The United States sent a clear signal last month that it remains committed to sanctions against Russia by naming many new individuals and entities to restricted parties lists. On September 1, 2016, the U.S. Department of the Treasury, Office of Foreign Assets Control ("OFAC") designated 37 Russian and Ukrainian individuals and entities on the list of Specially Designated Nationals and Blocked Persons ("SDN List"). On September 7, 2016, the U.S. Department of Commerce, Bureau of Industry and Security ("BIS") designated 81 entities with connections to Russia on the Entity List.
According to the U.S. government, these individuals and entities were designated for a variety of reasons, including acting for or on behalf of a previously designated party, operating in the Crimea region of Ukraine, operating in the Russian arms sector, and being involved in the destabilization of Ukraine. U.S. persons are prohibited from engaging in transactions or other dealings with or involving individuals and entities designated on the SDN List, as well as entities owned 50 percent or more by one or more designated parties. The restrictions on the entities designated on the Entity List vary from a broad prohibition on exports of items subject to the U.S. export control laws to narrowly tailored restrictions on exports for use in connection with certain end-uses.
In addition to the SDN List designations, OFAC designated approximately 100 subsidiaries of previously designated entities to the Sectoral Sanctions Identifications List, thereby imposing restrictions on the ability of U.S. persons to engage in certain transactions with or involving those entities. In parallel with the above-described designations, OFAC issued General License No. 10, which temporarily authorizes certain transactions that are ordinarily incident and necessary to divest or transfer to a non-U.S. person holdings in PJSC Mostotrest, one of the Russian construction companies designated on the SDN List.
These recent designations by OFAC and BIS evidence the U.S. government's continued focus on enforcing Russia-related sanctions. They also serve as a reminder that parties that are not owned by designated parties may, nonetheless, be designated for acting on behalf of, or being controlled by, a designated party.
U.S. companies interested in pursuing business opportunities in Russia should undertake thorough due diligence on all counterparties to ensure that none of them are designated on any restricted parties lists. To ensure business continuity, companies also should review whether potential business partners are subject to designation, such as by evaluating whether they are controlled by designated parties or engage in activities for or on behalf of designated parties.