On 8 May 2014, the US Treasury Department’s Office of Financial Assets Control (“OFAC”) issued implementing regulations for the Ukraine-related sanctions programme. The new Ukraine-Related Sanctions Regulations (Title 31 CFR Part 589) have been issued in an abbreviated format, and OFAC has stated that it intends to supplement them with a more comprehensive set of regulations in the future. Currently, the regulations incorporate by reference the prohibitions in Executive Orders 13660, 13661 and 13662, which have been included in the regulations as Appendices A, B and C, respectively. Among other things, the regulations include definitions of terms such as “property”, “property interest” and “transfer”, provisions for handling blocked property, and provisions governing the effect of prohibited transfers. In these respects, the regulations are generally similar to OFAC’s other sanctions programmes involving blocking of assets.
The new Ukraine-Related Sanctions Regulations set out the “50% rule”, whereby any entity in which a blocked person owns a 50% or greater interest is also subject to blocking, even if that entity does not itself appear on the list of blocked persons. The “50% rule” has existed as a matter of interpretative guidance for a number of years and has now been included explicitly in the new regulations.
The regulations also include a number of general licences, in other words, authorisations that can be used by anyone who meets the criteria described in the regulations without the need to apply to OFAC. The general licences in the new Ukraine-Related Sanctions Regulations include authorisations for certain transactions by financial institutions holding blocked property, for emergency medical treatment, and for certain legal services.
In particular, US persons are authorised to provide legal services to blocked persons limited to advice on the requirements of, and compliance with, US law or representation in legal proceedings in the US. Payment for these legal services may be received from funds located outside the United States subject to certain reporting and other requirements. However, payment from blocked funds in the United States, from blocked funds in the hands of a United States person or from a blocked person other than the client is not permitted without a specific licence from OFAC.