Last night, Russia launched a sweeping invasion of Ukraine. After recognizing Ukrainian regions Donetsk and Luhansk as “independent republics,” Moscow sent what it described as “peacekeepers” into the region, providing Russia with the pretext to stage troops inside what is legally the territory of Ukraine in preparation for an outright attack on its neighbor. President Biden, in response to Russian President Putin’s recognition of the DNR and LNR imposed sanctions on two Russian banks—Vnesheconombank (VEB) and Promsvyazbank (PSB)—and their subsidiaries, which collectively hold more than $80 billion in assets and finance the Russian defense sector and economic development.
After Putin announced a military invasion of Ukraine overnight, the United States, EU, and UK partners unleashed significant sanctions on Russia’s financial sector, as well as on Russian oligarchs, family members, and politicians. The US Treasury’s Office of Foreign Assets Control (OFAC) added 15 individuals and 76 entities to the Specially Designated Nationals and Blocked Persons (SDN) list, introduced blocking sanctions against major Russian financial institutions, VTB, Otkritie, Sovcombank, and Novikombank, as well as imposed prohibitions against correspondent and payable-through accounts for Sberbank, not fully blocking Russia’s largest financial institution, but cutting off its ability to transact in US dollars. VTB, Otkritie, Sovcombank, and Novikombank are fully blocked, any assets they have in the United States are are frozen, and US firms, financial institutions, and individuals are prohibited from transacting with these financial institutions.
In addition, the Biden administration designated several Russian elites and their family members, sanctioned 24 Belarusian individuals and entities, including ones linked to Belarus’ military and financial sector, and imposed debt and equity restrictions on 13 major Russian enterprises and entities, including Sberbank, AlfaBank, Credit Bank of Moscow, Gazprombank, Russian Agricultural Bank, Gazprom, Gazprom Neft, Transneft, Rostelecom, RusHydro, Alrosa, Sovcomflot, and Russian Railways.
Navigating the new restrictions can be overwhelming. Sberbank alone has 25 subsidiaries, VTB has 20, and Sovcom, Novikom, and Otkritiye have 34 subsidiaries that will need to be researched, and appropriate actions will have to be taken to ensure compliance with US sanctions. In addition, these subsidiaries could also own companies or entities that would need to be analyzed and possibly blocked. Separately, the Commerce Department’s Bureau of Industry and Security also included 49 Russian companies on the Entity List in response to Russia’s aggression against Ukraine, severely restricting Russia’s access to technologies and defense articles that help sustain its military capabilities. FiveBy recommends engaging with sanctions compliance experts to help make sense of the new designations and avoid regulatory pitfalls and reputational risk.