On June 14, 2022, the Office of Foreign Assets Control (“OFAC”) of the United States Department of the Treasury published General License (“GL”) 8C (replacing GL 8B), which extends the temporary liquidation period to December 5, 2022 for energy-related transactions involving the following Specially Designated Nationals (“SDNs”): (1) State Corporation Bank for Development and Foreign Economic Affairs Vnesheconombank; (2) Public Joint Stock Company Bank Financial Corporation Otkritie; (3) Sovcombank Open Joint Stock Company; (4) State Joint-Stock Company Sberbank of Russia; (5) VTB Bank Public Joint Stock Company; (6) Alfa-Bank Joint Stock Company; (7) any entity in which one or more of the above persons hold, directly or indirectly, individually or in aggregate, a participation of 50% or more; or (8) the Central Bank of the Russian Federation.
On the same day, OFAC updated eight FAQs (FAQ 967, FAQ 976, FAQ 977, FAQ 978, FAQ 1010, FAQs 1011, FAQ 1012and FAQ 1017) in connection with Russian Harmful Foreign Activities Sanctions Regulations31 CFR part 587.
- FAQ 967: Guideline 2 below Executive Order (“EO”) 14024 (“Prohibitions Related to Correspondent or Payable-Through Accounts and Processing of Transactions Involving Certain Foreign Financial Institutions” or the “CAPTA Directive”) prohibits U.S. financial institutions from: (i) opening or maintaining a correspondent account or an account transit for or on behalf of blocked institutions; or (ii) the processing of transactions involving blocked establishments. The establishments designated on the List of Foreign Financial Institutions Subject to Correspondent Account or Sweepstakes Sanctions (the “CAPTA list”) is accessible via OFAC website. Directive 2 under EO 14024 does not impose blocking sanctions and, therefore, does not require US financial institutions (or other US persons) to block the assets of foreign financial institutions considered subject CAPTA prohibitions. However, U.S. Persons should be aware that foreign financial institutions subject to the prohibitions in this directive may also be subject to additional prohibitions under other sanctioning authorities, such as additional directives under EO 14024 or EO 13662.
- FAQ 976: This FAQ specifies that GL 8C allows certain “energy-related” transactions involving the following “Covered Entities” (i) State Bank for Development and Foreign Economic Affairs Vnesheconombank (VEB); (ii) Public Joint Stock Company Bank Financial Corporation Otkritie; (iii) Sovcombank Open Joint Stock Company; (iv) Public Joint Stock Company Sberbank of Russia; (v) public joint-stock company VTB Bank; (vi) any entity owned 50% or more, directly or indirectly, individually or in aggregate, by any of the above entities; and (vii) the Central Bank of the Russian Federation. FAQ 976 also specifies that GL 8C does not allow (i) transactions otherwise prohibited by Guideline 1A under EO 14024 (“Prohibitions on Certain Sovereign Debts of the Russian Federation”), (ii) any debit to an account in the books of a US financial institution of the Central Bank of the Russian Federation, or (iii) a US financial institution to maintain (or open) a correspondent account or sweepstakes account for or on behalf of foreign financial institutions on the CAPTA list. Therefore, for a U.S. financial institution to engage in transactions permitted by GL 8C, all energy-related funds transfers involving one or more covered entities must be processed indirectly through an institution. unsanctioned non-US financial institution. GL 8C provides authorization only under EO 14024. Therefore, U.S. financial institutions that rely on the authorization provided in GL 8C to process energy-related transactions must also comply with the prohibitions of EO 14066, EO 14068and EO 14071.
- FAQ 977: For the purposes of GL 8Cthe term “energy-related” means the extraction, production, refining, liquefaction, gasification, regasification, conversion, enrichment, manufacture, transport or purchase of petroleum, including crude oil, rental condensate, unfinished oils, natural gas liquids, commodities, natural gas, or other products capable of producing energy, such as coal, wood, or agricultural products used to manufacture biofuels or uranium in any form, as well as the development, production, generation, transmission or exchange of electricity, by any means, including energy sources nuclear, thermal and renewables.
- FAQ 978: This FAQ provides examples of authorized funds transfer mechanisms to send funds to foreign financial institutions sanctioned under GL 6A, GL 7Aand GL 8C (for authorized energy transactions). FAQ 978 clarifies that these general licenses do not override the CAPTA directive. Therefore, in order for a U.S. financial institution to engage in transactions permitted under these general licenses (for example, an energy-related funds transfer), all such funds transfers must be processed indirectly through a non-US and non-sanctioned financial institution.
- FAQ 1010: This FAQ is intended to clarify permitted and unauthorized activities related to the transportation of Russian-origin oil under EO 14024. EO 14024 prohibits the import of Russian oil into the United States. For this purpose, Russian oil includes crude oil; oil; petroleum fuels, oils and products of their distillation; liquefied natural gas; coal; and coal products. EO 14066 does not prohibit the conclusion of contracts or other business activities by U.S. persons to comply with the Russian Federation oil import ban. In addition, EO 14066 imposes extensive sanctions on persons who operate or have operated in the financial services sector of the economy of the Russian Federation. This FAQ specifies that GL 8C authorizes US persons to process energy-related transactions involving sanctioned Russian financial institutions. These energy-related transactions include payments related to various upstream and downstream activities, including extraction, production, refining, liquefaction, gasification, regasification, conversion, enrichment, manufacturing , transport or purchase of energy to be imported from the Russian Federation to countries other than the United States or for export to the Russian Federation, as well as the financing, loading or unloading related to these processes . However, GL 8C does not override prohibitions related to new investments in the energy sector in the Russian Federation.
- FAQs 1011: OFAC encourages individuals to communicate with their financial institution regarding sending payments involving the Russian Federation and permitted activities to avoid misunderstandings and potential erroneous sequestration of funds. In addition, individuals with questions about making or processing transactions related to GL 8C may contact OFAC’s Sanctions Evaluation and Compliance Division more efficiently by email at [email protected] or by phone at (800) 540-6322 or (202) 622-2490.
- FAQ 1012: GL 8C extends the authorization for energy-related transactions until December 5, 2022 at 12:01 a.m. Eastern Standard Time, unless subsequently renewed. In the event of non-renewal of GL 8C, OFAC intends to issue a general license authorizing the orderly cessation of activities covered by GL 8C.
- FAQ 1017: GL 8C remains valid after the publication of EO 14066. However, GL 8C does not authorize any transactions specifically prohibited by EO 14066, which prohibits (i) the importation of petroleum products originating in the Russian Federation into the United States, (ii) new investments in the Federation’s energy sector by a U.S. person, wherever located, and (iii) any endorsement, financing, facilitation or guarantee by a U.S. person , wherever located, of any transaction made by a non-US person that would be prohibited by EO 14066 if made by a US person or in the United States.
This document is intended as a guide only and does not replace specific legal or tax advice. Please contact the authors with any specific questions. We plan to continue to monitor the topics covered in this document and provide future updates to customers when helpful.