The Week in Review delivers information and analysis on recent developments related to sanctions against Russia and key implications for the public, private, and non-profit sectors as the United States (U.S.), the European Union (EU), and the United Kingdom (UK) continue to lead a global sanctions campaign that has been unprecedented in its speed, complexity, and impact in responding to Russia's ongoing war against Ukraine.

DOLFIN users can visit the updated Russia Sanctions page on DOLFIN to find additional resources and information on sanctions against Russia, including sanctions evasion typologies, case studies, and analysis on other sanctions programs implicating Russian actors, such the Global Magnitsky Sanctions Program Targeting Human Rights Violations and Corruption.

Recent Developments Related to Sanctions Against Russia

Since the last update on 17 June, numerous authorities have undertaken sanctions-related actions against Russia, as detailed below, and the Russian government defaulted on its sovereign debt. Moscow failed to pay interest on bonds during a 30-day grace period that expired on 26 June due to international sanctions. According to Moody's credit agency, the missed payment “constitutes a default.”1

U.S. actions include:

  • On 28 June, the Department of the Treasury's Office of Foreign Assets Control (OFAC) announced the imposition of blocking sanctions on 70 Russia-related entities and 29 individuals pursuant to Executive Orders (E.O.) 14024 and 14065, as well as a prohibition on the importation of Russian-origin gold. Among the designated entities is Rostec, a massive state-owned aerospace and military conglomerate “whose subsidiaries are engaged in a wide range of industries, including automotive, defense, aviation, and metals,” according to Treasury.2
  • On 28 June, the U.S. Department of State announced the imposition of asset freezing sanctions on 45 entities and 29 individuals under E.O. 14024. Designated entities include dozens of defense industrial base entities as well as Rostec board members and certain adult family members of those board members. In addition, the Department of State also imposed asset freezing sanctions on an Uzbekistan company, Promcomplektlogistic Private Company (Promcomplektlogistic) for providing material support to a blocked Russian entity that procured items for Russia's defense industry.3
  • On 28 June, the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) and the U.S. Department of Commerce's Bureau of Industry and Security (BIS) issued a Joint Alert on potential Russian and Belarusian export control evasion attempts.4  The joint alert is intended to provide financial institutions with information to identify customers and transactions that may pose heightened risk of export evasion. Among other things, the alert identifies a non-exhaustive list of 16 categories of items that pose special concern because of their potential for diversion to Russian military end users. These items include, but are not limited to, aircraft parts, cameras, integrated circuits, and oil field equipment. The alert also includes a series of red flags of potential Russia-related export control evasion.
  • On 15 June, OFAC imposed blocking sanctions on Stanislav Shevchuk and Alexander Zhuchkovsky, two supporters of the ethnically motivated violent extremist group known as the Russian Imperial Movement (RIM) pursuant to E.O. 13224, as amended. In a statement, Treasury noted that Shevchuk traveled to the United States to establish links with far-right extremists and white nationalist groups and has spoken on behalf of RIM at rallies across Europe. Additionally, Zhuchkovsky allegedly used his social media platform to recruit and fundraise for RIM while providing material support for pro-Russian fighters in Ukraine's Donbas region. The U.S. Department of State previously designated RIM on 7 April 2020 as a specially designated global terrorist organization subject to blocking sanctions pursuant to E.O. 13224 for having provided training for acts of terrorism.5

EU-related actions include:

  • On 22 June, the European Commission issued updated guidance on the implementation of EU sanctions against Russia. The 207-page document offers detailed guidance and answers to frequently asked questions regarding the implementation of restrictive measures against Russia for national authorities and individuals.6

UK actions include:

  • On 16 June, the UK government imposed blocking sanctions against several Russian individuals for their involvement in forced transfers and adoptions of children from Ukraine. The sanctioned individuals include Russian Children's Rights Commissioner Maria Lvova-Belova, Russian Orthodox Church lead official Patriarch Kirill, Moscow City Duma Deputy Sergey Savostyanov, and several military officials. Lvova-Belova has been accused of allowing thousands of vulnerable children to be taken from the Luhansk and Donetsk regions of Ukraine and orchestrating a policy that enables forced adoptions in Russia. The designated individuals are subject to asset freezes and travel bans.7

Multilateral actions include:

  • On 29 June, the multilateral Russian Elites, Proxies, and Oligarchs (REPO) Task Force issued a statement highlighting its progress in blocking sanctioned Russians' assets and restricting their access to the international financial system. According to the statement, REPO members have:
    • Blocked or frozen more than $30 billion dollars' worth of sanctioned Russians' assets in financial accounts and economic resources;
    • Immobilized about $300 billion dollars' worth of Russian Central Bank assets;
    • Seized, frozen, or detained yachts and other vessels owned, held, or controlled by sanctioned Russians;
    • Seized or frozen luxury real estate owned, held, or controlled by sanctioned Russians; and
    • Restricted Russia's access to the global financial system, making it more difficult for Russia to procure technology necessary to sustain the war in Ukraine.
  • On 27 June, G7 leaders pledged to continue to impose targeted sanctions against individuals and entities responsible for Russia's continued aggression in Ukraine.8 According to a White House statement, G7 governments are prepared to:
    • Continue to coordinate to target Russia's military production and supply chains;
    • Impose tariffs on Russian goods;
    • Continue to restrict Russia's participation in global markets;
    • Crack down on sanctions evasion attempts; and
    • Continue to impose sanctions on those responsible for human rights abuses, including war crimes and attempts to exercise illegitimate authority in Ukraine.
  • On 26 June, the UK, U.S., Japan, and Canada announced a coordinated prohibition on the importation of Russian-origin gold. According to a UK government press release, for Russian elites, the value of gold has increased recently “with oligarchs rushing to buy gold bullion in an attempt to avoid the financial impact of western sanctions.”9
  •   On 17 June, the Financial Action Task Force (FATF) barred Russia from holding any leadership or advisory roles, taking part in decision-making on standard-setting, and peer-review processes within the intergovernmental anti-money laundering body. At a press conference following a four-day plenary meeting in Berlin, Marcus Pleyer, the group's president, said that Russia's invasion of Ukraine "runs counter to the FATF's core principles and represents a gross violation of their commitments as members of the FATF."10

Key Implications (Public, Private, and Non-Profit Sectors)

The FinCEN and BIS Joint Alert sends a clear message to U.S. financial institutions urging them to be vigilant against efforts by individuals and entities to evade export controls against Russia. Some financial institutions may not have considered potential exposure to trade control prohibitions previously. U.S. financial institutions—most notably those involved in trade finance—and businesses dealing in the commodities of concern should review the 28 June 2022 FinCEN and BIS Joint Alert to ensure that they understand the universe of potential risks, indicators of evasion, and their role in the trade control compliance process.

The imposition of secondary sanctions by the United States against Promcomplektlogistic under E.O. 14024 demonstrates that the United States is willing to use secondary sanctions against entities operating in third countries for providing support to designated Russian entities. In addition, the United States can also impose sanctions on persons that aid efforts by Russia to evade sanctions. Going forward, the United States will likely continue to utilize its secondary sanctions authorities selectively. As a result, all persons with touchpoints in Russia, regardless of location, should consider reviewing their operations for potential activity involving designated Russian individuals or entities.

The designations of Shevchuk and Zhuchkovsky demonstrate that U.S. authorities will target malign Russian actors or activity using a broad range of sanctions authorities, including those designed to address sanctionable conduct on a global basis, such as support for designated terrorist groups like RIM.

Footnotes

1 Russia in historic default as Ukraine sanctions cut off payments (27 June 2022) https://www.reuters.com/markets/europe/russia-slides-towards-default-payment-deadline-expires-2022-06-26/; West pushes Russia into its first foreign debt default since 1918 (28 June 2022) https://www.cnn.com/2022/06/27/economy/russia-debt-default-sanctions/index.html

2 U.S. Treasury Sanctions Nearly 100 Targets in Putin's War Machine, Prohibits Russian Gold Imports (28 June 2022) https://home.treasury.gov/news/press-releases/jy0838

3 Targeting Russia's War Machine, Sanctions Evaders, Military Units Implicated in Human Rights Abuses, and Officials Involved in Suppression of Dissent - United States Department of State (28 June 2022) https://www.state.gov/targeting-russias-war-machine-sanctions-evaders-military-units-implicated-in-human-rights-abuses-and-officials-involved-in-suppression-of-dissent/

4 FinCEN and BIS Joint Alert (28 June 2022) https://www.fincen.gov/sites/default/files/2022-06/FinCEN%20and%20Bis%20Joint%20Alert%20FINAL.pdf

5 U.S. Sanctions Members of Russian Violent Extremist Group (15 June 2022) https://home.treasury.gov/news/press-releases/jy0817

6 Consolidated FAQs on the implementation of Council Regulation No 833/2014 and Council Regulation No 269/2014 (22 June 2022) https://ec.europa.eu/info/sites/default/files/business_economy_euro/banking_and_finance/documents/faqs-sanctions-russia-consolidated_en.pdf

7 UK sanctions Russian linked to forced transfers and adoptions (16 June 2022) https://www.gov.uk/government/news/uk-sanctions-russian-linked-to-forced-transfers-and-adoptions

8 FACT SHEET: The United States and G7 to Take Further Action to Support Ukraine and Hold the Russian Federation Accountable (27 June 2022) https://www.whitehouse.gov/briefing-room/statements-releases/2022/06/27/fact-sheet-the-united-states-and-g7-to-take-further-action-to-support-ukraine-and-hold-the-russian-federation-accountable/

9 UK sanctions Russian gold exports (26 June 2022) https://www.gov.uk/government/news/uk-sanctions-russian-gold-exports

10 U.S. Treasury Commends Unprecedented Censure of Russia by Financial Action Task Force (17 June 2022) https://home.treasury.gov/news/press-releases/jy0823; Financial Watchdog FATF Curbs Russia's Influence Within Group (17 June 2022) https://www.wsj.com/articles/financial-watchdog-fatf-curbs-russias-influence-within-group-11655502001?mod=hp_minor_pos12#:~:text=%E2%80%9CThe%20FATF%20determined%20that%20Russia's,day%20plenary%20meeting%20in%20Berlin.

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