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The full alert is available for download with footnotes here.
On February 26, 2022, President Biden released a Joint Statement along with Canada, the European Commission, France, Germany, Italy and the UK imposing coordinated economic sanctions against Russia in response to Russia’s military operations in Ukraine (“Tranche 3 Sanctions”). Japan later joined the effort as well.
The Tranche 3 Sanctions: (1) prohibit certain Russian banks from participating in the Society of Worldwide Interbank Financial Telecommunication (“SWIFT”) messaging system, (2) impose further sanctions on Russian banks, (3) add to the Specially Designated Nationals (“SDN”) List, and (4) issue new regulations titled the “Harmful Foreign Activities Sanctions Regulations.”
b. Russian Banks Removed from SWIFT
The U.S. and its partner countries have committed to removing “selected Russian banks” from the SWIFT messaging system. The SWIFT messaging system is a financial messaging service for cross-border payments that are communicated between financial institutions in different countries. According to SWIFT, it has a network of “more than 11,000 banks, financial institutions and corporations in more than 200 countries and territories.” Since SWIFT operates under Belgian authority, and U.S. sanctions would not be able to directly prohibit SWIFT from processing financial messages, removing Russian banks from SWIFT will ultimately require approval by SWIFT. While the joint statement did not specify which banks would be removed from the SWIFT system, the European Union later adopted Council Decision (CFSP) 2022/346 and Council Regulation (EU) 2022/345, prohibiting the following banks from using SWIFT:
SWIFT also made an official announcement following issuance of the EU regulation, removing the Russian banks from its system. Russia’s second-largest bank, VTB Bank, has been removed but, as Reuters has pointed out, the EU regulation “stopped short of including those handling energy payments.” Given the possibility that more banks could be added to the list, all companies engaged in transactions using Russian banks must closely monitor any possible additions to the list of banks removed from SWIFT.
c. Additional U.S. Sanctions Imposed on the Central Bank of the Russian Federation
On February 28, 2022, the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) issued a number of additional sanctions measures against Russia. Specifically, OFAC issued (1) Directive 4, issued under Executive Order 14024, “Prohibitions Related to Transactions Involving the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, and the Ministry of Finance of the Russian Federation” and (2) Russia-related General License 8A.
(1) Directive 4 under Executive Order 14024:
Directive 4 prohibits United States citizens from engaging in “any transaction involving the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation, including any transfer of assets to such entities or any foreign exchange transaction for or on behalf of such entities.”
An updated list of entities determined to be subject to the prohibitions of Directive 4 can be found on OFAC’s Non-SDN Menu-Based Sanctions List.
OFAC has also issued a number of FAQs concerning, among others, the interpretation of Directive 4:
(2) Russia-related General License 8A:
OFAC also issued General License 8A, which authorizes certain energy-related transactions until June 24, 2022.
OFAC has also issued several rounds of Frequently Asked Questions related to General License 8A.
d. Additions to the SDN List:
On February 28, 2022, OFAC added the following individual and entities to the SDN List:
e. Russian Harmful Foreign Activities Sanctions Regulations
On February 28, 2022, OFAC issued the Russian Harmful Foreign Activities Sanctions Regulations to implement E.O. 14024. These regulations are intended to provide structure to the series of sanctions recently announced by the Biden administration, and also to provide important definitions to terms used in recent releases.
OFAC noted that “intends to supplement these regulations with a more comprehensive set of regulations, which may include additional interpretive guidance and definitions, general licenses, and other regulatory provisions.”
Attorney advertising. The material contained in this Client Alert is only a general review of the subjects covered and does not constitute legal advice. No legal or business decision should be based on its contents.
Jason D. Wright
John Taishu Pitt
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+1 202 452 7373
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