OFAC Expands SDN and SSI Lists to Include Russia- and Ukraine-Related Individuals and Entities (with Treanor Comment)

The Department of Treasury's Office of Foreign Assets Control ("OFAC") designated additional Russia- and Ukraine-related individuals and entities to its Specially Designated Nationals ("SDN") and Sectoral Sanctions Identifications ("SSI") Lists. The SDN List designations prohibit nearly all transactions with named parties. Thirteen individuals and entities are linked to "serious and sustained sanctions evasion" pursuant to Executive Order 13661, including previously-designated persons Gennady Timchenko, Boris Rotenberg, and Kalashnikov Concern. The SDN designations also include two Russian defense companies; former Ukrainian officials and close associates of former Ukrainian President Viktor Yanukovych; and Crimean port and sea ferry operators. A detailed summary of these SDN designations is available here.

The SSI designations announced by OFAC include a number of subsidiaries of the previously-designated Russian financial institution Vnesheconombank ("VEB") and of the energy firm Rosneft. According to OFAC, these entities were already subject to the same restrictions as their parent companies by operation of law under OFAC's 50-percent rule guidance. The July 30 designations were intended to "help the public more effectively comply with the sanctions on VEB and Rosneft." Under the sectoral sanctions established by Executive Order 13662 and related OFAC Directives, U.S. Persons generally are prohibited from engaging in transactions in new equity and new debt of longer than 30 days' maturity of designated financial institutions. In the energy sector, U.S. Persons are prohibited from engaging in transactions with designated entities related to new debt of longer than 90 days' maturity, or technology, goods and services in support of deepwater, Arctic offshore, and shale projects that have the potential to produce oil in the Russian Federation. Relevant finance and energy sector Directives are available here, here and here. (An additional OFAC Directive, available here, imposes prohibitions on transacting in new debt of longer than 30 days' maturity of designated Russian defense companies.) A complete listing of OFAC's July 30 SSI designations is available here.

Finally, OFAC also issued a Crimea Sanctions Advisory highlighting certain financial and trade practices used to circumvent or evade U.S. sanctions involving Crimea. According to OFAC, the evasive practices include omission or obfuscation of address and other identifying information on SWIFT messages and other financial or trade documents for the purpose of hiding a party's connection to Crimea. Under Executive Order 13685, U.S. Persons are prohibited from engaging in nearly all direct and indirect transactions with individuals and entities in the Crimean region. The Advisory recommends the implementation of appropriate compliance controls, including: 1) the use of transaction monitoring search terms that include, in addition to the term "Crimea," the major geographic locations within the region; 2) the enhanced scrutiny of parties that previously have violated or attempted to violate U.S. sanctions on Crimea; and 3) the clear communication of U.S. sanctions obligations to international partners.

Treanor Comment: While the situation in eastern Ukraine has stabilized somewhat in recent months, OFAC's actions demonstrate that the U.S. government remains committed to maintaining pressure on Russia for its perceived aggression. They also serve as a reminder that OFAC designations change often, and that companies should ensure their compliance policies and procedures enable continual screening and rescreening of relevant transactions and business relationships for potential sanctions' red flags.

See: U.S. Department of Treasury Press Release; OFAC Crimea Sanctions Advisory.