Following a meeting of G7 leaders on May 8, 2022, the United States adopted additional sanctions and export control measures in response to the ongoing conflict in Ukraine. Among the changes: a ban on U.S. persons providing accounting, trust and company incorporation and management consulting services to persons in Russia, sanctions against Russian state-controlled TV stations, additional SDN designations of persons, entities, and vessels, a new visa restriction, and expanded export licensing requirements for items destined for Russia. Organizations should ensure that they continue to assess and update their compliance procedures to address potential points of contact with these new sanctions and export control measures.
Prohibition on providing certain professional services
On May 8, 2022, the United States Department of Treasury’s Office of Foreign Assets Control (OFAC) issued a ruling that the designating authority of Section 1(a)(i) of Executive Order 14024 extends to persons who are determined to have operated in the accounting, trust and business formation, and management consulting sectors of the Russian economy, further expanding OFAC’s ability to impose sanctions on persons operating in Russia and strengthening designation authority under Executive Order 14024, which already applies to financial services, technology, defense and related materials, aerospace, electronics and marine in Russia.
OFAC further issued a ruling that the prohibitions in EO 14071 Section 1(a)(ii) apply to designated categories of professional services, effectively prohibiting the export, re-export, sale or the provision, directly or indirectly, from the United States, or by any US Person, wherever located, of such Services to any person located in the Russian Federation. Excluded from the scope of the determination (and, therefore, the prohibitions) are services provided to entities located in Russia that are owned or controlled, directly or indirectly, by a U.S. person and services related to the liquidation or the disposal of an entity in Russia that is not owned or controlled, directly or indirectly, by a Russian person. As part of these designations, OFAC has issued new General Licenses (“GLs”) authorizing the liquidation of activities involving these services as follows:
- GL 34 authorizes liquidation activities incidental and necessary to the provision of accounting, trust and business formation, and management services to any person in Russia; the general license expires at 12:01 a.m. Eastern Daylight Time on July 7, 2022.
- GL 35 permits liquidation activities incidental and necessary to the provision of credit rating or auditing services to any person in Russia; the general license expires at 12:01 a.m. Eastern Daylight Time on August 20, 2022.
New SDN designations targeting Russian TV stations and bank officials
Also on May 8, OFAC announced additional SDN designations of a number of people, entities and vessels in accordance with EO 14024. This most recent set of designations includes three directly controlled Russian TV stations or indirectly by the state: Joint Stock Company Channel One Russia, the Russia-1 television station and the joint-stock company NTV Broadcasting Company. OFAC also issued GL 33 authorizing liquidation activities involving these entities, which will expire at 12:01 a.m. Eastern Daylight Time on June 7, 2022.
On the same day, OFAC sanctioned the limited liability company Promtekhnologiya, which produces guns and other weapons; seven shipping companies, which own or operate 69 vessels; and a marine towing company. OFAC further announced the appointment of a number of Sberbank and Gazprombank executives and their families. U.S. Persons are prohibited from providing funds, goods or services to or for the benefit of any of the Designated Parties and from receiving funds, goods or services from any Designated Party, except as authorized by OFAC. In addition, any interest in the property of these entities that is in or comes from the United States or under the possession or control of a US Person must be blocked and reported. The prohibitions related to transactions with SDNs and the blocking and reporting requirements also extend to entities that are 50% or more owned, directly or indirectly, by one or more blocked persons, even if these persons are not separately identified on the list of SDNs. Ongoing activities by non-US persons with such SDNs may trigger secondary sanctions risks, which could include the non-US party itself being designated as the SDN.
Separately, OFAC issued GL 25A to EO 14024, updating GL 25 issued April 7, 2022, which authorizes transactions usually incidental and necessary to the receipt or transmission of telecommunications involving Russia and the export, re-export, sale or supply by U.S. Persons or from the United States to Russia of certain services, software, hardware or technology relating to the exchange of communications over the Internet to the extent such activities are prohibited under the Regulations Russia on sanctions against harmful foreign activities. Those relying on GL 25A must ensure compliance with the restrictions described in paragraph (c) on permitted activities under the General License.
In addition to growing SDN designations, on May 8 the United States Department of State announced the imposition of approximately 2,600 visa restrictions on Russian and Belarusian military officials. The Department of State also announced a new visa restriction policy that applies to certain Russian Federation military officials and alleged Russian-backed or installed authorities allegedly involved in human rights abuses. rights, violations of international humanitarian law or public corruption in Ukraine.
Extension of export controls
On May 9, 2022, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) issued a final rule further expanding licensing requirements for exports, re-exports, and transfers to and within Russia for more than 200 items related to the Russian industrial sector, including a wide range of inputs and products, including wood products, industrial engines, boilers, motors, fans and ventilation equipment, bulldozers and many other items with industrial and commercial applications. Applications for licenses under this section will be considered under a denial policy; however, items that may be required for health and safety reasons or items that meet humanitarian needs will be considered on a case-by-case basis. The changes introduced by this rule went into effect on May 9, 2022 and are intended to further align US restrictions with those enacted by the European Union.