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Sanctions on Russian Entities Expanded

Monday, April 09, 2018
Sandler, Travis & Rosenberg Trade Report

The Treasury Department’s Office of Foreign Assets Control has added seven Russian oligarchs and 12 companies they own or control, along with 17 senior Russian government officials, to its Specially Designated Nationals list. OFAC has also added a state-owned Russian weapons trading company and its subsidiary, a Russian bank, to the Sectoral Sanctions Identifications lists.

OFAC states that all assets subject to U.S. jurisdiction of the designated individuals and entities, and of any other entities blocked by operation of law as a result of their ownership by a sanctioned party, are frozen and that U.S. persons are generally prohibited from dealings with them. Additionally, non-U.S. persons could face sanctions for knowingly facilitating significant transactions for or on behalf of the blocked individuals or entities. However, OFAC has issued two general licenses to minimize immediate disruptions to U.S. persons, partners, and allies.

The accelerating addition of companies to the SDN and SSI lists can pose significant challenges for U.S. exporters, particularly due to the 50 percent rule, under which OFAC considers a subsidiary that is 50 percent or more owned by an SDN or SSI list entity to be subject to the same restrictions even if the subsidiary itself is not listed. Companies should thus ensure that their compliance programs continually screen business partners and customers against the SDN, SSI, and other U.S. government restricted party lists to avoid potential violations.

OFAC notes that a U.S. company that has ordered goods from a blocked entity may still accept the goods provided the importation is in accordance with the requirements and limitations specified in new General License 12. For the limited period of time specified, this general license authorizes all transactions ordinarily incident and necessary to the maintenance or wind down of operations, contracts, or other agreements, which includes authorization for U.S. persons to import goods into the U.S. from the blocked entities listed in General License 12, provided that any outstanding payment for the goods is deposited in a blocked account at a U.S. financial institution.

In addition, OFAC states, if one or more blocked persons hold an ownership interest of less than 50 percent in a U.S. company, the U.S. company is not itself blocked but must block all property and interests in property in which the blocked person has an interest. Depending on the nature of such property, the U.S. company may be able to continue operating, but any payments, dividends, or disbursement of profits to the blocked person would be prohibited and, to the extent such payments are required, must be placed in a blocked account at a U.S. financial institution. U.S. companies in such a scenario are encouraged to contact OFAC to determine whether a license or other authorization is required. 

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