As part of our continued coverage on U.S. sanctions against Russia and Ukraine, we share with you some detail on new guidance involving Crimea released by OFAC, originally featured on our AG Trade Law blog.
On July 30, 2015, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued a Crimea Sanctions Advisory highlighting certain practices that have been used to circumvent or evade U.S. sanctions involving Crimea and suggesting measures to mitigate Crimea sanctions risks.
Pursuant to its Russia- and Ukraine-related sanctions programs, OFAC also added 11 individuals and 15 entities to its Specially Designated Nationals (SDN) List, and added 35 companies owned 50 percent or more by Vnesheconombank (VEB) or Rosneft (including RDIF, the Russian Direct Investment Fund Management Company and other noteworthy entities) to the existing list of entities expressly named in its Sectoral Sanctions Identifications (SSI) List. These companies added to the SSI List on July 30 were all, in fact, already subject to the same SSI financing sanctions restrictions because of the pre-existing equity ownership interests in these entities already held by VEB or Rosneft, in accordance with OFAC’s 50 percent rule guidance on application of the sanctions. OFAC’s stated purpose in adding their names to the SSI List is to better identify them to enable more effective compliance by U.S. companies with SSI sanctions restrictions.
OFAC has publicly described its most recent designations as intended “to counter attempts to circumvent [U.S.] sanctions, to further align U.S. measures with those of our international partners, and to provide additional information to assist the private sector with sanctions compliance.” Moreover, it is our understanding that, within the executive branch, this action is generally regarded as a form of “maintenance” to ensure that this sanctions program remains active and effective as a means to maintain pressure on Russia in connection with U.S. policy concerns in Ukraine and Crimea.
A. Crimea Guidance
On December 19, 2014, President Obama issued Executive Order 13685, which implemented an investment, import and export ban against Crimea. OFAC characterizes these sanctions as prohibiting “virtually all direct and indirect transactions” with Crimea, unless authorized by OFAC or exempted by statute.
On July 30, 2015, OFAC issued a Crimea Sanctions Advisory, which highlights some of the practices that have been used to circumvent or evade U.S. sanctions related to Crimea, noting that “U.S. persons and persons conducting business in or through the United States should be aware of these practices in order to implement appropriate controls, commensurate with their OFAC sanctions risk profile, to ensure compliance with their OFAC obligations.”
The Advisory specifically notes the following evasive practices that have been used since the Crimea-related sanctions went into effect:
- omission or obfuscation of references to Crimea and locations within Crimea in documentation underlying transactions involving U.S. persons or the United States
- omission of originator or beneficiary addresses information from SWIFT messages involving individuals ordinarily resident in, or entities located in, Crimea
- listing counterparties on financial and trade documents as being located in Russia rather than in Ukraine.
To mitigate the risk of processing transactions in apparent violation of OFAC sanctions related to Crimea, OFAC suggests implementing the following types of measures, in addition to other measures specifically tailored to a company’s risk profile:
- ensuring that transaction monitoring systems include appropriate search terms corresponding to major geographic locations in Crimea and not simply references to “Crimea”
- requesting additional information from parties (including financial institutions, corporate entities and individuals) that previously have violated or attempted to violate U.S. sanctions on Crimea
- clearly communicating U.S. sanctions obligations to international partners (in both the financial and trade sectors) and discussing OFAC sanctions compliance expectations with correspondent banking and trade partners; such communications should include a description of the prohibition on the direct and indirect exportation or reexportation of goods, technology and services (including financial services) from the United States to Crimea.
B. SDN List Designations
Additionally, on July 30, 2015, OFAC added 11 individuals and 15 entities to its SDN List, pursuant to its Russia- and Ukraine-related sanctions programs. The individuals and entities added to the list include persons deemed responsible for supporting and sustaining evasion of existing sanctions, entities that operate in the arms or related material sector of Russia, former Ukrainian governmental officials or close associates, Crimean port operators and a Crimean ferry operator.
New individuals added to the SDN list on July 30, 2015 are:
- Bulyutin, Andrey
- Klyuyev Andriy Petrovych
- Kolbin, Petr
- Kurchenko, Sergey Vitalievich
- Omelchenko, Aleksander
- Paananen, Kai
- Rotenberg, Roman, Beregovaya
- Semenova, Olena Yurevna
- Stavytsky, Eduard Anatoliyovych
- Usachev, Oleg
- Yanukovich, Oleksandr Viktorovych.
New entities added to the SDN list on July 30, 2015 are:
- Airfix Aviation OY
- IPP Oil Product (Cyprus) Limited
- Izhevsky Mekhanichesky Zavod JSC
- Open Joint Stock Company “Konsern Izhmash”
- OY Langvik Capital LTD
- Private Joint-Stock Company Mako Holding
- Set Petrochemicals OY
- Southeast Trading OY
- Southport Management Services Limited
- State Enterprise Evpatoria Sea Commercial Port
- State Enterprise Feodosia Sea Trading Port
- State Enterprise Kerch Sea Commercial Port
- State Enterprise Sevastopol Sea Trading Port
- State Enterprise Yalta Sea Trading Port
- State Shipping Company Kerch Sea Ferry.
C. SSI List Designations
On July 30, 2015, OFAC also added 35 entities owned 50 percent or more by VEB and Rosneft to its SSI List. Prior to July 30, these entities were already subject to the same SSI financing restrictions as their parent entities, which were sanctioned last year. OFAC has included these entities on the SSI List to help companies better identify them and comply with applicable restrictions.
Specifically, OFAC added 18 entities owned 50 percent or more by VEB to its SSI List pursuant to Directive 1 under Executive Order 13662. (VEB was designated pursuant to Directive 1 on July 16, 2014.) Under Directive 1, U.S. persons and persons within the United States are prohibited from transacting in, providing financing for or otherwise dealing in new equity or new debt of greater than 30 days’ maturity with designated companies.
OFAC also added 17 entities owned 50 percent or more by Rosneft to its SSI List pursuant to Directives 2 and 4 under Executive Order 13662. (Rosneft was designated pursuant to Directive 2 on July 16, 2014, and Directive 4 on September 12, 2014.) Under Directive 2, U.S. persons and persons within the United States are prohibited from transacting in, providing financing for or otherwise dealing in new debt of greater than 90 days’ maturity issued by designated companies. Under Directive 4, U.S. persons and persons within the United States are prohibited from engaging in the direct or indirect provision, exportation or reexportation of goods, services (not including financial services) or technology in support of exploration or production for deepwater (greater than 500 feet), Arctic offshore, or shale projects that have the potential to produce oil in Russia, or in maritime area claimed by Russia and extending from its territory, that involve designated companies.
Below, we list the companies OFAC added to the SSI List on July 30 pursuant to Directive 1 and Directives 2 and 4:
Directive 1 Entities (Linked to VEB):
- Bank Belveb OJSC
- Development Corporation of North Caucasus OJSC
- Eximbank of Russia
- Far East and Baikal Region Development Fund OJSC
- Federal Center for Project Finance
- Kraslesinvest CJSC
- Resad LLC
- Rose Group Limited
- Russia Direct Investment Fund Management Company
- SME Bank
- VEB Asia Limited
- VEB Capital
- VEB Engineering LLC
- VEB Leasing OJSC
Directive 2 and 4 Entities (Linked to Rosneft):
- CJSC Vankorneft
- Neft-Aktiv LLC
- OJSC Achinsk Refinery
- OJSC Angarsk Petrochemical Company
- OJSC Kuybyshev Refinery
- OJSC Novokuybyshev
- OJSC Orenburgneft
- OJSC RN Holding
- OJSC Russian Regional Development Bank
- OJSC Samotlorneftegaz
- OJSC Syzran Refinery
- PJSC Verkhnechonskneftegaz
- RN-Komsomolsky Refinery LLC
- RN-Yuganskneftegaz LLC
- Rosneft Finance S.A.
- Rosneft Trade Limited
- Rosneft Trading S.A.
D. Additional Information
To view OFAC’s press release announcing these new sanctions, see here.
To view official identifying information released by OFAC for these new SDN and SSI listings, see here.
To view OFAC’s Crimea Sanctions Advisory, see here.