Russia Sanctions Update – April 7, 2022 | Foley Hoag LLP


  • New executive order prohibits new investment by U.S. persons in Russia
  • The United States imposes full asset freeze sanctions on Alfa-Bank and Sberbank, as well as other Russian government officials and their family members, including the daughters of Russian President Vladimir Putin
  • Sanctions target Russian cybercrime and ransomware

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I. New Executive Order Prohibits U.S. Investments in Russia

On April 6, 2022, President Biden issued a new executive order, “Ban on New Investments and Certain Services to the Russian Federation in Response to Continued Aggression by the Russian Federation” (the “April 6 EO”). The April 6 EO prohibits the following:

  • “new investment in the Russian Federation by a United States national, wherever located”;
  • “the export, re-export, sale or supply, directly or indirectly, from the United States, or by a United States person, wherever located, of any class of services determined by the Secretary to the Treasury, in consultation with the Secretary of State, to any person located in the Russian Federation”; and
  • “any endorsement, financing, facilitation, or guarantee by a United States person, wherever located, of a transaction by a foreign person where the transaction by such foreign person would be prohibited by this Section if effected by a person of the United States or within the United States.”

“Investment” is not defined in the EO, and it is currently unclear to what extent the prohibitions on new investments will apply and what types of transactions will be covered. However, an FAQ published in the framework of the EO of March 8, 2022, “Prohibition of certain imports and new investments with regard to the continued efforts of the Russian Federation to undermine the sovereignty and territorial integrity of Ukraine”, defines an “investment” as a “transaction which constitutes a commitment or contribution of funds or other assets for, or a loan or other extension of credit. A similar definition can be applied for the April 6 OE, but additional guidance will be needed from OFAC on the scope of the prohibitions in the April 6 EO. The Secretary of the Treasury has not yet identified any “categories of services” subject to the ban on export, re-export, sale or supply, and until further guidance is issued, it is unclear what specific services can be covered.

II. Block sanctions against Russian banks, government officials and family members

Also on April 6, 2022, the United States Department of Treasury’s Office of Foreign Assets Control (“OFAC”) added several other Russian government officials and their family members to the list of Specially Designated Nationals and Persons blocked (“SDN list”). OFAC also added Sberbank of Russia Public Joint Stock Company (“Sberbank”) and Alfa-Bank Joint Stock Company (“Alfa-Bank”) to the SDN List, in accordance with Executive Order (“EO”) 14024. While certain transactions with Sberbank and Alfa-Bank were already prohibited by US sanctions, the SDN list designations constitute the most restrictive level of sanctions imposed by the United States.

US persons are generally prohibited from engaging in transactions with SDNs unless authorized by OFAC, and all US assets of SDNs are “blocked” and must be reported to OFAC. Named individuals are also subject to a travel ban, and all entities 50% or more owned by an SDN are generally treated as if they are also on the SDN list (known as the “50% rule”). ), although they are not specifically listed. In addition, any person, including a non-U.S. person, may themselves be designated as an SDN for having materially aided, sponsored, or provided financial, material, or technological support, or goods or services to or in support of such SDN. .

Sberbank

OFAC added Sberbank, along with 42 of its subsidiaries, to the SDN list. Sberbank is Russia’s largest financial institution and is majority owned by the Russian government. OFAC has published General License 22, which allows certain trades to be liquidated until 12:01 a.m. Eastern Daylight Time on April 13, 2022 (only one week after designation). OFAC has also issued a general license specific to Sberbank CIB USA to allow transactions to be liquidated through June 7, 2022. Previously, on February 24, 2022, OFAC had identified Sberbank as subject to prohibitions pursuant to Directive 2 under EO 14024, which restricts transactions by US financial institutions, and Directive 3 under EO 14024, which prohibits transactions by US persons involving new debt and equity. The SDN List designation goes much further by prohibiting all transactions by US persons with Sberbank, in the absence of OFAC authorization.

Alfa Bank

OFAC also imposed full blocking sanctions on Alfa-Bank, Russia’s largest private financial institution and Russia’s fourth largest financial institution. Six of Alfa-Bank’s subsidiaries are also included in the designation. OFAC has published License 23which authorizes the liquidation of certain transactions with Alfa-Bank until 12:01 a.m. Eastern Daylight Time on May 6, 2022. Alfa-Bank was previously identified by OFAC on February 24, 2022 as subject to prohibitions in accordance with Directive 3 under EO 14024 (as with Sberbank).

In addition, OFAC amended several general licenses previously issued to cover certain transactions with Sberbank and Alfa-Bank.

  • 8B General License authorizes all energy-related transactions prohibited by EO 14024, including those involving Sberbank and Alfa-Bank, until June 24, 2022. This replaces the former General License 8A.
  • 9B General License authorizes transactions that are usually incidental and necessary to transactions in the debt or equity of identified sanctioned entities. Transactions involving trading in debt or shares of Sberbank issued before February 24, 2022 are allowed until May 25, 2022. Transactions involving trading in debt or shares of Alfa-Bank issued before April 6, 2022 are licensed until June 30, 2022. This replaces the old 9A General License.
  • General License 10B authorizes certain transactions that are usually incidental and necessary to the liquidation of derivative contracts with identified sanctioned entities. For Sberbank, transactions involving derivative contracts concluded before February 24, 2022 are allowed until May 25, 2022. For Alfa-Bank, transactions involving derivative contracts concluded before April 6, 2022 are allowed until June 30, 2022 This replaces the old 10A General License.

Sanctions against Russian government officials and their family members

In addition to the above sanctions against Russian banks, OFAC has also named several family members of Russian government officials, including President Vladimir Putin’s two daughters, Katerina Vladimirovna Tikhonova and Maria Vladimirovna Vorontsova. Maria Aleksandrovna Lavrova, the wife of Russian Foreign Minister Sergey Lavrov, and her daughter Yekaterina Sergeyevna Vinokurova were also added to the SDN list.

Additionally, all members of the Russian Security Council have now been added to the SDN list in accordance with EO 14024. While many members had previously been designated, the April 6, 2022 action captures the remaining 21 members who are not had not yet been added to the SDN List or were added under a different EO. Many of these members had previously been sanctioned by Canada, the European Union, Japan, New Zealand, Australia and the United Kingdom.

III. Penalties targeting ransomware and cybercrime

On April 5, 2021, the United States targeted illicit finance and cybercrime linked to Russia adding the world’s largest darknet market for Russian speakers, Hydra, along with over 100 of its associated virtual currency addresses, and virtual currency exchange, Garantex, to the SDN list. This action was carried out in concert with the German Federal Criminal Police, which shut down Hydra servers in Germany on the same day and seized $25 million worth of bitcoins.

As explained in OFAC’s press release, darknets are internet-based networks where individuals use special software in order to hide individuals’ identities and their associated internet activity. Marketplaces that reside on the darknet almost exclusively accept virtual currency as payment for a wide range of illegal goods and services, including ransomware as a service (“RaaS”).

Hydra provides a marketplace for illicit services, including RaaS, hacking services and software, stolen personal information, counterfeit currency, stolen virtual currency, and illicit drugs. Garantex is a virtual currency exchange that has processed millions of dollars in transactions associated with illicit actors, including nearly $6 million from the Russian Conti ransomware gang and more than $2 million from Hydra. As the sanctions targeting virtual currency exchanges SUAX and CHATEX Issued last October, these sanctions aim to prevent ransomware payments to illicit companies, especially those considered authorized or controlled by the Russian government. All three exchanges reportedly operated from the Federation Tower in Moscow.

OFAC stressed that fighting ransomware is a “top priority” of the Biden administration and warned that Russia “is a haven for cybercriminals.” In addition, OFAC reiterated that the virtual currency industry “has a critical role to play” in ensuring that controls are implemented to prevent sanctioned persons and other illicit actors from using virtual currencies. to circumvent US sanctions.

OFAC has already published Sanctions Compliance Tips for the Virtual Currency Industry; and FinCEN issued an alert identify red flags about potential attempts to circumvent Russian sanctions, including through the use of cryptocurrency.

Foley Hoag will continue to provide updates as the situation regarding Ukraine develops.

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