OFAC Takes Coordinated Action on Russia

An Alert on Russian Financial Institutions’ Sanctions Evasion is Issued, a General License is Issued, and Russian Individuals and Organizations Related to Efforts to Influence the 2024 U.S. Presidential Election are Sanctioned¹

On September 4, 2024, the U.S. Department of the Treasury Office of Foreign Assets Control (OFAC) issued an alert that Russian companies are attempting to evade U.S. sanctions by creating new branches or subsidiaries of Russian financial institutions in third countries. OFAC warns foreign parties that there are “significant sanctions risks associated with facilitating Russia’s efforts to evade sanctions.” Companies should be careful regarding any business dealings with overseas subsidiaries of Russian financial institutions, including indirect activities such as payment processing or trade finance. Under Executive Order 14024, OFAC has sanctioned foreign financial institutions that conduct or facilitate any significant transaction or provide any service involving Russia’s military-industrial base.

In another significant OFAC action, a previously operative General License No. 25D was superseded in its entirety by General License No. 25E. With certain exceptions, General License No. 25E authorizes the exportation or re-exportation, sale, or supply, directly or indirectly, from the United States or by U.S. persons, wherever located, to the Russian Federation of services incident to the exchange of communications over the internet such as, for example, instant messaging, chat, email, social networking, or web browsing, that would be otherwise prohibited under the Russian Harmful Foreign Activities Sanctions Regulations, 31 C.F.R. part 587. Additionally, General License No. 25E provides that the exportation or re-exportation, sale, or supply, directly or indirectly, from the United States or by U.S. persons to the Russian Federation of software, hardware, or technology incident to the exchange of communications over the internet is authorized provided that such actions that are subject to the Export Administration Regulations (EAR) are licensed or otherwise authorized by the U.S. Department of Commerce pursuant to the EAR and, if the action is not subject to the EAR, that it would be eligible for a license exception if it were subject to the EAR. The U.S. Department of the Treasury also released FAQ 1040, which provides additional insight into the operation of General License No. 25E.

General License No. 25E does not authorize the following: (1) the opening or maintaining of a correspondent account or payable-through account for or on behalf of any entity subject to Directive 2 under Executive Order 14024; (2) any debit to an account on the books of a U.S. financial institution of the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation; (3) any transactions prohibited by Executive Order 14066 or Executive Order 14068; or (4) any transactions involving a series of designated companies, including Russian government-affiliated media companies, that are designated pursuant to Executive Order 14024.

In addition to these actions, on September 4, 2024, OFAC also designated ten individuals and two entities as part of the U.S. effort to respond to Moscow’s malign influence efforts targeting the 2024 U.S. Presidential Election.² Several individuals that were sanctioned are employees of RT, formerly Russia Today, a Russian state-funded news outlet, and others are associated with RaHDit, a pro-Kremlin hacktivist group. The non-profit organizations that were sanctioned include Autonomous Non-Profit Organization (ANO Dialog), an organization that leverages AI technology in online Russian disinformation for use against election campaigns, and Autonomous Non-Profit Organization Dialog Regions (ANO Dialog Regions), a subsidiary of ANO Dialog. The Director General of these two organizations was also sanctioned – he had a history of working for the Russian government. These persons and entities were designated pursuant to Executive Order 14024 and added to OFAC’s Specially Designated Nationals List (SDN List).

U.S. and multinational companies must be vigilant in their compliance efforts with evolving sanctions and export control regulations. Screening current and new customers, intermediaries, and counterparties through the U.S. government sanction lists, as well as conducting risk-based due diligence on customers and intermediaries, is essential.  It is critical that every company employ a risk-based approach to sanctions and export compliance by developing, implementing and updating its own compliance policies and procedures. Buchanan has a coordinated team with deep national security experience who are here to assist.