The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctions Russian oligarchs, officials and entities.
OFAC has designated seven Russian oligarchs and 12 companies they own or control, 17 senior Russian government officials and a state-owned Russian weapons trading company and its subsidiary, a Russian bank.
What does this regulation mean for U.S. persons?
U.S. persons are generally prohibited from dealings with designated individuals and entities subject to U.S. jurisdiction. This prohibition also applies to employees and board members of designated entities if they are subject to U.S. jurisdiction.
OFAC has issued General License 12, which authorises a time-limited maintenance or wind-down of operations, contracts or other agreements (e.g. authorising the transfer of shares) that were in effect prior to 6 April 2018. Furthermore, General License 13 authorises U.S. persons with shares in a designated entity or blocked entity (50% OFAC rule) to divest or transfer these shares to a non-U.S. person, or to facilitate the transfer by a non-U.S. person to another non-U.S. person of debt, equity or other holdings in the blocked entities listed in this General License.
What does this regulation mean for companies owned or controlled by designated individuals or entities?
Property and interests in property of entities of which 50% or more is directly or indirectly owned by one or more designated individual(s) or entity(ies) are considered as blocked regardless of whether such entities appear on the OFAC’s Specially Designated Nationals and Blocked Persons List (SDN List).
Such participations could lead to significant difficulties not only with U.S. persons and entities, but also with non-U.S. persons (if applicable under the specific regulation) and persons who are risk-averse in the fairly long-term. Furthermore, this scenario could also result in reputational damage.
Will foreign persons (non-U.S. persons) be subject to sanctions for doing business with designated individuals or entities?
Foreign persons (non-U.S. persons) could also be subject to sanctions for doing business with designated individuals, entities and blocked entities (50% OFAC rule) for knowingly facilitating significant transactions, including deceptive or structured transactions, for or on behalf of any person subject to U.S. sanctions with respect to the Russian Federation or their children, spouses, parents, or siblings.
Broad factors for “significant transaction” and “significant financial transaction” include the size, number and frequency of the transaction(s), the nature of the transaction(s) or the level of awareness of management and whether the transaction(s) are part of a pattern of conduct.
You can count on us
Would you like to ensure compliance with sanctions regulations, review or expand your existing sanctions compliance system, or do you have any specific questions about sanctions regulations? We will be happy to actively support you as your partner:
- We can help you carry out health checks and ensure compliance with your obligations in accordance with the specific OFAC regulation on designated individuals, entities or blocked entities.
- Furthermore, we can help you carry out health checks and ensure compliance with your obligations in accordance with local (e.g. SECO, UNO) and EU sanctions regulations in general, including a comprehensive report with clear guidance on the next steps you need to take.
- We can provide you with a memorandum on specific questions with regard to your business model or project.
- We can offer support with the practical implementation of an adequate compliance management system.
- We can assist you with the development, improvement and implementation of your organisation, policies, guidelines, procedures, training and controls.
Leader Legal Compliance, PwC Switzerland
Direct: +41 58 792 17 12
Leader Customs & Trade, PwC Switzerland
Direct: +41 58 792 53 51
Leader Forensic Services and Financial Crime, PwC Switzerland
Direct: +41 58 792 17 60
Désirée Bysäth (Author)
Legal Compliance, PwC Switzerland
Direct: +41 58 792 40 03