Washington, D.C. – (February 15, 2023) In recent weeks, the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) has issued updates to several Russia-related general licenses and FAQs pertaining to the Russian Harmful Foreign Activities Sanctions Regulations at 31 C.F.R. part 587. It is important that companies stay informed of the latest developments in Russia-related regulations as these updates, detailed below, could have significant impacts on their businesses.

General Licenses

General License 6

These updates expand the scope of General License (GL) 6, which authorizes certain transactions related to agriculture and healthcare services that have otherwise been banned by the Russian Harmful Foreign Activities Sanctions Regulations. This update, codified as GL 6C, supersedes and replaces GL 6B, which was issued in July 2022. Previously, GL 6 authorized only transactions related to the "production, manufacturing, sale, or transport" of agricultural commodities and equipment, medicine, and medical devices. GL 6C broadens the authorization to include transactions related to the "provision" of these items.

Moreover, GL 6C now authorizes transactions related to "clinical trials" generally, rather than "ongoing clinical trials." Lastly, GL 6C clarifies that the transactions prohibited by Executive Orders (E.O.) 14066, 14068, and 14071 do not include transactions prohibited solely by the May 8, 2022 determination made pursuant to 1(a)(ii) of E.O. 14071. In other words, GL 6C now authorizes certain accounting, trust and corporate formation, or management consulting services that could prove helpful to companies in the agricultural or life sciences sectors.

General License 28

GL 28B temporarily authorizes transactions "ordinarily incident and necessary to the wind down of transactions involving Public Joint Stock Company Transkapitalbank (TKB)," or any entity in which TKB owns a 50% or greater interest, through March 18, 2023, provided that any payment to any TKB entity is made into a blocked account in accordance with the Russian Harmful Foreign Activities Sanctions Regulations. This GL authorizes only those transactions that are destined for or originating from Afghanistan and are prohibited by E.O. 14024.

General License 54

GL 54 authorizes the purchase and receipt of debt or equity securities of VEON Ltd. that were otherwise prohibited by E.O. 14071, which prohibits new investment in and provision of certain services to any person located in Russia. The January 17th update, codified at GL 54A, extend the authorization to VEON Holdings B.V. However, the authorization applies only to debt or equity securities issued by VEON Ltd. or VEON Holdings B.V. prior to June 6, 2022.

FAQs

FAQ 982

FAQ 982 asks whether U.S. funds are allowed to buy or sell debt or equity, and whether U.S. investors are allowed to invest in a fund that holds debt or equity, of blocked Russian financial institutions. The answer is generally no, unless otherwise authorized. The recent update to FAQ 982 removed references to GL 9, which expired on May 25, 2022, and which authorized transactions related to dealings in debt or equity of certain blocked Russian financial institutions. The update also clarifies that U.S. persons, in addition to U.S. funds, are prohibited from buying or selling debt or equity from blocked Russian financial institutions.

FAQ 1054 & FAQ 1055

FAQ 1054 asks whether the investment prohibitions of E.O.s 14066, 14068, and 14071 prohibit U.S. persons from purchasing debt or equity securities issued by an entity in Russia. The answer is generally yes, these E.O.s do prohibit the purchase of such securities. The update clarifies that purchasing shares in a U.S. fund is not prohibited if the debt or equity issued by Russian entities represent less than 50% of the funds value.

Similarly, FAQ 1055 asks whether these E.O.s prohibit U.S. persons from lending funds to, or purchasing a debt or equity interest in, entities located outside of Russia. The answer is generally no, provided that the funds are not intended for projects in Russia and, pursuant to the recent update, the entity derives less than 50% of its revenues from investments in Russia.

FAQ 1059

FAQ 1059 asks whether certain determinations made pursuant to E.O. 14071 prohibit U.S. persons from providing services to persons located outside of Russia that are owned or controlled by persons located in Russia. The services in question include accounting trust and corporate formation, management consulting, and quantum computing services.

The answer is that U.S. persons are generally allowed to provide such services to persons located outside of Russia, provided that the provision of services is not an indirect export to a person located in Russia. The update clarifies, in an example, that a U.S. corporate service provider would be prohibited from administering a trust established under U.S. law if that trust exists to hold, sell, or purchase assets on behalf of a settlor, trustor, or beneficiary who is ordinarily a resident in Russia.

FAQ 1113

On February 8, 2023, OFAC published FAQ 1113, which answers whether the new investment prohibitions in E.O.s 14066, 14068, and 14071 prohibit the transfer of securities issued by non-blocked Russian entities to the beneficiary of a decedent's estate. The answer provides that U.S. persons and financial institutions may transfer such securities to the account of a relevant beneficiary provided that the transfer is part of the ordinary course of administration of the estate, it does not involve an exchange for value, and there is no nexus to other sanctions. However, the transfer of blocked securities will require a specific license from OFAC.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.