News / Treasury Sanctions Gazprombank and Limiting Russia’s Use of the International Financial System
Treasury Sanctions Gazprombank and Limiting Russia’s Use of the International Financial System
The US has imposed extensive sanctions on Russian banks and financial institutions, especially targeting Gazprombank; the only remaining sanctioned bank of Russia.
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On November 21, 2024, the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) took another significant step in implementing G7 leaders’ commitments to limit Russia’s use of the international financial system to support its conflict against Ukraine.
OFAC has sanctioned Gazprombank, more than 50 internationally connected Russian banks, over 40 Russian securities registrars, and 15 Russian finance officials.
According to the Treasury, Gazprombank has served as a significant conduit for the Russian government to fund military operations and pay troops’ war bonuses.
The sanctions target Gazprombank’s six international subsidiaries in Luxembourg, Cyprus, Hong Kong, South Africa, and Switzerland. These entities face sanctions because Gazprombank owns or controls them.
Treasury Secretary Janet Yellen said, “today’s sanctions targeting Russia’s largest remaining non-sanctioned bank would further diminish Russia’s military effort and “will make it harder for the Kremlin to evade U.S. sanctions and fund and equip its military.”
OFAC Issues Warning on Joining SPFS
OFAC has also issued an alert highlighting sanctions risks associated with Russia’s System for Transfer of Financial Messages (SPFS), which the Kremlin developed and uses to circumvent sanctions.
OFAC issues a series of warnings to Foreign Financial Institutions(FFIs) on the SPFS. First, the alert states that FFIs that join or have already joined SPFS may be added to OFAC’s Specially Designated Nationals and Blocked Persons List under Executive Order (E.O.) 14024.
All property and interests in property subject to U.S. jurisdiction of FFIs designated as Specially Designated Nationals are frozen, and U.S. people are typically banned from transacting with them.
Second, OFAC explicitly states that joining SPFS will be deemed a “red flag,” and that FFIs that do so will be targeted more aggressively.
Restriction to Deal with Russian Sanctioned Entities
US enterprises operating in Russia should avoid doing business with any of the newly sanctioned entities, including Gazprombank, as well as any entities that are 50% or more owned by sanctioned entities or people.
Concurrently with these additional sanctions, OFAC releases two new general licenses permitting the termination of transactions involving Gazprombank and other sanctioned financial entities.
The OFAC continues to provide general licenses for specified types of transactions involving medicine, agriculture, certain business of international organizations and diplomatic missions, and other activities.
This latest set of sanctions reflects the United States’ commitment to holding Russia accountable for its actions against Ukraine and efforts to avoid existing restrictions.
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