In its latest move to counter the national security threat posed by Russia sanctions invaders, the Biden Administration targeted over 300 companies and individuals around the world on Wednesday, October 30, placing them under either sanctions or export controls lists.
OFAC Sanctions
U.S. Department of Treasury’s Office of Foreign Assets Controls (OFAC) sanctioned 275 individuals and entities involved in supplying Russia with advanced technology and equipment that the country could effectively use in its war with Ukraine, placing them on the agency’s List of Specially Designated Nationals and Blocked Persons List, commonly referred to as the SDN List. The action targeted both individual actors and sanctions evasion networks across 17 jurisdictions (Belize, Benin, Bermuda, Chile, China, Germany, Greece, Hong Kong, India, Malaysia, Montenegro, Russia, South Korea, Switzerland, Thailand, Turkey, the United Arab Emirates (UAE)). In addition to blocking these global evasion networks, the action also targets domestic Russian imports and producers of key potential inputs for war efforts. These designations were pursuant to the authority of Executive Order (E.O.) 14024 (April 15, 2021), which has been the primary authority used by the Administration for sanctioning Russia-related parties following the onset of that country’s invasion of Ukraine in February 2022.
BIS Entity List Additions
Separately, the Commerce Department’s Bureau of Industry and Security (BIS) added 40 foreign entities to its Entity List, in an attempt to combat the diversion of U.S.-origin products to military-end users in Russia, acts deemed contrary to the national security and foreign policy interests of the United States. These entities came from 10 jurisdictions, specifically China, Estonia, Finland, India, Malaysia, Russia, Singapore, Turkey, the United Arab Emirates (UAE), and the United Kingdom (UK). This was implemented under the authority of the Export Control Reform Act of 2018 (ECRA) and its implementing regulations, the Export Administration Regulations (EAR). These entities are subject to specific individual licensing requirements and policies supplemental to those found elsewhere in the EAR, and once obtained can resume certain prior transactions.
Often overshadowed by the SDN List, the Entity List has mushroomed in recent years and has served as a key tool for preventing the diversion of a broad range of U.S. origin goods and technologies to certain end-users, be they particular entities, or entities in particular jurisdictions. The list is administered by the End-User Review Committee (ERC), which consists of the Departments of Commerce (Chair), Defense, State, Energy, and where appropriate, the Treasury. While the BIS’s mandate is often connoted with so-called “dual use” items which have civilian and military application, the agency’s jurisdiction is broad as the EAR’s definition of what can constitute U.S. origin goods and technologies is very broad, ranging from mundane everyday items to highly sophisticated technologies that may be made abroad from U.S. origin technology or plants. The level of regulation can depend on the technology itself, the end-user, and the end destination.
Key Takeaways
Wednesday’s moves are just the latest by the U.S. in its commitment since the start of the Russo-Ukrainian War to stem the flow of critical tools and technologies that Russia can use in its war efforts, continuing to make it more challenging for Russia to procure items. This continuing national security and foreign policy effort to enforce Russian sanctions circumvention and evasion signifies a “maturing” of the Russian sanctions’ framework, as the world has followed the lead of the U.S. and its allies in isolating Russia economically and financially since the war started in 2022.
From a compliance standpoint, Westerday’s announcement only emphasizes the pace the administration has taken with pursuing Russia sanctions evaders and other parties deemed to be acting contrary to U.S. national security interests. SDN List additions related to Russia since February 2022 now add to over 3,500 entities, and Entity List additions number over 900, making the list substantially larger than it was even just a few years ago
Noticeably, many of the targeted entities are based in jurisdictions that are friendly with the United States. While this is certainly not a new phenomenon, the diversity and number of the jurisdictions (21) underscore the need for U.S. and other companies to bolster compliance strategies in their operations around the world, and not just only in the jurisdictions generally considered gateways for sanctions and export control violations and evasion. Depending on the size and sophistication of the company, various tools can be used to detect these fast-evolving risks, and to adapt compliance procedures accordingly. Given Russia’s use of a wide range of such third countries and efforts by U.S. federal agencies to bolster enforcement, multinational businesses must exercise increased vigilance and ensure that their compliance programs are up to date to prevent violations given these newer risks. Key steps can include:
- Updating written policies and procedures to ensure they capture the types of sectors and activities as they become targeted by U.S. sanctions
- Enhanced due diligence on potential customers and end users with improved screening
- Better understanding the nature of the goods and/or services to be sold and the potential desirability unique to such goods and/or services for illicit actors and end-uses
- Improved upwards reporting of potential red flags
- Better compliance training to accommodate new changes
This list is only suggestive and not conclusive, and companies should take care to implement policies that are bespoke and responsive to their particular needs, noting their business line, their scope of operations and the unique compliance risks that they pose.
Finally, it should be noted that OFAC did remove certain entities from the SDN List as well. Removal from the SDN List, while not nearly as common as placement onto the list, occurs regularly, and designated parties are free to submit requests for removal. Similarly, Entity List removal is also possible with petitioning before the ERC. Notably 15 parties have been removed from the Entity List since 2020. A unanimous vote by all ERC members is required for removal.
Please contact Farhad Alavi at [email protected] or (202)-686-4859 if you have any questions.
This Client Alert is intended solely for informational purposes and should in no way be construed as legal advice. If you have any questions or are unclear on any of the subject matters addressed or discussed in this Client Alert, please consult a licensed legal professional.