OFAC Russia Update and Related Sanctions | Locke Lord LLP

0

On May 11, 2022, the U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”) updated three FAQs (FAQ 1034, FAQ 1035, and FAQ 1038). Specifically, OFAC amended its guidance on the meaning of the terms “accounting services”, “trustee and business formation services”, “management consulting services”, “credit rating services”, “credit ‘audit’, ‘accounting sector’, ‘fiduciary and business creation services’. business development services sector” and “management consultancy sector” as follows:

  • ‎“Accounting services” – includes services related to the measurement, processing and evaluation of financial data on economic entities. Please note that OFAC has issued General License (“GL”) 35 to authorize certain transactions usually incidental and necessary to the export, re-export, sale or supply, directly or indirectly, from the United States, or through a person of the United States, wherever located, credit scoring or auditing services to anyone located in the Russian Federation until 12:01 a.m. Eastern Daylight Time on August 20, 2022. See FAQ 1035 .
  • “Trust and Company Formation Services” – includes services relating to assisting individuals in the formation or structuring of legal persons, such as trusts and companies; act or cause others to act as directors, secretaries, administrative trustees, fiduciary trustees, registered agents or registered shareholders of legal entities; provide a registered office, a business address, a mailing address or an administrative address for legal persons; and the provision of administrative services for trusts. Please note that all of these activities are routine activities of trust and corporate service providers (“TCSPs”), although they may be provided by other persons.
  • “Management Consulting Services” – includes services related to strategic business advice; organizational and system planning, assessment and selection; development or evaluation of marketing programs or implementation; mergers, acquisitions and organizational structure; staff augmentation and human resource policies and practices; and brand management.
  • “Credit Rating Services” means services relating to assessments of a borrower’s ability to meet financial commitments, including analysis of creditworthiness generally or with respect to a specific debt or financial obligation.
  • “Audit Services” means the examination or inspection of business records by an auditor, including verification and verification of accounts, statements or other representation of the financial condition or regulatory compliance of the audited entity.
  • “Accounting sector” – includes the measurement, processing and evaluation of financial data on economic entities.
  • “Trust and Company Formation Services Sector” – includes assisting individuals in the formation or structuring of legal persons, such as trusts and corporations; act or cause another person to act as directors, secretaries, administrative trustees, fiduciary trustees, registered agents or registered shareholders of legal persons; provide a registered office, a business address, a mailing address or an administrative address for legal persons; and the provision of administrative services for trusts.
  • “Management Consulting Sector” – includes strategic business advice; organizational and system planning, assessment and selection; development or evaluation of marketing programs or implementation; mergers, acquisitions and organizational structure; staff augmentation and human resource policies and practices; and brand management.

On May 16, 2022, the United States Department of State, the United States Department of the Treasury, and the Federal Bureau of Investigation issued a notice to alert the international community, the private sector, and the public to the attempts by the Democratic People’s Republic of Korea (” DPRK”) and DPRK information technology (“IT”) workers to obtain employment while posing as non-DPRK nationals. The notice provides detailed information on how IT professionals in the DPRK operate and identifies red flags to help companies avoid hiring freelance developers from the DPRK and to help freelance and digital payment platforms identify DPRK IT people abusing their services. A fact sheet titled “Guidance on the Democratic People’s Republic of Korea Information Technology Workers” was also released.

On May 24, 2022, OFAC confirmed that the liquidation period ending May 25, 2022 set forth in GL 9C will not be extended. GL 9C relates to certain debt or equity transactions involving ‎(i) the State Corporation Bank for Development and Foreign Economic Affairs ‎Vnesheconombank; (ii) Public Joint Stock Company Bank Financial Corporation ‎Otkritie; (iii) Sovcombank Open Joint Stock Company; (iv) State Joint Stock Company Sberbank of Russia; (v) public joint-stock company VTB Bank; or (vi) any entity in which one or more of the above entities holds, directly or indirectly, individually or collectively, a 50% or greater interest are no longer permitted. However, GL 9C still permits transactions that are usually incidental and necessary to debt or equity transactions of Alfa-Bank Joint Stock Company (“Alfa-Bank”), issued before April 6, 2022, and of the company by Alrosa public shares (“Alrosa”), issued before April 7, 2022, or any entity in which they hold, directly or indirectly, an interest of 50% or more, provided that any divestment or transfer or facilitation of the divestment or transfer of the debt or equity must be to a non-US person. Such transactions related to Alfa-Bank under GL 9C are permitted until June 30, 2022 and July 1, 2022 for Alrosa.

On May 25, 2022, OFAC issued GL 13A, replacing GL 13 dated March 2, 2022. GL 13A extends the time for U.S. persons “to pay any import taxes, fees, or duties, and purchase or receive permits, licenses, registrations or certifications” which are otherwise prohibited by Directive 4 under Executive Order 14024 (“Prohibitions on Transactions Involving the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation of Russia and the Ministry of Finance of the Russian Federation”). The new deadline is September 30, 2022.

Conclusion

This document is intended as a guide only and does not replace specific legal or tax advice. ‎

Share.

About Author

Comments are closed.