State Department Imposes Additional Financial Measures Against Russia

The Department of State today took additional financial steps against individuals and entities to combat sanctions evasion, hinder Russia’s ability to wage its aggression against Ukraine and diminish Russia’s capacity. These designations were made pursuant to E.O. 14024 which authorizes sanctions against persons found responsible or complicit with harmful foreign activities of the Russian Government.

Since Russia’s unprovoked invasion of Ukraine, the United States has escalated economic measures against Moscow along with our allies and partners. These include new primary and secondary sanctions on major Russian banks; expanding Russia-related debt and equity restrictions to state-owned enterprises (SOEs); implementing full blocking sanctions against certain Kremlin-connected elites; increasing export control restrictions; and imposing full blocking sanctions.

These actions have increased the immediate and intense financial costs that President Putin’s war of aggression will impose on Russia, while further isolating it from global markets, investments, trade, and cutting-edge technologies. They include an intensive set of sanctions against VTB Bank (VTB) and its subsidiaries which effectively cut one fifth of Russia’s banking sector from accessing U.S. financial system; MOEX also faces full blocking sanctions that have effectively limited its activities in America and globally.

OFAC recently strengthened its powers to impose secondary sanctions against foreign financial institutions (FFIs) that engage in prohibited transactions with designated individuals and entities, furthering our determination to combat sanctions evasion by Russia-related entities. We strongly advise FFIs doing business in Russia to consider instituting risk-based controls such as enhanced screening procedures, reviewing customer and correspondent relationships, communicating compliance expectations to customers directly, sending questionnaires out for completion, as well as requiring compliance attestations forms from them – we will explore this further in future OFAC advisor.

Russia has come under scrutiny with new sanctions to deny access to essential goods and technology, with Treasury expanding the scope of secondary sanctions to include foreign financial institutions (FIs) that conduct significant transactions or provide services with individuals designated under Executive Order 14024 who support Russia’s war machine. This policy enhancer comes in addition to continued focus from Administration officials on third-country actors who help Russia avoid sanctions while bypassing global banking systems.

The Bureau of Industry and Security (BIS) tightened export controls in an unprecedented show of multilateral coordination to effectively deny Moscow access to certain sensitive items used for defense, aerospace and maritime industries such as semiconductors, computers, telecommunications equipment, information security equipment lasers and sensors that it relies upon for defense, aerospace and maritime purposes, such as semiconductors computers telecommunications equipment information security equipment lasers and sensors. EU Japan Australia Canada New Zealand have all announced their intentions to implement similar export control measures as Russia.

JSC Bank Novikombank was placed under sanctions by the Department of Commerce with an asset freeze, trust service prohibition and correspondent banking prohibition imposed. Furthermore, Justice issued sanctions on Moscow Exchange, National Clearing Center and National Settlement Depository which play crucial roles in Russia’s securities markets and economy respectively. Finally Commerce also placed additional sanctions against future energy production, metal mining sector development and defense procurement by sanctioning owners, developers and operators of Arctic-2 LNG project.

Treasury’s actions go further than just expanding sanctions against Russian individuals and entities; Treasury is restricting many of the most significant state-owned enterprises’ ability to raise money through restricting U.S. markets for their debt and equity securities issued by thirteen of Russia’s major enterprises and entities such as Sberbank, AlfaBank, Credit Bank of Moscow, Gazprombank, Russian Agricultural Bank Transneft Rostelecom RusHydro Sovcomflot Russian Railways

Treasury also is taking measures to impose secondary sanctions against foreign financial institutions (FFIs) with significant dealings or access to the United States, including full blocking sanctions on Russia’s largest bank – holding nearly one-third of all Russian banking sector assets and having nearly all correspondent and payable-through account relationships – this move aims to further limit Russia’s access to global financial systems and procurement networks while encouraging de-risking among FFIs that do business with Russia.

Treasury and State are expanding export control restrictions on goods and services that could aid Russia’s military capabilities, including energy technology. Their unprecedented cooperation with Allies and partners shows they stand firmly against Russian aggression against Ukraine.

Under conditions of impunity, government officials frequently used their power for personal gain and engaged in corruption at alarmingly high rates. They denied, manipulated, or circumvented investigations into high-profile incidents of violence or harassment by officers of Russia’s Federal Security Service such as the 2020 poisoning of prominent opposition politician Aleksey Navalny by its officers.

The Trump Administration took steps to deny Russia access to its foreign assets by imposing full blocking sanctions on Moscow Exchange, National Clearing Center, National Settlement Depository as well as several individuals. This action underscores their firm commitment to crack down on sanctions evasion while serving as a strong deterrent against foreign financial institutions (FFIs) continuing business with Russia or those engaging in similar activity.

The Obama Administration also issued full blocking sanctions on Russian elites for their involvement in human rights abuses against their own people, and expanded restrictions to encompass family members of senior Russian government officials. Furthermore, Treasury extended a ban on secondary markets for new debt issued by key Russian government financial institutions – further restricting liquidity available to the Kremlin. Furthermore, additional full blocking sanctions were placed upon entities and individuals which assist Russia’s war effort by funneling materiel and funds through convoluted and sanction-evasion schemes.