The United States and the European Union imposed new targeted sanctions on Russian and Ukrainian political figures viewed as responsible for undermining Ukrainian sovereignty on 17 March 2014. Both the EU and U.S. have made clear that these sanctions are an opening move, intended to induce a diplomatic resolution of the Crimean crisis, and that additional sanctions may be imposed in response to continued escalation by Russia. As of 18 March 2014, Russian President Putin formally announced Russian annexation of Crimea and the Crimean Parliament has signed a treaty of accession with Russia, suggesting that a diplomatic resolution might not be forthcoming absent further escalation of sanctions in the near term. At this time, notwithstanding threats to retaliate with sanctions against certain unidentified western persons and possibly to ban U.S. Senators from traveling to Russia, nothing concrete has been proposed by the Russian Government in the form of countermeasures. Since it has now formally agreed to annex Crimea and Sevastopol, it may think that further measures are unnecessary at this stage. Below we discuss the specific sanctions imposed by the EU and the U.S. and highlight screening solutions that companies should implement as part of a broader compliance program.

European Union

On 17 March 2014, the EU Foreign Affairs Ministers adopted Council Decision 2014/145/CFSP (“the Decision”) and its Implementing Regulation EU No 269/2014 (“the Regulation”) concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine. The Decision includes the list of individuals who are subject to the travel bans and asset freezes referred to in Dechert’s update of 13 March 2014.

The list of the 21 individuals can be found via the following links: Council Decision and Council Implementing Regulation.

At the European Council to take place later this week, on the 20 and 21 March, EU Heads of State and Government may decide to extend the list to additional individuals in application of a “gradual increased approach” agreed by Ministers.

In order to comply with the provisions of the Decision and the Regulation, it is strongly advisable that you screen your customers and counter parties against the newly published list to establish whether you have any commercial relations with these individuals that may be affected by the sanctions, or whether you hold any funds or economic resources belonging to these individuals that you are required to freeze and report. Particular care should be paid to transactions involving individuals or entities who are owned or controlled by the listed individuals, as these will also be subject to the asset freeze provisions.

United States

President Obama issued an Executive Order (“E.O.”) freezing the assets subject to U.S. jurisdiction of, and banning visas for, Russian individuals found to be undermining democratic processes and sovereignty in Ukraine. A White House Fact Sheet elaborates that the sanctions are designed “to impose costs on named individuals who wield influence in the Russian government and those responsible for the deteriorating situation in Ukraine.” The current focus of the sanctions is to identify individuals and target their personal assets, but not companies that they manage on behalf of the Russian state, though the E.O. is broad enough to authorize future sanctions against companies in addition to individuals.

The new E.O. specifically targets seven Russians, including several advisers or supporters of President Vladimir Putin: Vladislav Surkov, Sergey Glazyev, Leonid Slutsky, Andrei Klishas, Valentina Matviyenko, Dmitry Rogozin, and Yelena Mizulina. Any assets subject to U.S. jurisdiction – or that come under the control or possession of U.S. persons – must be blocked, and U.S. persons are prohibited in dealing in such assets.

The White House has made clear that it intends to go after additional individuals and entities if the crisis continues, and will publicly identify any such individuals and entities that are targeted. In addition to imposing sanctions on the seven Russian officials identified above, the E.O. authorizes the Secretary of the Treasury, in consultation with the Secretary of State, to target additional individuals or entities that:

  • Are Russian government officials;
  • Operate in the arms and related materiel sector in Russia;
  • Are owned or controlled by Russian government officials or sanctioned individuals; or
  • Have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of the above.

The new Executive Order expands the scope of E.O. 13660, issued on 6 March and discussed previously, which authorizes sanctions against specified persons determined to be responsible for undermining the Ukrainian democratic process or misappropriating Ukrainian state assets. To date, four Ukrainian persons have been designated under the March 6 E.O., including: Crimea-based separatists Sergey Aksyonov and Vladimir Konstantinov, former Ukrainian presidential chief of staff Viktor Medvedchuk, and former President of Ukraine Viktor Yanukovych. Similar to the 17 March E.O., all assets of such persons subject to U.S. jurisdiction or that come under the control or possession of U.S. persons must be frozen, and U.S. persons are prohibited in dealing with such blocked property.

In order to comply with the orders, we recommend companies remain vigilant in screening all parties to contemplated transactions involving Russians or Ukrainians for connections to individuals or entities listed above as well as entities or individuals listed on the List of Specially Designated Nationals and Blocked Persons maintained by the U.S. Department of Treasury’s Office of Foreign Assets Control.