The Week in Review delivers the impact and analysis for the public, private, and non-governmental sectors from our daily reporting of the evolving global sanctions campaign against Russia.

This week, we reviewed the recent developments since our webinar on 3 March 2022, summarized here, 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 7 March, numerous authorities have undertaken sanctions-related actions against Russia as follows:

EU actions include:

• On 9 March, the EU introduced a SWIFT ban for three Belarusian banks, a prohibition on transactions with the Central Bank of Belarus, limits on the financial inflows from Belarus to the EU, prohibitions on the provision of euro-denominated banknotes to Belarus, and restrictions on the export of maritime navigation and radio communication technology to Russia.¹ The EU also imposed asset freeze measures on 160 individuals, including oligarchs and their family members.
• On 2 March, the EU sanctioned Russian state-owned media outlets, Russia Today and Sputnik.²
• On 2 March, the EU introduced a SWIFT ban for seven Russian banks. Additionally, the EU introduced prohibitions on engaging in certain activities with the Russian Direct Investment Fund and selling/supplying/transferring euro banknotes to Russia.³

UK actions include:

• On 10 March, the UK sanctioned seven oligarchs to include Roman Abramovich, owner of London’s Chelsea FC, who also holds stakes in steel giant Evraz and Norilsk Nickel.

U.S. actions include:

• On 9 March, the White House issued an Executive Order (“EO”)⁴ calling on the U.S. government to strengthen regulation and oversight of virtual currencies to protect the U.S. and global financial stability and mitigate systemic risk. Virtual currencies pose a significant illicit finance risk to the United States, including the growing concerns about Russian sanctions evasion and broader illicit financing perpetrated through virtual currencies.
• On 8 March, the White House issued an EO⁵ to ban the import of Russian oil, liquified natural gas, and coal to the United States and prohibit new U.S. investments in Russia’s energy sector. Simultaneously, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued General License 16⁶ to authorize transactions related to certain imports until 22 April 2022.
• On 7 March, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) published an advisory to remind financial institutions about potential Russian sanctions evasion attempts. The alert provides red flags to assist in identifying potential sanctions evasion activity and reminds financial institutions of their Bank Secrecy Act reporting obligations, including with respect to convertible virtual currency.⁷
• On 4 March, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) issued two regulations to restrict access to U.S. commodities, software, and technology for 91 entities that support Russian military activities and were added to the Entity List and imposed a policy of denial on export of items related to deepwater oil and gas exploration and extraction industries.⁸
• On 3 March, OFAC sanctioned numerous Russian elites and their family members, and Russia and Ukraine-based persons for reinforcing disinformation or engaging in Russian propaganda in Ukraine.⁹
• On 3 March, the U.S. Department of State sanctioned 22 defense-related firms and several Russian elites and their financial networks.¹⁰
• On 2 March, BIS imposed stringent export controls on Belarus to prevent the diversion of technology, defense, aerospace, and maritime sector items to Russia.¹¹
• On 2 March, OFAC issued additional guidance to cease Russia’s attempts to access the U.S. financial system and amended general licenses to close loopholes for Russia to evade the unprecedented prohibitions.¹²
• On 2 March, the U.S. Department of Justice announced a new interagency task force, KleptoCapture, designed to enforce sanctions and export restrictions imposed against Russian officials and oligarchs and seize and forfeit assets that belong to oligarchs and those who violate the sanctions.¹³
• On 10 March, the UK sanctioned seven oligarchs to include Roman Abramovich, owner of London’s Chelsea FC, who also holds stakes in steel giant Evraz and Norilsk Nickel.

Key Implications

• Countries and financial institutions with economic and financial ties to Russia will likely see a surge in unusual Russian-related transactions and activity due to the aggressive multilateral sanctions campaign, the outflow of private companies divesting from the Russian economy, and the massive disruption of these events on the Russian economy and financial system.
• Financial institutions should closely monitor all Russia-related transactions and relationships and conduct enhanced due diligence where necessary to: (i) address growing concerns of Russian sanctions evasion; and (ii) distinguish unusual but legitimate transactions and relationships by customers with exposure to Russia’s tanking economy from suspicious activity by criminal actors that may exploit the current economic and financial turbulence in and from Russia to launder criminal proceeds.
• Supervisors and enforcement authorities in countries with economic and financial ties to Russia should similarly call on their financial institutions to pay heightened attention to Russia-related transactions and relationships.
• Countries that have not sanctioned Russia may be viewed as safe havens by sanctioned parties in or from Russia and may become sanctions evasion conduits to those countries that have sanctioned Russia.
• Financial institutions, energy companies, and other corporates with potential investment exposure to Russia’s energy sector should carefully review the details of the new EO of 8 March 2022, including OFAC’s broad definition of “new investment” as any commitment or contribution of funds or assets, or a loan or other extension of credit to new energy sector activities in Russia. Examples cited by OFAC include loans, purchases of loans made by another person, repurchase agreements, and standby letters of credit.¹⁴
• Based on this review, those with investment exposure to Russia’s energy sector should carefully analyze potentially relevant investments, customers, products, and services to: (i) understand those which could be implicated by the broad new investment ban, and (ii) swiftly enact exit, wind-down, or risk management plans that comply with these new prohibitions.
• International energy and oil prices will be highly volatile following the U.S. announcement and comprehensive ban on U.S. imports of Russian oil, liquified natural gas, and coal. The market is also witnessing steep increases in prices of other commodities such as nickel and aluminum, all of which will continue to put pressure on pandemic recovery.
• In response to the actions by the U.S., EU, UK and their allies, Russia introduced several domestic measures aimed at preventing outflow of funds and assets from the country. Russia is also reportedly considering nationalization of foreign assets.¹⁵ These actions will further impede foreign companies’ ability to repatriate funds.
• The U.S. government took steps to target some, but not all, family members of Russian oligarchs. Financial institutions should consider strengthening their internal controls to be able to detect and prevent any unusual activity through the accounts of non-designated family members as a well-reported sanctions evasion tactic.
• In accordance with the EO of 9 March, U.S. regulatory and enforcement authorities will likely accelerate efforts to regulate virtual currencies and intensify scrutiny and investigation of virtual currency flows, in part to address growing concerns of Russian sanctions evasion through the use of such virtual currencies. Other countries may pursue similar efforts. Read our special alert on the topic: Global Markets May Face Risk of Virtual Currency Abuse as Russian Actors Seek to Circumvent Sanctions.