OFAC Updated its SDN list, issues new General Licenses, a new Determination, and several new FAQs

On August 24, 2023, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) has imposed new sanctions, updated the SDN list, and issued new documents: Determination pursuant to §1(a)(i) of Executive Order 14024 and four General Licenses (“GLs”).

Determination Against Russian Metals and Mining Sector

Determination pursuant to §1(a)(i) of Executive Order 14024 aims the Russian metals and mining sector.

The US President Executive Order 14024 dated April 15, 2021 authorizes Secretary of the Treasury and several other US officials to impose measures against certain property and interests of Russian and Russia-related entities and individuals (belonging to defense or any other sector of Russian economy — §1(a)(i)) that are in control of the US.

Namely, “all property and interests in property that are in the US” may be determined as “blocked, and may not be transferred, paid, exported, withdrawn, or otherwise dealt in”. According to the said Determination, OFAC expands this provision to the metals and mining sector of the Russian economy effective immediately.

Practically speaking, that means that right now OFAC doesn’t sanction any individual or entity but reserves a right to do simply by listing such individual or entity in the further SDN lists. The issuance of Determination is a preparation step for the upcoming sanctions.

Updated SND List

OFAC has also updated its Specially Designated Nationals (SDN) list by adding more than 30 individuals, 83 entities, and, inter alia, several key Russian banks, including Bank Saint-Petersburg, Bank Uralsib, and MTS Bank.

It is worth mentioning that, in early January 2023, MTS Bank was first Russian major bank to obtain a banking license of UAE Central Bank.

Issued General Licenses

The following general licenses were issued on February 24, 2023 and provide for certain temporary authorizations:

General License No. 8F (effective immediately and valid through May 16, 2023 unless renewed) grants temporary authorization to perform energy-related transactions with the updated list of Russian banks that includes Alfa-Bank.

Following it, the General License No. 61 (effective immediately and valid through May 25,2023) authorizes all transactions related to divestment, transfer, or facilitation of such, or transfer of debt or equity in the newly-sanctioned Russian banks (including Bank Uralsib and Zenit Bank).

General License No. 13D (effective immediately and valid through June 6, 2023) permits US persons and US-controlled individuals and entities to execute Russia-related transactions (such as payment of taxes and import duties, receipt of transaction permits or registrations), except for the transactions with persons and entities restricted by the Directive 4 under US President Executive Order 14024 (i.e. transactions that involve the Central Bank of Russia, National Wealth Fund of Russia etc.).

General License No. 60 (effective immediately) authorizes to terminate all transactions involving Russian banks listed in this GL through May 25, 2023.

New FAQs

Issued together with the mentioned documents, the FAQs aim to clarify their execution of such documents.

Restrictions and permissions imposed by GLs 8F and 13D were clarified in FAQ 1118. It is stipulated there that these GLs do not apply to so-called “exit tax” that US and other “hostile states” businesses pay to divest from Russian companies. To pay the “exit tax”, the entity intending to divest from Russia should request a special OFAC license.

By “exit tax” the OFAC means the Extract from the Protocol of Subcommission of Russian Governmental Commission for the Control over Foreign Investments no. 118/1 dated December 22, 2022. This Subcommission within the Russian Ministry of Finance has introduced a “voluntary donation” of 10% of assets price to be paid to the Russian Federal Budget by foreign companies leaving Russia, as well as minimal 50% discount for all the assets being sold within the divestment.

Correspondingly, FAQs 1115-1117 provide guidance on the meaning of the mentioned Determination. To elucidate, the ban on metals and mining sector will not target entities that work with Russian target persons “solely for the safety and care of personnel, protection of human life, prevention of accidents or injuries, maintenance or repair necessary to avoid environmental or other significant damage, or activities related to environmental mitigation or remediation”.

On the other hand, new investments in the Russian economy, including the named sector, may be prohibited,  along with the import of diamond and gold of Russian origin to the US.