The Week in Review delivers the impact and analysis for the public, private, and non-profit sectors from our daily reporting of the evolving global sanctions campaign against Russia.
This week, we reviewed the recent developments since our last update on 25 March as the United States (U.S.), the European Union (EU), and the United Kingdom (UK) continue to lead a global coalition in this sanctions campaign, which has been unprecedented in its complexity, impact, and speed in responding to Russia’s ongoing war against Ukraine.
Recent Developments Related to Sanctions Against Russia
Since the last update, numerous authorities have undertaken sanctions-related actions against Russia. Please note there were no significant developments regarding EU sanctions against Russia.
UK actions include:
- On 31 March, the UK's Foreign, Commonwealth and Development Office (FCDO) announced new blocking sanctions targeting 14 Russian propagandists and state media organizations. Sanctions targets include Sergey Brilev, a famous TV anchor on Russian state-owned media Rossiya, as well as TV-Novosti and Rossiya Segodnya, which own the RT and Sputnik news organizations, respectively.1 The UK also took coordinated action with the U.S. and imposed blocking sanctions against three entities located in the UK involved in sanctions evasion activities.2
- On 30 March, the FCDO published an amendment to the Russia (Sanctions) (EU Exit) Regulations 2019, which extend the existing finance, shipping, and trade-related prohibitions relating to the Autonomous Republic of Crimea and the city of Sevastopol to the Donetsk and Luhansk oblasts of Ukraine.3 Also on 30 March, the FCDO announced legislation that prohibits maintenance on aircraft or ships belonging to sanctioned Russian oligarchs.4
- On 29 March, the UK seized a superyacht docked in London, marking the first such detention in UK waters.5 The Financial Times established that the yacht, which is valued at GBP 38 million (USD $50 million), was ultimately owned by Vitaly Vasilievich Kochetkov, the founder of Motiv Telekom, a small mobile phone network in Russia’s Urals region.
- On 24 March, the UK's Office of Financial Sanctions Implementation (OFSI) published two General Licenses (GLs). Both GLs expire on 23 April 2022.
- The first GL, INT/2022/1424276, permits the winding down of positions involving various designated banks, including Alfa Bank, Gazprombank, Rosselkhozbank, SMP Bank, and Ural Bank for Reconstruction and Development.6 The license permits the wind down of any transactions involving the designated banks or their subsidiaries, including transactions to close out any positions as well as transactions that are "reasonably necessary" to effect the wind down.
- The second GL, INT/2022/1424277, permits the wind down of positions involving Bank Dabrabyt or its subsidiaries, including closing out positions and any activity reasonably necessary to effect the wind down.7
- On 24 March, OFSI amended GL INT/2022/1381276, which permits the winding down of derivatives, repurchase, and reverse repurchase transactions entered into prior to 1 March 2022 with the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, and the Ministry of Finance of the Russian Federation.8 The amended GL extends the scope of the existing GL to include winding down derivatives, repurchase, and reverse repurchase transactions with entities owned or controlled by, or acting on behalf or at the direction of, the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, and the Ministry of Finance of the Russian Federation. The license expires on 2 May 2022.
U.S. actions include:
- On 31 March, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) targeted operators of a Russian sanctions evasion scheme as well as companies in the Russian technology sector to prevent that sector from evading sanctions.9 OFAC blocked 21 entities and 13 individuals, including Serniya Engineering and Sertal—both Moscow companies that were involved in a global network to procure dual-use technology for the Russian military and intelligence services—and Mikron, the largest Russian manufacturer and exporter of microelectronics. In addition, the U.S. Department of the Treasury (the Treasury) also determined that the aerospace, marine, and electronics sectors of the Russian economy are subject to sanctions pursuant to Executive Order (EO) 14024. This gives the Treasury the power to designate entities operating in these sectors.
- On 29 March, Wally Adeyemo, the Deputy Secretary of the Treasury, warned that the U.S. government will pursue individuals and companies who help Russia circumvent economic sanctions imposed by the international community over Moscow's invasion of Ukraine.10 Mr. Adeyemo said that cryptocurrency exchanges and other businesses in the financial sector will be held accountable if they aid Russia in evading sanctions. This follows an earlier statement made by Mr. Adeyemo to the Chatham House on 29 March in which he said that the international community is planning further coordinated sanctions against “additional sectors that are critical to the Kremlin’s ability to operate its war machine” as well as efforts to disrupt such companies’ supply chains via export controls.11
- On 29 March, an unnamed senior official of the Treasury said in an interview with the Financial Times that the Treasury is monitoring the financial transactions of Russian oligarchs and businesses for any signs of sanctions evasion, as well as tracking those offering them “material support.”12 The official specified that the Treasury has observed common sanctions evasion practices, such as the creation of shell companies and the transferring of assets to new associates.
Key Implications (Public, Private, and Non-Profit Sectors)
- Two OFSI GLs expired over the past week and two more are set to expire over the coming days.
- GL INT/2022/1272278, which authorized certain wind down transactions involving VTB Bank, expired on 27 March.13
- GL INT/2022/1277778, which authorized UK financial institutions to maintain a correspondent banking relationship with or to process sterling payments to, from, or via Sberbank or non-UK financial institutions that are owned or controlled by Sberbank, expired on 31 March 2022.14
- GL INT/2022/1295476, which authorized certain wind down transactions involving Bank Otkritie, Promsvyazbank, Bank Rossiya, Sovcombank, and Vnesheconombank, expires on 3 April 2022.15
- Finally, INT/2022/1298776, which authorizes persons to provide financial services to Sberbank or a subsidiary for the purposes of winding down that activity, expires on 3 April 2022.16
- To the extent that parties subject to UK jurisdiction and want to continue engaging in otherwise prohibited transactions that are not authorized by a GL, those parties should apply to OFSI for a specific license. If a GL expires before parties can obtain a specific license to carry out the sanctioned activity, parties must apply the full weight of the relevant prohibition.
- Companies should review their entire supply chains for ties to Russia in anticipation of additional sanctions and export controls on companies that enable Russia's ability to conduct war against Ukraine. Under EO 14024, the Secretary of the Treasury in consultation with the U.S. Secretary of State has wide latitude to target companies operating in any sector of the Russian economy, as evidenced by the 31 March determination that the aerospace, marine, and electronics sectors of the Russian economy are subject to sanctions. Companies can expect continued sanctions against Russia's technology, defense, and financial sectors as well as export controls that, over time, are designed to degrade Russia's ability to develop key technologies.
- Financial institutions and cryptocurrency exchanges should be mindful of potential sanctions evasion activity given the Treasury's warnings and OFAC's strict liability standard. As discussed in K2 Integrity’s Policy Alert on 9 March, virtual asset service providers (VASPs) and financial institutions serving VASPs should be on alert for the use of convertible virtual currencies and associated anonymizing tools by sanctioned persons and their networks to evade sanctions. Red flags include transactions from or to Internet Protocol addresses previously flagged as suspicious and those from non-trusted sources or locations in Russia, Belarus, and comprehensively sanctioned jurisdictions.
1 Foreign Secretary announces sanctions on Putin’s propaganda. (March 31, 2022) https://www.gov.uk/government/news/foreign-secretary-announces-sanctions-on-putins-propaganda--2
2 Financial Sanctions Notice, Russia. Office of Financial Sanctions Implementation, HM Treasury. (March 31, 2022). https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1065607/Notice_Russia__310322.pdf
3 The Russia (Sanctions) (EU Exit) (Amendment) (No. 7) Regulations 2022 (March 30, 2022). https://www.legislation.gov.uk/uksi/2022/395/pdfs/uksi_20220395_en.pdf
4 Oligarchs’ aircraft and ships targeted through new legal powers. (March 30, 2022) https://www.gov.uk/government/news/oligarchs-aircraft-and-ships-targeted-through-new-legal-powers#:~:text=Today's%20legislation%20adds%20new%20routes,Putin's%20inhuman%20assault%20in%20Ukraine.
5 UK seizes first superyacht in British waters. (March 29, 2022) https://www.bbc.com/news/business-60912754
6 General Licence – Wind Down of Positions Involving Various Designated Banks. (March 24, 2022) https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1063223/INT20221424276_GL.pdf
7 General Licence – Wind Down of Positions Involving Bank Dabrabyt. (March 24, 2022) https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1063227/GL_INT20221424277.pdf
8 General Licence – Wind down of derivatives, repurchase, and reverse repurchase transactions with the Central Bank of the Russian Federation, National Wealth Fund of the Russian Federation and Ministry of Finance of the Russian Federation. (March 24, 2022) https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1063230/GENERAL__LICENCE_276.pdf
9 Treasury Targets Sanctions Evasion Networks and Russian Technology Companies Enabling Putin’s War. (March 31, 2022) https://home.treasury.gov/news/press-releases/jy0692
10 ‘We will come and we will find you’: U.S. issues warning to anyone helping Russia bypass sanctions. (March 29, 2022) https://www.cnbc.com/2022/03/29/us-issues-warning-to-crypto-banks-helping-russia-bypass-sanctions.html
11 Remarks by Deputy Secretary of the Treasury Wally Adeyemo on Economic Statecraft in International Affairs at the Chatham House in London, England. (March 29, 2022) https://home.treasury.gov/news/press-releases/jy0684
12 US warns wealthy Russians against shifting assets to evade sanctions. (March 29, 2022) https://www.ft.com/content/88843c3a-b652-4324-85bf-5614fbf1db30
13 GENERAL LICENCE – Wind Down of Positions Involving VTB. (February 25, 2022). https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1059254/Wind_down_30_day_VTB_general_licence_final_INT-2022-1272278.pdf
14 GENERAL LICENCE: Correspondent Banking Relationships & Processing Sterling Payments. (March 1, 2022) https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1060446/GL_INT20221277778_110322.pdf
15 GENERAL LICENCE – Wind Down of Positions Involving Various Designated Banks. (March 4, 2022) https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1058765/OFSI_General_Licence_INT20221295476.pdf
16 GENERAL LICENCE – Wind Down of Positions Sberbank. (March 4, 2022) https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1058967/Sberbank_Wind_down_General_licence.pdf