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Designation of Accounting, Trust and Corporate Formation, and Management Consulting Sectors in Russia as Sanctionable

The Department of the Treasury’s Office of Foreign Assets Control (OFAC) has issued a&nbsp;<a href="https://home.treasury.gov/system/files/126/determination_05082022_eo14024.pdf" target="_self" rel="noopener">Determination under Section 1(a)(i)</a> under&nbsp;<a href="https://www.govinfo.gov/content/pkg/FR-2022-04-08/pdf/2022-07757.pdf" target="_self" rel="noopener">Executive Order (EO) 14071</a> which states that persons operating in the accounting, trust and corporate formation services, and management consulting sectors of the Russian economy may be subject to sanctions, including blocking designations. See Thompson Hine SmarTrade Update of&nbsp;<a href="https://www.thompsonhinesmartrade.com/2022/04/president-biden-announces-ban-on-new-investment-on-russia-sberbank-alfa-bank-and-other-entities-designated-as-sdns/" target="_self" rel="noopener">April 7, 2022</a> for more information on EO 14071. This action follows previous determinations which allowed sanctions against Russian entities operating in the aerospace, marine, electronics, financial services, technology, and defense and related materiel sectors of the Russian economy.

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U.S. Persons Prohibited from Providing Accounting, Trust and Corporate Formation, and Management Consulting Services to Russian Persons

OFAC also announced that, effective June 7, 2022, U.S. persons will be prohibited from providing accounting, trust and corporate formation, and management consulting services to any person in Russia. According to OFAC, “[t]hese services are key to Russian companies and elites building wealth, thereby generating revenue for Putin’s war machine, and to trying to hide that wealth and evade sanctions.” This announcement was made in a separate <a href="https://home.treasury.gov/system/files/126/determination_05082022_eo14071.pdf" target="_self" rel="noopener">Determination under Section 1(a)(ii) EO 14071</a>. These restrictions do not apply to: (1) any service to an entity located in the Russian Federation that is owned or controlled, directly or indirectly, by a United States person; or (2) any service in connection with the wind down or divestiture of an entity located in the Russian Federation that is not owned or controlled, directly or indirectly, by a Russian person.

Related to these determinations, OFAC has issued new General Licenses under its Russian Harmful Foreign Activities Sanctions authorizing certain transactions related to these services.

In a series of <a href="https://home.treasury.gov/policy-issues/financial-sanctions/faqs/added/2022-05-08" target="_self" rel="noopener">FAQs</a>, OFAC has provided guidance on the implementation of these directives and offers the following definitions:

Further, OFAC notes that it anticipates publishing regulations defining the term “Russian person” to mean an individual who is a citizen or national of the Russian Federation, or an entity organized under the laws of the Russian Federation.

Francesca M.S. Guerrero Partner, International Trade 202.973.2774 <a href="mailto:Francesca.Guerrero@ThompsonHine.com">Francesca.Guerrero@ThompsonHine.com</a>

Samir D. Varma Partner, International Trade 202.263.4136 <a href="mailto:Samir.Varma@ThompsonHine.com">Samir.Varma@ThompsonHine.com</a>

Joyce Rodriguez Managing Associate, International Trade 202.973.2724 <a href="mailto:Joyce.Rodriguez@ThompsonHine.com">Joyce.Rodriguez@ThompsonHine.com</a>

Scott E. Diamond* Senior Legislative &amp; Regulatory Policy Advisor, International Trade 202.263.4197 <a href="mailto:Scott.Diamond@ThompsonHine.com">Scott.Diamond@ThompsonHine.com</a>

This advisory bulletin may be reproduced, in whole or in part, with the prior permission of Thompson Hine LLP and acknowledgment of its source and copyright. This publication is intended to inform clients about legal matters of current interest. It is not intended as legal advice. Readers should not act upon the information contained in it without professional counsel.

This document may be considered attorney advertising in some jurisdictions.

https://admin.thompsonhine.com/wp-content/uploads/2022/08/International_Trade_Update_-_Provision_of_Certain_Professional_Services_to_Russia_Prohibited_under_U.S._Sanctions.pdf

Provision of Certain Professional Services to Russia Prohibited under U.S. Sanctions

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