assets that support the production of Russian materiel used in the war against Ukraine, or contribute in any way to Russia’s domestic war economy.

All of the designations were issued pursuant to Executive Order 14024, as amended, for operating in the financial services, defense, manufacturing, technology or transportation sectors of the Russian economy.  As a result of these designations, all property and interests in property of the designated persons within the United States or within the possession or control of a U.S. person are blocked, and U.S. persons are generally prohibited from engaging in transactions involving a designated person.  Entities owned 50 percent or more by one or more blocked persons are also blocked.

In light of the new designations and new prohibitions in the determination, OFAC issued six new general licenses pursuant to Russian Harmful Foreign Activities Sanctions Regulations (“RuHSR”), 31 CFR part 587.  OFAC issued General Licenses 6D and 25D to allow certain humanitarian-related transactions and certain telecommunications and internet-related transactions to continue with Russia.  General License 8J authorizes transactions involving certain designated energy-related entities until November 1, 2024.  General License 98 and 99 permit wind down transactions with several newly-designated entities and transactions involving MOEX, the National Clearing Center (“NCC”) and JSC National Settlement Depository (“NSD”), in particular, until August 13, 2024.  Finally, General License 100 enables U.S. persons to divest debt or equity to certain non-U.S. persons or to convert currency involving MOEX, NCC, or NDS until August 13, 2024.

To further clarify the provisions in the new determination and general licenses, OFAC issued Frequently Asked Questions 1181 – 1188.  OFAC also amended 10 FAQs (FAQs 976, 1949, 1968, 1122, 1128, 1146, 1147, 1148, 1151, and 1152) in order to address changes resulting from the new prohibitions and new general licenses and to discuss how they affect the implementation of existing Russia-based determinations and general licenses.

OFAC also published an updated Compliance Advisory specifically for Foreign Financial Institutions to provide them with guidance regarding the impact of the new prohibitions and how to implement sanctions risks and corresponding controls.

U.S. Department of Treasury Press Release | U.S. Department of State Press Release | Determination – Prohibition on Certain IT and Software Services | Updated Compliance Advisory