One-Year Anniversary of Initial Russia Sanctions Resulting from the Invasion of Ukraine

This marks the first Russia Sanctions Update from Yormick Law LLC, a relaunch of my small firm practice focused on international business and trade matters, which previously operated from 1995-2019.  We thank you for the opportunity to continue representing and advising your company. 

More significantly, Tuesday marks the one-year anniversary of the President issuing Executive Order (“EO”) 14065, Blocking Property of Certain Persons and Prohibiting Certain Transactions With Respect to Continued Russian Efforts To Undermine the Sovereignty and Territorial Integrity of Ukraine.  EO 14065 prohibits new investment in the so-called Donetsk People’s Republic (“DNR”) and the Luhansk People’s Republic (“LNR”) regions of Ukraine, the “Covered Regions.”  The EO also prohibits the importation into the US, and the export, reexport, sale, or supply, directly or indirectly, of goods, services, or technology to the Covered Regions. 

Several other waves of sanctions and export controls have since been issued by the US, Australia, Canada, the EU, Japan, South Korea, Switzerland, UK and other nations, while democracies such as Brazil, India, Israel, Mexico, and South Africa stand alongside China, Turkey, the UAE, and other countries that have failed to take such actions, leading to the Financial Crimes Enforcement Network (“FinCen”) and the Bureau of Industry and Security (“BIS”) to issue a Joint Alert last June urging increased vigilance for potential Russian and Belarusian export control evasion attempts including transshipments from countries that have not imposed sanctions and export controls on Russia and Belarus.  The FinCen-BIS Joint Alert came just weeks after Deputy Attorney General Lisa Monaco remarked that sanctions are the “new FCPA.”

While the outcome of the war is Ukraine remains unclear, aggressive civil and criminal enforcement of Russian-related sanctions and export controls will continue ranging from German authorities raiding firms suspected of violating sanctions through intermediary companies in Turkey to BIS issuing a Temporary Denial Order (“TDO”) immediately suspending the export privileges of individuals and US companies in connection with indictments to disrupt a procurement network to evade US export controls.

There are now reports that the Office of Foreign Assets Control (“OFAC”) is investigating Raiffeisenbank, based in Austria, regarding its exposure in Russia, as well as in the Covered Regions, and Syria.  According to Reuters, Raiffeisenbank is reportedly only one of two foreign banks on the Russian Central Bank’s list of 13 “systematically important credit institutions.”  In the past year, we have seen clients with customers in Russia open accounts in Raiffeisenbank or one of its subsidiaries in Central and Eastern Europe to avoid sanctions on certain Russian banks.  Raiffeisen Bank International operates subsidiary banks in these CEE markets:

• Albania                                    Raiffeisen Bank Sh.a.
• Belarus                                    Priorbank, OAO
• Bosnia and Herzegovina         Raiffeisen Bank d.d. Bosna i Hercegovina
• Czech Republic                       Raiffeisenbank a.s.
• Croatia                                    Raiffeisenbank Austria d.d.
• Kosovo                                    Raiffeisen Bank Kosovo S.A.
• Hungary                                  Raiffeisen Bank Zrt.
• Romania                                  Raiffeisen Bank S.A.
• Russia                                      ZAO Raiffeisenbank
• Slovakia                                  Tatra banka, a.s.
• Serbia                                      Raiffeisenbank a.d.
• Ukraine                                   Raiffeisen Bank

Potential OFAC sanctions against Raiffeisenbank might be imminent.  Accordingly, companies should promptly review any transactions in which it issues payments to or receives payments from the bank and any of its subsidiaries and consider alternative banking services.

Finally, it is also being reported that with the one-year anniversary of Russia’s invasion of Ukraine approaching later this week, the US is considering further export controls and sanctions that will target Russia’s defense and energy sectors, as well as financial institutions, and several individuals.  Sanctions will likely be multilateral and there are reports the US and its allies might also take measures aimed at disrupting evasion and circumvention of sanctions as a result of actions by and in third-countries.

We will continue to provide regular updates on Russia-related export controls and sanctions as they are considered and imposed.  For any questions or concerns regarding specific trade prohibitions or restrictions involving Russia or other countries, regions, and parties, please do not hesitate to contact me at jon@yormicklaw.com or at M: +1.216.269.5138.