OFAC Issues New Sanctions on Russian Central Bank, Finance Ministry and National Wealth Fund | Practical Law

OFAC Issues New Sanctions on Russian Central Bank, Finance Ministry and National Wealth Fund | Practical Law

In response to the 2022 Ukraine crisis, the Office of Foreign Assets Control (OFAC) issued new Directive 4 under Executive Order 14024, “Prohibitions Related to Transactions Involving the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, and the Ministry of Finance of the Russian Federation” (Russia-related Sovereign Transactions Directive).

OFAC Issues New Sanctions on Russian Central Bank, Finance Ministry and National Wealth Fund

by  Practical Law Finance
Published on 02 Mar 2022 • USA (National/Federal)
In response to the 2022 Ukraine crisis, the Office of Foreign Assets Control (OFAC) issued new Directive 4 under Executive Order 14024, “Prohibitions Related to Transactions Involving the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, and the Ministry of Finance of the Russian Federation” (Russia-related Sovereign Transactions Directive).
On February 28, 2022, in response to the 2022 Ukraine crisis, the Office of Foreign Assets Control (OFAC) issued new Directive 4 under Executive Order 14024, “Prohibitions Related to Transactions Involving the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, and the Ministry of Finance of the Russian Federation” (Russia-related Sovereign Transactions Directive). These sanctions prohibit US persons from engaging in any transaction involving:
  • The Central Bank of the Russian Federation.
  • The National Wealth Fund of the Russian Federation.
  • The Ministry of Finance of the Russian Federation.
These sanctions followed a joint statement made by the US, leaders of the European Commission, France, Germany, Italy, the UK, and Canada on February 26, 2022 announcing their intent to:
  • Ensure that selected Russian banks are removed from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) messaging system in order to impair their ability to operate globally.
  • Impose restrictive measures in order to prevent the Russian Central Bank from deploying its international reserves in ways that undermine the impact of sanctions.
  • Act against people and entities who facilitate the war in Ukraine and harmful activities of the Russian government.
  • Commit to launching a transatlantic task force to ensure the effective implementation of financial sanctions by identifying and freezing the assets of sanctioned individuals and companies.
  • Coordinate against disinformation and other forms of hybrid warfare.
OFAC has also added the following three entities and one individual to its Specially Designated Nationals (SDN) list to block their access to the US financial system:
  • The Russian Direct Investment Fund (RIDF), a key Russian sovereign wealth fund.
  • Kirill Dmitriev, a close ally of Putin and the CEO of RIDF.
  • The management company of RIDF, Joint Stock Company Management Company of the Russian Direct Investment Fund (JSC RDIF).
  • A subsidiary of JSC RDIF, Limited Liability Company RVC Management Company (LLC RVC).

Practical Implications

US companies and their counsel should closely review these sanctions to ensure that their activities (including those outside of Russia) are compliant. OFAC also issued General License 8A, which authorizes certain energy-related transactions with sanctioned entities until June 24, 2022. US companies and their counsel should closely review the definitions and conditions under this general license to ensure that transactions are allowed.
For more information on OFAC sanctions, see Practice Note, US Anti-Money Laundering and Trade Sanctions Rules for Financial Institutions.