The Week in Review delivers the impact and analysis for the public, private, and non-profit sectors from our regular reporting of the evolving global sanctions campaign against Russia.
We have reviewed the recent developments since our last update on 6 June as the United States (U.S.), the European Union (EU), and the United Kingdom (UK) continue to lead a global coalition in this sanctions campaign, which has been unprecedented in its complexity, impact, and speed in responding to Russia's ongoing war against Ukraine.
Recent Developments Related to Sanctions Against Russia
Since the last update, various authorities have undertaken sanctions-related actions against Russia.
U.S. actions include:
- On 14 June, the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) announced that it has extended the General License (GL) that allows U.S. banks to process transactions related to Russian energy. The GL was set to expire on 24 June but has been extended to 5 December 2022.1
EU-related actions include:
- On 10 June, the Swiss Federal Council mirrored the most recent round of EU sanctions and implemented restrictive measures against an additional 100 individuals and entities. According to a press release, the Federal Council announced that it would adopt the EU's embargo on crude oil and other refined petroleum products from Russia, as well as a ban on the provision of audit and business consulting services. Additionally, the Federal Council approved the exclusion of four banks, including Sberbank, from the SWIFT transaction system. The Swiss list of sanctioned individuals and entities is now identical to that of the EU. 2
UK actions include:
- According to data released by the UK Office for National Statistics, UK imports from Russia were GBP 1.8billion in February 2022 but then fell precipitously to GBP 545million in March and to GBP 244million in April 2022.3
Actions from other jurisdictions include:
- On 6 June, the Canadian government announced a ban on the export of 28 services vital for the operation of the oil, gas, and chemical industries to Russia. Providing construction work, transportation services, advertising, or public-relations services to Russia's oil, gas, and chemical industries will be prohibited.4
- On 8 June, New Zealand imposed sanctions on 44 companies from Russia and Belarus, including Russian gas giant Gazprom and six Belarusian defense entities. The designated entities are all subject to asset freezes, service prohibitions, and prohibitions related to dealings in securities pursuant to the Russia Sanctions Regulations 2022.5
- On 10 June, the Japanese government announced a ban on the export of heavy equipment and other items to Russia. According to the Japanese government, export of 67 products in total will be prohibited after 17 June. Hagiuda Koichi, Japan's minister for economics, said Japan will continue to monitor the situation in Ukraine while imposing strict penalties on Russia. The sanctions follow Japan's previous moves to ban exports of semiconductors, cars, and other items.6 Additionally, the Japanese government-imposed asset freeze sanctions on a number of banks that will be effective on 7 July, including Russian Agricultural Bank, Credit Bank of Moscow, and Belarusian Bank of Development and Reconstruction.7
Key Implications (Public, Private, and Non-Profit Sectors)
- Given the length of time prohibitions have been in place,
controls to mitigate risk related to Russia sanctions should be
incorporated into routine operations of market participants around
the world. Specifically, companies should ensure they are
undertaking the following measures:
- Updating screening lists periodically to ensure recently identified terms that could indicate a sanctions nexus are incorporated;
- Conducting diligence on transactions that involve red flags associated with Russian sanctions evasion, as outlined in the U.S. Department of the Treasury's Financial Crime Enforcement Network's (FinCEN) March 2022 guidance to financial institutions; and
- Training employees on the prohibitions and related changes to compliance controls.
- While the U.S., EU, and UK have coordinated their sanctions against Russia to a large extent, differences remain in the specific prohibitions and authorizations related to the Russia sanctions regimes implemented by those countries. Persons subject to U.S., EU, and UK jurisdiction should conduct thorough due diligence on Russia-related transactions and customer relationships to assess the related risk and permissibility under each relevant regime.
- OFAC regularly adds or updates GLs related to the Russia sanctions program, resulting in an ever-evolving risk environment. Companies should continually check OFAC's website for the most recent version of a given GL to ensure that they are aware of what the latest version authorizes.
1 Russian Harmful Foreign Activities Sanctions Regulations 31 CFR part 587 General License No. 8C (14 June 2022) https://home.treasury.gov/system/files/126/russia_gl8c.pdf
2 Ukraine: Federal Council adopts new EU sanctions against Russia and Belarus (10 June 2022) https://www.admin.ch/gov/en/start/documentation/media-releases.msg-id-89229.html
3 Exports to Russia fell to 18-year low in April as sanctions hit (13 June 2022) https://www.standard.co.uk/news/uk/europe-russia-exports-graham-office-for-national-statistics-b1005764.html
4 Regulations Amending the Special Economic Measures (Russia) Regulations (6 June 2022) https://www.international.gc.ca/world-monde/international_relations-relations_internationales/sanctions/russia_regulations-reglement_russie20.aspx?lang=eng
5 Details of Designations made under the Russia Sanctions Regulations 2022 (8 June 2022) https://www.mfat.govt.nz/en/countries-and-regions/europe/ukraine/russian-invasion-of-ukraine/sanctions/#bookmark0
6 Japan to impose additional trade sanctions against Russia (10 June 2022) https://www3.nhk.or.jp/nhkworld/en/news/20220610_27/
7 Japan adopts Russia export ban & lists Russian & Belarusian banks (10 June 2022) https://www.europeansanctions.com/2022/06/japan-adopts-russia-export-ban-lists-russian-belarusian-banks/
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