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4. the nexus between the transaction(s) and a blocked person; 5. the impact of the transaction(s) on statutory objectives; 6. whether the transaction(s) involve deceptive practices; and 7. such other factors that the Secretary of the Treasury deems relevant on a case-by-case basis. OFAC has confirmed that these new measures apply to significant transactions with entities subject to Russian sectoral sanctions (SSIs), as well as with full-blown SDNs. Under the Russian sanctions regime there are two classes of sanctioned entities: SDNs and SSIs. SDNs face the most restrictive measures and are subject to asset freezes, whereas SSIs face less restrictive measure aimed at preventing them from raising money on western capital markets and undertaking certain types of business. The SSI list includes some of Russia’s largest and most strategically significant companies. It is important to note that, according to OFAC FAQs, a transaction with an SSI will only be considered “significant” if it involves deceptive practices. “Deceptive practices” are described as “attempts to obscure or conceal the actual parties or true nature of a transaction, or to evade sanctions”. Nevertheless the prohibition on facilitating “significant” transactions for or on behalf of these businesses represents an important extension of the restrictions targeting SSIs. Activities with either an SDN or an SSI will not be considered significant if US persons would not require specific licenses from OFAC to participate in them. This includes where a US person could participate under the authority of one of the general licences which OFAC has published in relation to the new sanctions. At the time of writing, OFAC has published three general licenses: General License 12B, General License 13A and General License 14. As relations between the US and Russia continue to deteriorate, we are likely to see further additions to the SDN list, particularly in areas such as energy, defence and finance. With the introduction of enhanced secondary sanctions, both US and non-US firms that deal with Russian counterparties will need to keep abreast of the latest developments.
“‘Deceptive practices’ are described as ‘attempts to obscure or conceal the actual parties or true nature of a transaction, or to evade sanctions’. Nevertheless the prohibition on facilitating “significant” transactions for or on behalf of these businesses represents an important extension of the restrictions targeting SSIs.”
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