On April 12, 2023, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced further efforts to deny Russia’s access to the international financial system through facilitators and their businesses. For example, OFAC has designated and sanctioned the “facilitation network” of Alisher Burhanovich Usmanov, who had previously been placed on OFAC’s Specially Designated Nationals (SDN) List in his individual capacity in March 2022. A Russian oligarch and close associate of Vladimir Putin, Usmanov holds significant interests in Russia’s metals and mining, telecommunications and information technology sectors. As such, OFAC’s updated designations target Usmanov’s wide network of businesses in financial safe havens, business associates and family members through which Usmanov could potentially circumvent sanctions to conduct financial transactions. OFAC’s actions also sanction numerous nationals from Cyprus, financial trust service companies, management consulting firms and other Cyprus-based companies known to be connected to Usmanov.
With these actions targeting Usmanov’s vast network of companies and associates, OFAC has revoked Russia-related General License 15, “Authorizing Transactions Involving Certain Blocked Entities Owned by Alisher Burhanovich Usmanov.” This General License had authorized transactions involving any entity owned 50% or more, directly or indirectly, by Usmanov that was not listed on OFAC’s SDN List. However, as a result of this revocation, any entity in which Usmanov had a 50% or more ownership stake, directly or indirectly, is now blocked regardless of whether such entity had been listed on the SDN List. Similarly, all transactions either by U.S. persons or within (or transiting) the United States that involve any property or interests in property of Usmanov are prohibited unless authorized by a general or specific license issued by OFAC or exempt.
Notably, OFAC also sanctioned the International Investment Bank (IIB), a Russia-controlled financial institution located in Budapest, Hungary, and its fully-owned Russia subsidiary, Joint Stock Company IIB Capital. According to OFAC, the entities operate in Russia’s financial sector and thus have the potential to “serve as a mechanism for corruption and illicit finance” for the government of Russia.
In total, the actions taken by OFAC, in coordination with sanctions imposed by the State Department, targeted more than 120 individuals and entities. Several newly-designated entities operate in the defense sector of Russia’s economy, while other newly-designated entities are known for supporting Russia’s war against Ukraine, including several China-, Turkey-, and UAE-based companies. Several individuals associated with the Russian State Atomic Energy Corporation (Rosatom) were sanctioned as well. Finally, a number of Russian-and Turkey-flagged vessels have been added to the SDN List. For additional identifying details on these individuals, entities and vessels, see OFAC’s SDN List Update here.
As a result of these actions, all property and interests in property of the persons placed on OFAC’s SDN List above that are in the United States or in the possession or control of U.S. persons are blocked and must be reported to OFAC. In addition, any entities that are owned, directly or indirectly, 50% or more by one or more blocked persons are also blocked. All transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of designated or blocked persons are prohibited unless authorized by a general or specific license issued by OFAC or otherwise exempt. These prohibitions include the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any blocked person and the receipt of any contribution or provision of funds, goods, or services from any such person.
Issuance of OFAC General Licenses
Due to the designation of several significant Russian entities, OFAC has issued multiple General Licenses which either allow for the wind-down of transactions and/or continued limited activities. These newly-issued General Licenses include:
- General License 62, “Authorizing the Wind Down of Transactions Involving Holdingovaya Kompaniya Metalloinvest AO, MegaFon PAO, Limited Liability Company USM Telecom, or Akkermann Cement Ca Limited Liability Company,” which permits transactions that are ordinarily incident and necessary to the wind down of any transaction involving these entities until July 11, 2023.
- General License 63, “Authorizing Transactions Related to Debt or Equity of, or Derivative Contracts Involving, Holdingovaya Kompaniya Metalloinvest AO,” which permits transactions that are ordinarily incident and necessary to the divestment or transfer, or the facilitation of the divestment or transfer, of debt or equity of this entity until July 11, 2023.
- General License 64, “Authorizing Certain Transactions Involving Kommersant,” which permits all transactions involving JSC Kommersant, or any entity in which JSC Kommersant owns, directly or indirectly, a 50% or greater interest, that are ordinarily incident and necessary to the operations of the newspaper, Kommersant.
- General License 65, “Authorizing Transactions Related to Telecommunications and Certain Internet-based Communications Involving MegaFon PAO or Digital Invest Limited Liability Company,” which permits transactions ordinarily incident and necessary to the receipt or transmission of telecommunications involving these entities and involves Tajikistan or Uzbekistan.
However, certain transactions remain unauthorized under these general licenses and still require close analysis.