On March 20, 2014 the U.S. Government responded to the latest developments affecting Crimea by blocking the property of certain Russian government officials, their supporters and a Russian bank. These parties were identified as Specially Designated Nationals (SDN) under Executive Orders 13660 and 13661 of March 6 and March 16, 2014, respectively. Their names have been added to the SDN List published by the Office of Foreign Assets Control (OFAC) and U.S. persons are now barred from having any dealings with them. In addition, the President issued a third Executive Order relating to the situation in Ukraine that again expands the criteria for further designations.
According to OFAC, the new designations target Russian government officials and “members of the Russian leadership’s inner circle.” The U.S. Government also designated the first entity, Bank Rossiya, in relation to the national emergency relating to Ukraine. This designation is significant, as Bank Rossiya is ranked as Russia’s seventeenth largest bank and holds correspondent accounts at many major U.S. financial institutions. Additionally, any entities that are majority owned by Bank Rossiya are also blocked. Rossiya’s 2012 financial statements identify the following entities as majority-owned subsidiaries: Sobinbank, Zest, SVK, Leasing Company Kapital, Leasing Company Kapital-ABR, IC Abros and SOGAZ. SOGAZ is a major insurance company in Russia.
U.S. companies should move quickly to identify any interactions with the newly designated parties. U.S. companies must cease providing services to the named SDNs and any entities in which they hold a majority ownership interest. U.S. companies must also block any property (e.g., letters of credit, services agreements, insurance contracts) in which the SDNs have an interest and report the blocked property to OFAC within 10 business days. Any cash funds in which the SDNs have an interest must be placed in an interest bearing account at a U.S. financial institution.
More sanctions may follow. The March 20, 2014 Executive Order expanded designation criteria to permit sanctions against Russian industrial sectors identified by the Treasury Secretary. The Executive Order specifically mentions the following industrial sectors as potential targets for further sanctions:
- Financial services;
- Metals and mining;
- Defense and related materiel.
New General License for Educational Activities Involving Iran
In an unrelated action, OFAC also issued a new General License G on March 20, 2014, in connection with the sanctions against Iran. General License G authorizes accredited U.S. institutes of higher education to establish exchange programs with Iranian universities for undergraduate and graduate decree programs, and to provide certain enumerated educational services.