The Week in Review delivers information and analysis on recent developments related to sanctions against Russia and key implications for the public, private, and non-profit sectors as the United States (U.S.), the European Union (EU), and the United Kingdom (UK) continue to lead a global sanctions campaign that has been unprecedented in its speed, complexity, and impact in responding to Russia's ongoing war against Ukraine.
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, such the Global Magnitsky Sanctions Program Targeting Human Rights Violations and Corruption.
Recent Developments Related to Sanctions Against Russia
Since the last update on 30 June, numerous authorities have undertaken sanctions-related actions against Russia, as detailed below. These actions include the U.S. Department of Commerce's Bureau of Industry and Security (BIS) adding numerous parties to its Entity List; the announcement of a "maintenance and alignment" package to clarify certain provisions of existing EU sanctions; and the UK government broadening some designation criteria definitions.
U.S. actions include:
- On 14 July, the Department of the Treasury published a Food Security Fact Sheet ("Fact Sheet") to underscore that the U.S. has not imposed sanctions on the production, manufacturing, sale, or transport of agricultural commodities (including fertilizer), agricultural equipment, or medicine relating to Russia.1 The Fact Sheet answers several detailed questions regarding transactions related to the exportation of agricultural and medical goods to Russia. Additionally, Treasury's Office of Foreign Assets Control (OFAC) amended existing General License (GL) 6B, GL 25C, and GL 30A and issued a new GL 44, authorizing certain transactions related to agricultural commodities, agricultural equipment, medicine, and medical devices.
- On 28 June, BIS added 36 entities in nine countries to its Entity List.2 The new additions include six entities from China, Lithuania, Russia, UK, Uzbekistan, and Vietnam that are now subject to severe restrictions on access to U.S. technologies and items for continuing to supply the Russian military since the beginning of the Russian invasion of Ukraine. In addition, two Russia-based entities are being listed for their attempts to procure U.S.-origin items while serving as agents of previously BIS-listed entities.
EU actions include:
- On 20 July, Bloomberg reported that the EU had signed off on updates to its Russia sanctions program, including measures against Russian gold, increased trade restrictions on machinery, and additions to the sanctions list.3 The new prohibitions will enter into force when published in the EU's Official Journal. The sanctions were announced on 15 July when the European Commission (EC) adopted a proposal for a new package of initiatives to strengthen EU sanctions against Russia. The "maintenance and alignment" package is a joint proposal between the EC and the High Representative of the Union for Foreign Affairs and Security Policy. It provides clarifications on several provisions to establish legal certainty for operators and enforcement across EU member states. The new measures also further align EU sanctions with those of the Group of Seven.4
- On 3 July, the Financial Times reported that EU officials are examining the possible creation of an EU-wide sanctions authority. According to Mairead McGuinness, the European Commissioner for Financial Stability, Financial Services and the Capital Markets Union, EU officials are discussing the introduction of an EU version of the U.S. Treasury's OFAC to "help member states implement" EU sanctions.5
UK actions include:
- On 19 July, the UK's Russia (Sanctions) (EU Exit)
(Amendment) (No. 12) Regulations 2022 went into effect. The
regulations prohibit individuals and entities from engaging in
additional types of new investment activities involving Russia or
individuals connected with Russia.6 Specifically, the
regulations prohibit the following:
- Acquisition of any ownership interest in land in Russia and in entities connected with or having a place of business in Russia;
- Establishment of commercial arrangements such as branches in Russia and joint ventures with persons connected with Russia; and
- Investment services directly related to those activities.
- On 18 July, the UK adopted the Russia (Sanctions) (EU Exit)
(Amendment) (No. 13) Regulations 2022 that went into effect the
same day. The Amendment does the following:
- Broaden some of the designation criteria definitions, such as expanding the definition of being "associated with" a person to include being an immediate family member of that individual;
- Introduce a humanitarian exception from trade sanction measures in the non-government-controlled areas of Donetsk and Luhansk; and
- Expand upon the definition of "owned" in relation to ships and aircraft.7
- On 12 July, the National Economic Crime Centre (NECC), a multi-agency unit in the National Crime Agency (NCA), and HM Treasury's Office of Financial Sanctions Implementation (OFSI) issued a "Red ALERT" warning of growing evidence of the transfer of assets by sanctioned Russian individuals.8 According to the report, "some Designated Persons (DPs) are using a range of techniques in order to evade sanctions," including the transfer of assets "directly and indirectly to jurisdictions where sanctions are not in place, such as the UAE, Turkey, China, Brazil, India and the former Soviet Union (excluding the Baltic States and Ukraine)." The report also summarizes legal offenses that could apply relating to sanctions circumvention and facilitation, and notes that "failure to undertake appropriate due diligence, for example willful blindness in relation to source of funds or wealth checks, should be considered a red flag for complicity and both breach and/or circumvention" offenses.
- On 7 July, OFSI issued GL INT/2022/1947936 to allow for the delivery of humanitarian assistance relating to the ongoing war in Ukraine.9 The General License covers humanitarian assistance in non-government controlled regions of Ukraine, including the Crimean Peninsula, and the Donetsk and Luhansk regions. Additionally, GL INT/2022/1947936 allows for "relevant UK financial institutions to engage in "any activity to effect the delivery of humanitarian assistance, and other activities that support basic needs in relation to the conflict in Ukraine, as they play an important role in working with NGOs to deliver humanitarian assistance."
- On 4 July, the UK government imposed additional economic, trade, and transport sanctions on Belarus over the Lukashenko regime's continued support for Russia's continued aggression against Ukraine. In a statement, the UK's Foreign, Commonwealth and Development Office noted that the latest sanctions measures include import and export bans on goods worth around GBP 60 million (USD 73 million). Specifically, the UK is banning exports of oil refining goods, advanced technology components such as those used in quantum computing, and luxury goods including British artwork and designer handbags, while halting the importation of Belarusian iron and steel products.10
Key Implications (Public, Private, and Non-Profit Sectors)
- The Red Alert published on 12 July demonstrates the UK's commitment to identifying and preventing sanctions evasion and alerting the public against becoming enablers of such evasion. The UK, U.S., and others will continue to pursue opportunities to further pressure prominent Russian parties and narrow the range of authorized activities involving Russia. Such pressure will rely heavily upon implementation of existing sanctions prohibitions and enforcement against those who evade sanctions across various jurisdictions.
- On 30 June, the Assistant Secretary for Export Enforcement at
the U.S. Department of Commerce published a memo that announced
four policy changes to strengthen administrative enforcement powers
as they relate to BIS cases:
- Imposition of significantly higher penalties within the exiting regulatory framework;
- Using non-monetary resolutions for less serious violations;
- Elimination of "no admit, no deny" settlements so the parties that receive reduced penalties admit the factual conduct that led to the settlement; and
- Dual-track processing of Voluntary Self-Disclosures to resolve minor infractions on a "fast-track."11
While the recent policy changes do not expressly relate to Russia, they indicate the U.S. intent to enforce restrictions effectively.Export controls that curb the flow of certain goods and technologies to Russia play a key role in the global response to Russia's invasion. Private sector parties need to ensure that they have the means to comply with the export control restrictions or they may face a higher risk of enforcement action.
- While also not expressly related to Russia sanctions, the EU published a Commission Guidance Note on the Provision of Humanitarian Aid in Compliance with EU Restrictive Measures (Sanctions) on 30 June. This publication — along with the Department of the Treasury's Food Security Fact Sheet and the UK's Humanitarian GL, among other actions — shows a commitment to supporting efforts to bring grain to world food markets. Private sector parties face the challenge of maintaining compliance with sanctions programs while facilitating activity that aligns with foreign policy and humanitarian objectives. Compliance with sanctions requires risk-based controls tailored to the needs of a given institution and its products and services.
1 OFAC Food Security Fact Sheet: Russia Sanctions and Agricultural Trade (14 July 2022) https://home.treasury.gov/system/files/126/russia_fact_sheet_20220714.pdf
2 Commerce Rule Applies Powerful Restrictions Directly on Entities Seeking to Supply Russia's Military Since Start of Invasion of Ukraine (28 June 2022) https://www.bis.doc.gov/index.php/documents/about-bis/newsroom/press-releases/3042-2022-06-28-bis-press-release-russia-backfill-entity-list/file
3 EU Approves Ban on Russian Gold and Other New Sanctions (20 July 2022). Bloomberg. https://www.bloomberg.com/news/articles/2022-07-20/ukraine-latest-putin-warns-gas-flow-may-resume-at-reduced-rate?sref=Pw1Mp35R
4 Implementation of EU sanctions against Russia: Commission adopts proposal for "maintenance and alignment" package (15 July 2022) https://ec.europa.eu/commission/presscorner/detail/en/ip_22_4548
5 Brussels pushes for tougher sanctions enforcement via EU-wide body (3 July 2022) https://www.ft.com/content/fe83c67b-5dcc-447e-aba3-34911aa5f39d
6 Explanatory Memorandum to the Russia (Sanctions) (EU Exit) (Amendment) (No. ) Regulations 2022 (19 July 2022) (19 July 2022) https://www.legislation.gov.uk/uksi/2022/801/pdfs/uksiem_20220801_en.pdf
7 Explanatory Memorandum to the Russia (Sanctions) (EU Exit) (Amendment) (No. 13) Regulations 2022 (19 July 2022) https://www.legislation.gov.uk/uksi/2022/814/pdfs/uksiem_20220814_en.pdf
8 Financial Sanctions Evasion Typologies: Russian Elites and Enablers (12 July 2022) https://www.nationalcrimeagency.gov.uk/who-we-are/publications/605-necc-financial-sanctions-evasion-russian-elites-and-enablers/file
9 OFSI issues Humanitarian Activity General Licence under Russia sanctions regime (7 July 2022) https://ofsi.blog.gov.uk/2022/07/07/ofsi-issues-humanitarian-activity-general-licence-under-russia-sanctions-regime/; General Licence: Humanitarian Activity INT/2022/1947936 (7 July 2022) https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1089102/General_Licence_INT-2022-1947936_.pdf
10 UK to implement further punishing economic measures on Belarus (4 July 2022) https://www.gov.uk/government/news/uk-to-implement-further-punishing-economic-measures-on-belarus
11 Further Strengthening Our Administrative Enforcement Program (30 June 2022) https://bis.doc.gov/index.php/documents/enforcement/3062-administrative-enforcement-memo/file
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