As indicated in recent media reports, for example from Bloomberg and The Wall Street Journal, many are closely watching developments related to the “Russian oligarch” report due from the Trump Administration next week under Section 241 of the Countering America’s Adversaries Through Sanctions Act. Under Section 241, the Secretary of the Treasury (in consultation with the Secretary of State and the Director of National Intelligence) must submit to Congress by January 29 a “detailed report” that, among other things, identifies “the most significant senior foreign political figures and oligarchs in the Russian Federation,” as well as “Russian parastatal entities.”
One challenging and potentially problematic aspect of the Section 241 report is that CAATSA does not define “oligarch,” nor are we aware of any relevant definition elsewhere in U.S. law or regulation. Generally speaking, the term “oligarch” has been used in the context of contemporary Russia to refer loosely to very wealthy and politically-connected businessmen, generally with close ties to President Putin, and independent of whether the relevant individuals have necessarily engaged in illicit activity. Given the lack of a statutory definition and the imprecise use of the term “oligarch” in public circles, the Executive Branch’s own definition will be important in setting the scope for this report. Section 241 defines the term “senior foreign political figure” by cross-reference to the very broad definition found in the regulations of Treasury’s Financial Crimes Enforcement Network (FinCEN) — this definition includes any current or former senior officials in civilian, military, or judicial positions, or in political parties; state-owned entities and senior executives of state-owned entities; and immediate family members and close associates of any such individuals. The requirement to identify only “the most significant” senior foreign political figures and oligarchs provides the Executive Branch with additional discretion.
On the one hand, Section 241 does not impose any sanctions. In other words, the individuals and entities identified in the Section 241 report will not automatically be subject to sanctions. However, the economic analysis that is required as part of the Section 241 report suggests the real possibility of future sanctions. For example, the Section 241 report must include an assessment of the potential economic impact of imposing “secondary sanctions with respect to Russian oligarchs, Russian state-owned enterprises, and Russian parastatal entities.” The report must also identify “the likely effects of imposing debt and equity restrictions on Russian parastatal entities, as well as the anticipated effects of adding Russian parastatal entities” to the OFAC SDN list. Concern about future sanctions related to the oligarch report is not entirely theoretical. On January 16, Senators Chris Van Hollen (D-MD) and Marco Rubio (R-FL), introduced S. 2313, bipartisan legislation targeting foreign governments (or their agents) that knowingly interfere in US elections. Under S.2313, if the Russian government or an agent thereof is identified as interfering in US elections, the president would be required to impose a variety of sanctions, including sanctions on the senior foreign political figures and oligarchs to be identified in the Section 241 report. Thus, the Trump administration no doubt will be mindful of the potential congressional interest in sanctions in this area as it finalizes its report. Of course, to the extent that the report is made public, banks and other private parties may also make risk-based business decisions regarding the persons named in this report, and may be more reluctant to engage with them as a result of this report. Furthermore, this report could trigger anti-money laundering requirements, such as enhanced due diligence or transactional reporting, which could have a deterrent or chilling effect.
Section 241 requires the report to be submitted to Congress as an unclassified document, although it may be submitted with a classified annex. This does not necessarily mean that unclassified portions of the report automatically will be made public: many unclassified reports submitted by the Executive Branch to Congress are not made public in light of an underlying sensitivity associated with the document. Given the continued media and other interest in this topic, there may be more pressure than normal to publicly release (formally or informally) at least some of the Section 241 report.