State, Treasury, And Commerce Reveal Measures Aimed At Additional Limits On Russia And Belarus

On August 23rd, 2024 the “U. S. Treasury’s Office of Foreign Assets Control (OFAC), and the U. S. Department of State (State), sanctioned Russia with measures planned in coordination with the Commerce Department’s Bureau of Industry and Security (BIS)” aimed at restricting the global procurement for the Russian military.

The Office of Foreign Assets Control of the U. S. Treasury Department (“OFAC”) and the State Department ‘sanctioned almost 400 people and companies within Russia and beyond including Asian, European, and Middle Eastern ones.’

These ‘designations encompass a wide range of Russian procurement practices, such as many transnational networks, several entities involved in providing offshore trust and shell firm formation services to the Russian oligarchs to help them evade sanctions, several companies identified to be involved in money laundering for a Russian gold firm, which was subjected to sanctions, and many firms, which supplied sensitive and critical items, and companies involved in sanction busting for Russian citizens in the sphere of cyberspace,’ stated the press release.

A significant number of OFAC’s designations involved firms and persons providing listed commodities on the U.S. “Common High Priority List,” which lists commodities that Russia needs for its weapon programs.

OFAC Emphasized Implementing Efficient Screening Solutions

To prevent violations of relevant rules and regulations, it is required for companies to conduct restricted party screening on counterparties to determine whether they are included in the sanctions list or not, stated press release.

OFAC mandated that some of the designated entities are not registered and operating in Russia or Belarus, which means that screening procedures covering only those countries will not adequately address the risks.

“Today’s business leaders and financial industries that are cooperating with them, as well as governments around the world, must make sure that they do not contribute to Russia’s supply of weaponry for their military-industrial complex,” he added.

Sanctions Evasion and Circumvention

The U. S. Treasury aims at freezing the assets of global networks that assist Russia in circumventing sanctions networks supplying arms and alleged dual-use products essential to Russia’s invasion of Ukraine. These networks are in 16 jurisdictions, such as China, Switzerland, Türkiye, and the UAE, and help it organize unlawful schemes and other monetary processes profitable for Russian oligarchs and revenue producers.

This action Guided by commitments made by President Biden and G7 leaders and coupled with the cooperation with FinCEN, targets over 100 individuals and entities to counteract these techniques of evasion.

Limiting Russia’s Strategic Metals And Mining Sector

To decrease the Russian revenues in its vital segments: the strategic metals and mining, the Treasury is aiming to target companies of steel production, iron, and coal mining, and also the auxiliary companies providing essential and specialized services to the mining industries. This move aligns with ‘commitments made by President Biden and G7 leaders’ to constrain the funding available for Russia to fund its hostile endeavors.

Russia’s Technological Base

The Treasury is designating more than 60 Russian technology and defense firms that are crucial to maintaining Russia’s warfare capacity. Such are parties that are involved in the creation of weapons, electronics that can be used for military purposes, surveillance products, and artificial intelligence technologies.

The sanctions mean to disrupt Russia’s military-industrial complex and at the same time, make sure that the Russian citizens do not suffer from a lack of Telcoms and digital services.

Russian Financial Technology

OFAC is now designating Russian FinTech companies that provide the Russian economy with access to the world financial system. It includes Atol as the payments technology developer, Centre of Financial Technologies Group (CFT) as the major software provider for the banking and payment industries, and Diasoft Ltd – the key IT solutions provider for Russian financial business.

These measures comply with Executive Order 14024  and are deliberate efforts to increase the pressure on Russia through economic isolation that will deny it the resources required to continue its unprovoked war on Ukraine.

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Regulations By The Bureau of Industry and Security

The Bureau of Industry and Security (“BIS”) of the U.S. Department of Commerce has released final regulations that will:

• Increase the “scope and number of entities covered by the Russia/Belarus Military End User (“MEU”) Foreign Direct Product (“FDP”) rule: Procurement Entities. Commerce will list Russian and Belarusian Procurement Entities—that is, companies that buy goods for Russia’s war effort—on the Entity List with a footnote and subject them to FDP regulations.”
• Introduce “new licensing conditions concerning operation software of computer numerically controlled (“CNC”) machine tools. This will take effect on the 16th of September of the year 2024” and also have an implementation date of 2024.
• Expand the “Entity List by more than 100 entities such as companies” with operations in Russia, China including Hong Kong, the Crimea Region of Ukraine, Iran, Kyrgyzstan, Turkey,  the UAE, and Cyprus for ‘violation of shipping US-origin and US-branded products and providing services to Russia which violates the export control of USor for other conduct which is contrary to the national security and foreign policy interest of the US.’
• Out of the “123 entities that are being added to the Entity List majority are added under Russia which stands at 63 while China stands at 42.” Some of these entities are referred to as MEUs or Procurement Entities and are going to be impacted by the FDP rule.
• Advise exporters on how to ‘recognize doubtful transactions, associated with foreign corporate service providers and listed foreign addresses.’
• Offer further guidelines and tips regarding contractual language that could be helpful when it comes to export compliance.

The above “BIS guidance on contractual language” will be useful for the companies to note that their standard contract language or terms and conditions address export controls.

As per the Treasury press release, the firms must carry out extra research and ‘deeper due diligence before they supply their products to Russia or Belarus, or any other client from a country that might be acting as an intermediary for Russia or Belarus’ such as the United Arab Emirates, Turkey, China or Hong Kong, amongst others.