Sanctions and Export Controls News Digest – January 2024
SYSTEMIC CHANGES
US REPO Act Passes Foreign Relations Committee Stage
On 24 January 2024, the US Foreign Relations Committee passed the Rebuilding Economic Prosperity and Opportunity for Ukrainians Act (“REPO Act”). Since Russia’s full-scale invasion of Ukraine, the US has frozen billions of dollars of Russian Central Bank and sovereign assets. The REPO Act would allow the US to transfer assets to Ukraine for its reconstruction. Specifically, the REPO Act:
Gives the president the authority to confiscate Russian sovereign assets that have been frozen in the United States and transfer them to assist in Ukraine’s reconstruction efforts.
Prohibits the release of funds to sanctioned Russian entities until Russia withdraws from Ukraine and agrees to provide compensation for harm caused by its unprovoked war.
Instructs the president to work with allies and partners to establish an international compensation mechanism to transfer confiscated or frozen Russian sovereign assets to assist Ukraine.
Gives the State Department additional resources to work with partners and allies abroad toward the goal of confiscation of additional Russian sovereign assets in other countries.
The Bill has now been placed on the Senate Legislative Calendar. The Bill still needs to be passed by the Senate, the House of Representatives and the President to become law.
US Commerce Department’s Bureau of Industry and Security Strengthens Export Controls Against Russia and Belarus
On 23 January 2024, the Bureau of Industry and Security (“BIS”) strengthened its export controls under the Export Administration Regulations against Russia and Belarus. Specifically, BIS added 94 new HTS codes which list items requiring a license for export, re-export or transfer to Russia and Belarus (incl. chemicals, lubricants, metals, antenna parts, aircraft/spacecraft parts). The changes ultimately limit Russia’s access to critical components for its military-industrial complex and harmonise US export controls with those of its partners and allies, in recognition of the fact that export controls are more impactful when imposed on a multilateral basis.
US Department of the Treasury’s Financial Crimes Enforcement Network begins accepting beneficial ownership information reports
On 1 January 2024, the Financial Crimes Enforcement Network (“FinCEN”) began accepting information reports from corporate entities under the Corporate Transparency Act on their ultimate beneficial owners. As mentioned in State Capture’s December 2023 news digest, the law is an attempt to address “ongoing exploitation of anonymous companies to hide and launder funds.” Corporate anonymity enables money laundering, drug trafficking, terrorism, and corruption. Having a centralised database of beneficial ownership information should minimise corporate anonymity in the US financial system and help to prevent “illicit finance enabled by opaque corporate structures.” Existing companies have until 1 January 2025 to file their first reports.
US Issues New Executive Order Authorising Secondary Sanctions on Foreign Financial Institutions Enabling Russian Military-Industrial Complex
On 22 December 2023, President Biden issued Executive Order (“E.O.”) 14114 “Taking Additional Steps With Respect to the Russian Federation’s Harmful Activities” which amends E.O. 14024 and E.O. 14068. The Office of Financial Assets Control (“OFAC”) can now impose secondary sanctions on foreign financial institutions determined to be involved in (including facilitating) any significant transactions enabling Russia’s military-industrial complex. Designated financial institutions will not be able to open or maintain correspondent accounts or payment through accounts in the United States and may have all of their US property and interests blocked.
President Biden Issues a New Proclamation Expanding US Visa Ban Authorities to Focus on Enablers of Corruption
On 11 December 2023, President Biden issued Proclamation 10685 which allows the Secretary of State to suspend entry into the US of persons who are considered to be enabling corruption. The Proclamation observes that “[a]ctivity by these ‘‘enablers’’ - who are often professional service providers - often occurs through opaque legal structures and financial mechanisms.” The ban applies to “[p]ersons who have enabled, facilitated, or otherwise been involved in significant corruption, including through the laundering of its proceeds or obstruction of judicial or investigative processes, among other acts”, as well as their immediate family members.
EU Agrees on New Anti-Money Laundering Rules
On 18 January 2024, the EU Council and European Parliament reached an agreement on new anti-money laundering rules. Notably, the new rules seek to improve beneficial ownership and real estate registers across member states, and capabilities of national supervisory bodies and competent authorities to monitor and regulate these registers. Critically, interested parties such as anti-money laundering watchdogs will be able to access beneficial ownership registers.
RUSSIA SANCTIONS AND ENFORCEMENT
US Sanctions Updates
On 18 January 2024, the US Department of State sought to enforce the Oil Price Cap by designating shipping company Hennesea Holdings Limited. The price cap policy prohibits maritime transport of Russian crude oil by members of the Price Cap Coalition, unless bought and sold in accordance with the Coalition’s agreed price caps ($60 USD/barrel for crude oil). This move signals the US’s commitment to enforcing the Oil Price Cap.
EU Sanctions Updates
The EU is reportedly preparing to issue a 13th Sanctions Package by 24 February 2024 - the two-year anniversary of Russia’s full-scale invasion of Ukraine. Reportedly, measures may include “further listings, more trade restrictions and cracking down on Moscow’s continued ability to get around the bloc’s sanctions both through third countries and companies within the EU”. Others have reported that there will be no new trade restrictions and that the package will be relatively modest.
On 29 January 2024, the EU Council imposed sanctions against four individuals and one entity under its Global Human Rights Sanctions Regime. Three individuals from Russia’s judiciary were deemed to be involved in arbitrary arrests and detentions. Russia’s “Safe Internet Leage” and its chairperson – Ekaterina Mizulina – were sanctioned for being responsible for serious and systematic abuses of freedom of opinion and expression.
Eurojust and Europol Support Dutch Legal Action Against Violation of Export Sanctions to Russia
In January 2024, Eurojust and Europol supported an action against a Dutch-registered enterprise alleged to have violated export sanctions to Russia. The action was brought jointly by Dutch, German, Latvian, Lithuanian and Canadian authorities. Three suspects were arrested in relation to the illegal export of technological and laboratory equipment, which could be used for military purposes.
