As Russian forces continue their attacks on major Ukrainian cities and Executive Orders (EO) flood from the White House, compliance officers and departments are left scrambling for guidance on how best to operate under this new regime and clarity on where to go next. As the front line enforcers of the sanctions war against Russia, Compliance Officers must be prepared to utilize all of the compliance tools at their disposal and rise to the challenge they have been called to face. To that end, it is crucial that compliance, risk, and financial professionals understand the U.S. sanctions and where they may be headed.
Since the beginning of 2022, the measures taken by the Biden administration to curtail Russian aggression in Ukraine have ranged from seeking to restrict Russia’s use of cryptocurrency to evade U.S. sanctions to categorical bans on imports from certain sectors of the Russian economy, including, but not limited to, seafood, alcohol, diamonds and other luxury goods. To accomplish these goals, the Office of Foreign Assets Control (OFAC), which administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals, has been working overtime to implement and enforce these new sanctions and restrictions.
By way of non-exhaustive example, the Biden administration has issued the following Executive Orders targeting Russian elites, entities and economic sectors:
- On February 21, President Biden signed an executive order, Blocking Property of Certain Persons and Prohibiting Certain Transactions with Respect to Continued Russian Efforts to Undermine the Sovereignty and Territorial Integrity of Ukraine, which, in coordination with OFAC, authorizes the imposition of significant sanctions against Russian elites and their family members as well as Russia’s top financial institutions, including sanctioning Russia’s two largest banks and nearly ninety (90) financial institution subsidiaries around the world.
- On March 8, Executive Order 14066, Prohibiting Certain Imports and New Investments With Respect to Continued Russian Federation Efforts to Undermine the Sovereignty and Territorial Integrity of Ukraine, targeted the Russian energy sector placing certain prohibitions and restrictions on energy-related transactions in Russia. This EO prohibits imports of certain Russian-origin energy products including, but not limited to: crude oil, liquefied natural gas, coal, petroleum, and petroleum fuels. In addition, EO 14066 bans any new investment in the Russian energy sector which, according to OFAC guidance, includes the transport of Russian energy products.
- On March 11, President Biden, through an executive order, Prohibiting Certain Imports, Exports, and New Investment with Respect to Continued Russian Federation Aggression, banned certain imports, exports, and new investments to and from Russia. Specifically, this EO bans the import of Russian Federation origin seafood, alcohol, and non-industrial diamonds and the export of certain luxury goods to Russia. Additionally, the EO authorizes the Treasury Department to restrict certain investment in any sector of the Russian economy. The White House stated that these efforts collectively will block more than $1 billion in Russian revenues.
While the Executive Orders and regulations issued to date appear extensive, the Biden Administration has made clear that these measures are “not the last steps” it will take in combatting Russia’s invasion of Ukraine. To that end, the Administration, on March 11, called on Congress to revoke Russia’s “most favored nation” status, which would downgrade Russia as a trading partner and open the door to new tariffs on Russian products.
OFAC strongly encourages organizations subject to U.S. jurisdiction, as well as foreign entities that conduct business in or with the United States, to employ a risk-based approach to sanctions compliance by developing, implementing, and routinely updating a sanctions compliance program. It is important to note that violations of OFAC’s regulations can result in both civil and criminal penalties. For example, as of February 9, 2022, OFAC may assign civil penalties of up to $97,529 per violation of the Trading with the Enemy Act and fines of up to $330,947 per violation of the International Emergency Economic Powers Act. In January 2022 (the most recent publicly available data), OFAC issued civil penalties of $5,319,470.29. Just as importantly, knowing and willful violation of US economic sanctions laws can result in criminal penalties.
Buchanan’s has a coordinated team of international trade and national security attorneys ready to help your compliance officers and departments continue to navigate these new sanctions and restrictions against Russia.