OFAC Issues General Licenses on Winding Down Russia-related Securities Transactions

OFAC issued a general license authorizing transactions "ordinarily incident and necessary to the wind down" of certain financial contracts with Russian Federation entities. OFAC also issued a general license authorizing transactions related to auction processes to settle Russia-related credit derivative transactions. OFAC added two new FAQs and amended two FAQs on the scope of the licenses and related matters.

The new general licenses, issued under the "Russian Harmful Foreign Activities Sanctions Regulations" (31 CFR Part 587), include:

• General License 45, which authorizes through October 20, 2022 all transactions that are ordinarily incident and necessary to the wind down of financial contracts entered into on or before June 6, 2022 that involve, or are linked, to debt or equity issued by an entity in the Russian Federation otherwise prohibited by section (1)(a)(i) of Executive Order 14071 ("Prohibiting New Investment in and Certain Services to the Russian Federation in Response to Continued Russian Federation Aggression"). The transactions authorized by this general license include the purchase by U.S. persons of debt or equity issued by Russian entities and the facilitating clearing, and settling of such a purchase, in each case so long as the purchase is ordinarily incident and necessary to the wind down of covered contracts.
• General License 46, which authorizes transactions related to the establishment, administration, participation in and execution of an auction process to settle credit derivative transactions with a reference entity of the Russian Federation that are otherwise prohibited by Executive Order 14071.

OFAC published two new FAQs, FAQ 1071 and FAQ 1072, that clarify the scope of the two new general licenses. OFAC also amended FAQ 1053 and FAQ 1054 to provide additional guidance on transactions relating to divesting and selling securities of entities in the Russian Federation.