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Thompson Hine LLP, a full-service business law firm with approximately 400 lawyers in 11 offices, was ranked number 1 in the category “Most innovative North American law firms: New working models” by The Financial Times and was 1 of 7 firms shortlisted for The American Lawyer’s inaugural Legal Services Innovation Award. The firm has been recognized by the National Law Journal as a Legal Technology Trailblazer and featured by Bloomberg for its innovative service delivery models, which drive accuracy and predictability. The firm’s commitment to innovation is embodied in Thompson Hine SmartPaTHTM – a smarter way to work – predictable, efficient and aligned with client goals. For more information, please visit ThompsonHine.com and ThompsonHine.com/SmartPaTH.

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On March 2, 2022, the Department of the Treasury&rsquo;s Office of Foreign Assets Control (OFAC) provided clarifying guidance on the implementation of several of its sanctions involving Russia.&nbsp; In doing so, OFAC noted that since implementation of the sanctions, &ldquo;Russia has taken steps to use exporters to act as their agents and help them raise resources to prop up their currency and fund their priorities. [This additional] guidance makes clear that such actions on behalf of Russia&rsquo;s Central Bank are prohibited, closing off attempts to access the U.S. financial system.&rdquo;&nbsp; The clarifications and guidance focus on interpretation of transactions authorized by Directive 4 under Executive Order (E.O). 14024, &ldquo;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, involving the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation&rdquo; (collectively, &ldquo;Directive 4 entities&rdquo;).
In a <a href="https://home.treasury.gov/news/press-releases/jy0624">press release</a>, OFAC stated that, &ldquo;Treasury remains committed to permitting energy-related payments &mdash; ranging from production to consumption for a wide array of energy sources &mdash; involving specified sanctioned Russian banks. To help protect Americans, partners, and allies from higher energy prices that would drive more resources to Russia, Treasury swiftly issued and updated Russia-related guidance to allow U.S. financial institutions to continue processing these transactions and underscore that such activity is not prohibited by sanctions. While current circumstances and the dangers from Russia&rsquo;s war in Ukraine may lead entities and individuals to make their own risk assessments and business decisions, Treasury is making clear that sanctions will not block energy payments.&rdquo;
OFAC issued a number of General Licenses (GLs) in furtherance of the Russia sanctions.&nbsp; <a href="https://home.treasury.gov/system/files/126/russia_gl9a.pdf">GLs 9A</a>&nbsp;authorizes all transactions prohibited by the Russia-related Sovereign Transactions Directive that are ordinarily incident and necessary to the receipt of interest, dividend, or maturity payments in connection with debt or equity of the Directive 4 entities. &nbsp;<a href="https://home.treasury.gov/system/files/126/russia_gl10a.pdf">GL 10A</a> authorizes all transactions prohibited by the Russia-related Sovereign Transactions Directive that are ordinarily incident and necessary to the wind down of derivative contracts, repurchase agreements, or reverse repurchase agreements entered into prior to 12:01 a.m. eastern standard time, March 1, 2022, that include a Directive 4 entity as a counterparty. &nbsp;OFAC has highlighted that neither GL 9A nor GL 10A authorize any debit to an account on the books of a U.S. financial institution of a Directive 4 entity. &nbsp;These GLs authorize transactions related to dealings in certain debt or equity, and certain derivative contracts involving (i) 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) Public Joint Stock Company Sberbank of Russia; and, (v) VTB Bank Public Joint Stock Company.
OFAC issued&nbsp;<a href="https://home.treasury.gov/system/files/126/russia_gl13.pdf">GL 13</a>, &ldquo;Authorizing Certain Administrative Transactions Prohibited by Directive 4 under Executive Order 14024,&rdquo; to clarify that U.S. persons are authorized to pay taxes, fees, or import duties and purchase or receive permits, licenses, registrations, or certifications, to the extent such transactions are prohibited by the Russia-related Sovereign Transactions Directive, provided such transactions are ordinarily incident and necessary to such persons&rsquo; day-to-day operations in the Russian Federation. &nbsp;This GL expire on June 24, 2022.
OFAC also issued&nbsp;<a href="https://home.treasury.gov/system/files/126/russia_gl14.pdf">GL 14</a>, &ldquo;Authorizing Certain Clearing and Settlement Transactions Prohibited by Directive 4 under Executive Order 14024,&rdquo; to clarify and authorize certain transactions involving any Directive 4 entity where the Directive 4 entity&rsquo;s sole function in the transaction is to act as an operator of a clearing and settlement system. &nbsp;GL 14 does not authorize any transfer of assets to or from any Directive 4 entity, or any transaction where a Directive 4 entity is either a counterparty or beneficiary to the transaction. &nbsp;In addition, GL 14 does not authorize any debit to an account on the books of a U.S. financial institution of any Directive 4 entity.
To further assist in the understanding and application of these, and other General Licenses, OFAC has published&nbsp;<a href="https://home.treasury.gov/policy-issues/financial-sanctions/faq/added/2022-03-02">new Frequently Asked Questions</a>&nbsp;and&nbsp;<a href="https://home.treasury.gov/policy-issues/financial-sanctions/faq/updated/2022-03-02">updated several Frequently Asked Questions</a>.

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SmarTrade

Senior Legislative and Regulatory Policy Advisor

Scott E. Diamond

International Trade

OFAC Issues Clarifying Guidance on Its Russia Sanctions and Amends Several General Licenses