What are the Implications of OFAC's Recent Ukraine Related Sanctions?
Following the recent political unrest in Ukraine, President Obama issued three (3) Executive Orders – EO 13660, EO13661 and EO13662 – in March 2014, imposing sanctions on individuals who have contributed to the political turmoil in Ukraine. EO13660 provides that all property and interests in property held in the U.S., or in the possession or control of any U.S. person, which belong to individuals who have contributed to the situation in Ukraine must be blocked. Travel of those individuals to/from the U.S. is also prohibited. E013661 expanded the scope of the sanctions to require the blocking of property and prohibition of travel to the U.S. of, inter alia¸ officials of the Government of the Russian Federation, and those who operate in the arms sector in Russia. Finally, EO13662 further expanded the blocking restrictions to a broader scope of individuals associated with Russia's economy, including those operating in the financial services, energy, metals, mining and engineering sectors. On May 8, 2014, regulations were issued by the U.S. Treasury Department's Office of Foreign Assets Control ("OFAC") implementing these Executive Orders.
All three (3) Executive Orders give the Secretary of Treasury, in cooperation with the Secretary of State, broad discretion to determine which individuals qualify as blocked persons. The Secretary of Treasury has delegated authority to identify such individuals to OFAC. OFAC continuously updates its list of Specially Designated Nationals and Blocked Persons ("SDN") to include additional Russian individuals and entities. A complete listing of those subject to Ukraine related OFAC sanctions can be found by using OFAC's search tool at http://sdnsearch.ofac.treas.gov, and searching under the Ukraine programs. The European Union also recently implemented similar sanctions. The list of individuals and entities sanctioned by the European Union can be found at: http://hmt-sanctions.s3.amazonaws.com/sanctionsconlist.htm.
What do these OFAC sanctions mean? Those U.S. persons doing business with Russian individuals or entities who may be targeted by the sanctions should conduct due diligence to determine whether that individual/entity could be treated as an SDN under OFAC's regulations. The regulations prohibit U.S. persons from engaging in transactions with an SDN, or with a majority-owned entity of a SDN. Further, funds transfers to or from any individuals/entities involved in transactions with Russian individuals/entities may be blocked if they involve a targeted bank or individual/entity. Overall, any persons who conduct business with Russian individuals/entities who may be subject to OFAC's sanctions must proceed with caution before continuing to conduct business with those entities.
To read a copy of the OFAC Ukraine related sanctions regulations, click here.
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