Last Month Today: Sanctions continue ratcheting higher as Russia continues Ukraine war with U.S., EU, U.K. targeting powerful oligarchs, ritzy assets, and more

Last Month Today is a new series from ACFCS to bring professionals a wrap-up of news, knowledge, industry updates and views important to you.

By Brian Monroe
bmonroe@acfcs.org
April 4, 2022

Here is a wrap-up of ACFCS and outside news coverage and links to government and related sites that happened in March, with a focus on sanctions. Enjoy!

ACFCS Coverage

An ACFCS Emerging Risks Interview: Risk and Russia – What Are We Missing?

In ACFCS’s Emerging Risks series, we sit down with Ross Delston attorney and expert witness, to shed light on the issues that have NOT been widely discussed in regard to Russia and the global financial industry, to include geographic, credit, and operational risk.

Ross also discusses the need for financial institutions to remain vigilant when reviewing Politically Exposed Persons (PEP)s.

The ACFCS Emerging Risks series features interviews with thought leaders and change-makers who are tackling the latest challenges and most pressing threats across the financial crime spectrum.

To see the video, click here.

The Inside Track: Decisions, Implications and Humans – A Thank you from the trenches to the frontline fincrime sanctions fighters, from veteran industry thought leader Jon Elvin

In all, fincrime compliance professionals take their respective roles to help safeguard national security, be a strong referral source for law enforcement and protect customers, communities and the integrity of the brand of their organizations, very seriously.

As an industry, we also know what the mission objectives quickly become for institutions: watch the money movements, look for patterns, interpret sanctions program guidance, understand exemptions, review carve outs, prepare answers for everyone that immediately asks, and then yes, act.

Act is a small word itself but looms large in the intricate nuances and compliance complexities of what that means in the trenches for fincrime fighters, particularly in such an unprecedented time of soaring sanctions and broader fincrime compliance risks. What often is not told, is how that actually happens inside of our institutions.

To read the full story, click here

In mad scramble to comply with flurry of new, updated U.S., global Russian designations, don’t forget guidance to implement five core components of sanctions compliance program

As companies try to keep sprinting with the historic degree of sanctions sprawl tied to the Russian-Ukraine crisis – replete with intricate complexities like updated general licenses, overruled specific licenses, tempting exemptions and requirements to uncover hidden, opaque owners and slippery subsidiaries – they should realize they may not be focusing on the biggest risk of them all.

What is it? Not having a defined, empowered and effective sanctions compliance program (SCP) – the core and foundation of any operation’s combined efforts to monitor for blacklisted entities and jurisdictions, prevent them from becoming customers, or seize assets and report on them when found as sanctions expand and contract.

Why is an SCP so important? Because OFAC has a strict liability standard for sanctions failings – just one has the risk of costing potentially hundreds of thousands of dollars – and the strength of your SCP is one of the very few things that can lower, or even negate, your exposure to massive penalties that in recent years have run into the billions of dollars.

To read the full story click here.

Image and data courtesy PIIE. To see the full Russia-Sanctions timeline, click here.

United States

March

After Russia’s formal invasion on February 24, sanctions in the U.S. and other countries have quickened their pace. Allies had issued 2,754 sanctions before February 22 and have issued more than 6,650 since then, according to data and technology firm, Castellum.AI.

To see the full report and Russia-Ukraine conflict sanctions dashboard, click here.

In March, the Biden administration and U.S. Treasury’s Office of Foreign Assets Control targeted a host of Russian entities, including by land, air, sea – and formally designated the rich and powerful oligarchs propping up key energy and other sectors for what they are: Putin cronies.

The sanctions worked to ensure U.S. technology did not go to Belarus to help its defense, aerospace and maritime sectors – the country “enabled” the invasion, according to U.S. authorities – along with tightening the screws on Russian oligarchs, politicians and preventing sanctions evasion through cryptocurrencies.

February

To read the full list of updated sanctions against Russia and related specific and general licenses and exemptions, click here.

OFAC imposed full blocking sanctions on Bank Otkritie, Sovcombank OJSC, and Novikombank, along with 34 subsidiaries

• OFAC bans on dealing on new debt and equity for 13 institutions –
• Sberbank, AlfaBank, Credit Bank of Moscow, Gazprombank, Russian Agricultural Bank, Gazprom, Gazprom Neft, Transneft, Rostelecom, RusHydro, Alrosa, Sovcomflot, and Russian Railways.
• OFAC banned transactions with central bank, Russian National Wealth Fund, Ministry of Finance
• OFAC issued eight general licenses related to Russian and Belarusian energy, agriculture and more
• US Treasury reportedly conducting outreach to crypto exchanges on sanctions evasion

European Union

March 15, 2022 – Fourth package

The Council adopted the following restrictive measures:

• A full prohibition on transactions with certain Russian State-owned enterprises, with the exception of State-owned banks, railways and the maritime shipping register
• Prohibit EU agencies to provide financial rating services to Russian companies
• A ban on imports of iron and steel products currently under EU safeguard measures as well as new investments in the Russian energy sector, with the exception of nuclear energy and the transport of energy products
• Prohibit the export of luxury goods
• Add 15 individuals and 9 entities to the list of sanctioned persons and entities, to include more oligarchs and business elites linked to the Kremlin, as well as companies active in military and defence sectors, and disinformation. With these additions, the list comprises a total of 877 individuals and 62 entities.

Related documents

• Commission press release of 15 March 2022
• Commission Frequently asked questions of 15 March 2022
• Council press release of 15 March 2022
• Sanctions adopted on 15 March 2022 published in the Official Journal

March 9, 2022 – “Compliance package”

The Council adopted the following restrictive measures

• Exclude three banks of Belarus from the SWIFT system
• Prohibit transactions with the Central Bank of Belarus related to the management of reserves or assets, and the provision of public financing for trade with and investment in Belarus
• Clarify the notion of “transferable securities” so as to clearly include crypto-assets, and thus ensure the proper implementation of the sectoral restrictions in place
• Prohibit the listing and provision of services in relation to shares of Belarus state-owned entities on EU trading venues as of 12 April 2022
• Significantly limit the financial inflows from Belarus to the EU, by prohibiting the acceptance of deposits exceeding €100.000 from Belarusian nationals or residents, the holding of accounts of Belarusian clients by the EU central securities depositories, as well as the selling of euro-denominated securities to Belarusian clients
• Prohibit the provision of euro denominated banknotes to Belarus
• Further restrictive measures with regard to the export of maritime navigation goods and radio communication technology to Russia
• Add 160 individuals to the list of sanctioned persons and entities. With these additions, the list comprises a total of 862 individuals and 53 entities

SWIFT ban for seven banks

Prohibition of investment in Russian Direct Investment Fund

Prohibition on selling or supplying euro banknotes to Russia, any natural or legal person in Russia

Expansion of previous sanctions on Belarus targeting multiple industries, accounting for 70% of exports

Sanctions on 22 members of Belarus military

Overall – fresh sanctions now cover nearly 700 individuals and more than 50 entities

Russian, Belarusian Banks Out in the Cold

Banks cut off from SWIFT:

• VTB – 2nd largest institution
• Bank Otkritie
• Novikombank
• Promsvyazbank
• Bank Rossiya
• Sovcombank
• VEB

Includes the many subsidiaries of these institutions

Doesn’t include Sberbank and Gazprombank – conduits for oil and gas payments

Sberbank subject to sanctions on correspondent, payable through accounts – 30 days to close for US institutions

Related documents

• Commission press release of 9 March 2022
• Council press release on the extended sanctions adopted on 9 March 2022
• Council press release on the extended financial measures adopted on 9 March 2022
• Sanctions adopted on 9 March 2022 published in the Official Journal
• Extended financial measures adopted on 9 March 2022 published in the Official Journal

To visit the main EU Russia sanctions timeline page, click here.

February 23

Targeted sanctions on 351 members of Russian State Duma, restrictions on Russia’s access to capital markets

Banned imports, certain exports from Donetsk and Luhansk regions

February 25

Sanctions on Putin and Lavrov

Broad sanctions on Russian aviation sector, dual-use goods, semiconductors, and other technologies

February 28

Additional package of sanctions targeting 26 individuals, one entity in financial services, energy

Ban on transactions with the Russian Central Bank

March 2

SWIFT ban for seven banks

• Prohibition of investment in Russian Direct Investment Fund
• Prohibition on selling or supplying euro banknotes to Russia, any natural or legal person in Russia
• Expansion of previous sanctions on Belarus targeting multiple industries, accounting for 70% of exports
• Sanctions on 22 members of Belarus military
• Overall – fresh sanctions now cover nearly 700 individuals and more than 50 entities

Russian, Belarusian Banks Out in the Cold

Banks to be cut off from SWIFT:

• VTB – 2nd largest institution
• Bank Otkritie
• Novikombank
• Promsvyazbank
• Bank Rossiya
• Sovcombank
• VEB
• Includes the many subsidiaries of these institutions
• Doesn’t include Sberbank and Gazprombank – conduits for oil and gas payments
• Sberbank subject to sanctions on correspondent, payablethrough accounts – 30 days to close for US institutions

United Kingdom

March

The UK in March stated it would phase out imports of Russian oil over the rest of 2022 and also issued freezes to the assets of and bans tied to travel for 386 members of the Russian Duma who voted for independence of Ukraine’s Luhansk and Donetsk regions.

In some cases alone, and others in tandem with other partner countries, the U.K. withdrew export finance support, added tariffs to Russian vodka and banned certain luxury goods.

The U.K. also with strengthened its own laws to go after Russian oligarchs and their assets – along with joining the U.S. and other jurisdictions as part of a unified Russian Elites, Proxies, and Oligarchs (REPO) multilateral task force.

To read the full updates, click here.

Image and data courtesy PIIE. To see the full Russia-Sanctions timeline, click here.

Crypto

US Treasury Department Formally Adds Crypto Rules to Russian Sanctions Guidance

The U.S. government is warning crypto exchanges not to facilitate transactions for individuals and entities newly added to its sanctions list.

The Treasury Department published new regulations banning U.S. persons from providing any support to certain Russian oligarchs and entities as part of an ongoing effort to sanction Russia over its invasion of Ukraine, with the rules taking effect on March 1, according to CoinDesk.

To read the full story click here.

“All property and interests in property that are in the United States, that hereafter come within the United States, or that are or hereafter come within the possession or control of any United States person of the following persons are blocked and may not be transferred, paid, exported, withdrawn, or otherwise dealt in … deceptive or structured transactions or dealings to circumvent any United States sanctions, including through the use of digital currencies or assets or the use of physical assets,” the document said.

The U.S., alongside a coalition of European and other nations has been sanctioning Russian officials and President Vladimir Putin after military forces invaded Ukraine last week.

These sanctions include seizing international assets held by Russia’s central bank as well as the nation’s largest commercial and state-owned banks.

The regulations published Monday apply to U.S.-based entities. U.S. officials are also asking crypto exchanges around the world to prevent Russian entities from evading sanctions using cryptocurrencies, Bloomberg reported Monday.