On the first anniversary of Russia’s invasion of Ukraine, the United States (U.S.), the European Union (EU), the United Kingdom (UK), the Group of Seven (G7), the Financial Action Task Force (FATF), and other authorities announced a series of sanctions and related actions to inflict additional costs on Russia and further limit its ability to wage war. These announcements demonstrate that both sanctions and strategic trade controls will remain a key tool to counter Russia’s aggression in Ukraine. With the increased focus of various authorities on evasion and enforcement, financial institutions and other corporations must ensure they follow all the Russia sanctions-related developments across different jurisdictions and have controls commensurate to their exposure to the Russian economy, interests, and related parties and networks.
U.S. Actions and Announcements
- The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced a new determination targeting the metals and mining sector of Russian’s economy that allows OFAC to subject actors in that sector to asset freeze sanctions. OFAC imposed asset freeze sanctions on 4 entities in that sector, as well as 22 individuals and 79 other entities pursuant to Executive Order (E.O.) 14024. The targets included over a dozen financial institutions in Russia and over 30 third-country individuals and entities involved in Russia’s sanctions evasion efforts. The designations also targeted persons involved in wealth management and Russia’s military supply chains.[1]
- The U.S. Department of State imposed asset freeze sanctions pursuant to E.O. 14024 on more than 60 individuals and entities supporting Russia’s war of aggression, including government ministers, governors, and high-level officials in Russia, and imposed visa restrictions on more than one thousand individuals as part of its sanctions package.[2]
- The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) expanded the scope of Russian and Belarusian industry sector restrictions and luxury goods restrictions to align better with those imposed by U.S. allies and partners. BIS also expanded restrictions on Iran to address Iranian Unmanned Aerial Vehicles (UAVs) and their use by Russia against Ukraine. Furthermore, BIS added 86 entities located in various countries—including Russia, China, Canada, France, and Luxemburg—to its Entity List.[3]
- President Biden issued a proclamation imposing additional duties on certain articles imported from Russia, namely metals, minerals, and chemical products.[4]
- The U.S. Department of Justice announced a major action to seize six real properties located in the United States worth approximately USD75 million that are beneficially owned by a prominent sanctions target, Viktor Vekselberg. It separately announced charges against a Russian individual with various offenses related to a years-long scheme to illegally smuggle sensitive devices used in counterintelligence operations from the United States to Russia.[5]
UK Actions and Announcements
- HM Treasury’s Office of Financial Sanctions Implementation (OFSI) imposed asset freeze sanctions on 92 individuals and entities including four banks, senior executives at Russian state-owned nuclear power company Rosatom, executives from Russia’s two largest defense companies, and other Russian elites under the UK’s Russia sanctions regime.[6] Furthermore, the UK government announced it will be extending existing measures against Crimea and non-government-controlled territory in Donetsk and Luhansk oblasts in order to target Russian-controlled areas of Kherson and Zaporizhzhia oblasts.[7]
- The UK Foreign Secretary announced a new package of sanctions and trade measures, including export bans on items Ukraine has found Russia using on the battlefield.[8] The UK Foreign, Commonwealth, and Development Office also announced a ban on the import of 140 types of goods including iron and steel products processed in third countries.[9]
EU Actions and Announcements
- The EU Council adopted its 10th sanctions package against Russia, imposing asset freeze sanctions on 87 individuals and 34 entities that include Alfa-bank, Rosbank, and Tinkoff Bank.[10] The Council also imposed asset freeze sanctions on 11 individuals and seven entities linked to Wagner Group, a Russian private military company.[11]
- The EU Council further expanded restrictions on the exportation of critical technology and industrial goods directed to Russia’s military and prohibited the transit of dual-use items through Russia.[12] The Council also expanded the scope of restrictions on the importation of goods that generate significant revenues for Russia, such as asphalt and synthetic rubber.[13]
- The EU Council introduced new restrictions preventing Russian nationals from holding positions in the governing bodies of EU critical infrastructure entities. It also banned the provision of gas storage capacity to Russian nationals and introduced more detailed reporting obligations on frozen assets.[14]
Additional Actions and Announcements
- Australia imposed additional asset freeze sanctions on 90 individuals and 40 entities supporting Russia’s military aggression. [15]
- Similarly, Canada added over 100 individuals and 11 entities to its list of sanctions targets pursuant to the country’s Russia sanctions program.[16]
- Canada also banned the importation, purchase, or acquisition from Russia or from any person in Russia of any type of weapon, ammunition, military vehicle or military or paramilitary equipment, or a spare part for any of those goods. Canada also introduced a prohibition on knowing facilitation of sanctions violations.[17]
- In its February Plenary, FATF decided to suspend the membership of the Russian Federation. It was the first time that FATF took an action with this level of severity. Despite the suspension, FATF noted that Russia remains accountable for its obligations to implement FATF Standards.[18] This is a significant rebuke and signal of Russia’s isolation from the international financial community and the standard setting body for anti-money laundering/countering the financing of terrorism.
Key Implications
- Sanctions will continue to be a key tool to counter Russia’s aggression in Ukraine. In addition to applying continued pressure to key sectors like banking and energy, sanctions regimes will continue to expand to new sectors, activities, and parties. Financial institutions and other corporations must continue to monitor the expansion of sanctions against Russia across different jurisdictions and must ensure they have controls in place to keep abreast of the evolving changes in response to the continuing war in Ukraine.
- The increased focus on strategic trade controls is likely to continue through the expansion of restrictions on Russia, Belarus, and Iran, as well as the addition of entities to the Entity List. While financial institutions remain focused on sanctions, it is imperative that they also be vigilant in developing risk-based controls that ensure compliance with trade restrictions. Manufacturers, exporters, and shipping companies also play vital roles in implementing such controls and must have compliance programs that address their exposure to Russia, countries supporting Russia, and countries with an elevated risk of re-exportation to Russia.
- After a year featuring an unprecedented set of sanctions and trade controls targeting Russia, the United States and other G7 countries will continue to ramp up efforts to enforce these restrictions with a focus on sanctions evaders and Russian military supply chain networks.[19] As seen in these recent actions, enforcement of sanctions will continue to target individuals, entities, and networks tied to Russian supply chains, sanctions evasion, and financial facilitation well beyond Russian borders and in key jurisdictions, banking centers, and industries of concern. This has been highlighted by the Deputy Secretary of the U.S. Treasury, Wally Adeyemo, in one of his recent speeches where he laid out plans to target further Russian military supply chains, sanctions evasion, and access to dual-use items. He also warned the private sector by noting the following: “Officials from the U.S. and the governments of our coalition partners are also engaging with companies and banks in these jurisdictions to tell them directly that if they do not enforce our sanctions and export controls, we will cut them off from access to our markets and financial systems.”[20]
DOLFIN users can visit the updated Russia Sanctions page on DOLFIN to find additional resources and information on sanctions against Russia, including sanctions evasion typologies, case studies, and analysis on other sanctions programs implicating Russian actors.
[1] The U.S. Department of the Treasury, press release, Targeting Key Sectors, Evasion Efforts, and Military Supplies, Treasury Expands and Intensifies Sanctions Against Russia, February 24, 2023, https://home.treasury.gov/news/press-releases/jy1296
[2] The U.S. Department of State, press statement, The United States Imposes Additional Sweeping Costs on Russia, February 24, 2023, https://www.state.gov/the-united-states-imposes-additional-sweeping-costs-on-russia/
[3] The U.S. Department of Commerce Bureau of Industry and Security, press release, Commerce Imposes Additional Export Restrictions in Response to Russia’s Brutal War on Ukraine, February 24, 2023, https://www.bis.doc.gov/index.php/documents/about-bis/newsroom/press-releases/3227-2023-02-24-bis-press-release-additional-russia-invasion-response-actions/file
[4] White House Press Release, FACT SHEET: On One Year Anniversary of Russia’s Invasion of Ukraine, Biden Administration Announces Actions to Support Ukraine and Hold Russia Accountable. February 24, 2023. https://www.whitehouse.gov/briefing-room/statements-releases/2023/02/24/fact-sheet-on-one-year-anniversary-of-russias-invasion-of-ukraine-biden-administration-announces-actions-to-support-ukraine-and-hold-russia-accountable/
[5] The U.S. Department of Justice, press release, Task Force KleptoCapture Unseals Two Cases Charging Evasion of Russian Economic Countermeasures, February 24, 2023, https://www.justice.gov/opa/pr/task-force-kleptocapture-unseals-two-cases-charging-evasion-russian-economic-countermeasures
[6] Office of Financial Sanctions Implementation HM Treasury, Financial Sanctions Notice, February 24, 2023, View PDF
[7] New Sanctions Ban Every Item Russia Is Using on the Battlefield. February, 24, 2023 https://www.gov.uk/government/news/new-sanctions-ban-every-item-russia-is-using-on-the-battlefield.
[8] Id.
[9] Id.
[10] Council of the EU, press release, 10th Package of Sanctions on Russia’s War of Aggression against Ukraine: The EU Includes Additional 87 Individuals and 34 Entities to the EU’s Sanctions List, February 25, 2023, https://www.consilium.europa.eu/en/press/press-releases/2023/02/25/10th-package-of-sanctions-on-russia-s-war-of-aggression-against-ukraine-the-eu-includes-additional-87-individuals-and-34-entities-to-the-eu-s-sanctions-list/
[11] Council of the EU, press release, Wagner Group: Council Adds 11 Individuals and 7 Entities to EU Sanctions Lists, February 25, 2023, https://www.consilium.europa.eu/en/press/press-releases/2023/02/25/wagner-group-council-adds-11-individuals-and-7-entities-to-eu-sanctions-lists/
[12] Council of the EU, press release, One Year of Russia’s Full-Scale Invasion and War of Aggression against Ukraine, EU Adopts Its 10th Package of Economic and Individual Sanctions, February 25, 2023, https://www.consilium.europa.eu/en/press/press-releases/2023/02/25/one-year-of-russia-s-full-scale-invasion-and-war-of-aggression-against-ukraine-eu-adopts-its-10th-package-of-economic-and-individual-sanctions/
[13] Id.
[14] Id.
[15] Australia Minister for Foreign Affairs, press release, Australia Stands with Ukraine with Additional Military Support and Sanctions, February 24, 2023, https://www.foreignminister.gov.au/minister/penny-wong/media-release/australia-stands-ukraine-additional-military-support-and-sanctions
[16] Government of Canada, Regulations Amending the Special Economic Measures (Russia) Regulations (SOR/2023-033), Regulations Amending the Special Economic Measures (Russia) Regulations (archive.org)
[17] Government of Canada, Regulations Amending the Special Economic Measures (Russia) Regulations (SOR/2023-032), Regulations Amending the Special Economic Measures (Russia) Regulations (archive.org)
[18] Financial Action Task Force, FATF Statement on the Russian Federation, February 24, 2023, https://www.fatf-gafi.org/en/publications/Fatfgeneral/fatf-statement-russian-federation.html
[19] G7 Leaders’ Statement. February 24, 2023. https://www.whitehouse.gov/briefing-room/statements-releases/2023/02/24/g7-leaders-statement-5/
[20] Council on Foreign Relations, C. Peter McColough Series on International Economics With Wally Adeyemo, February 21, 2023, https://www.cfr.org/event/c-peter-mccolough-series-international-economics-wally-adeyemo
