On February 24, 2022, Russian President Vladimir Putin announced a “special military operation” on Ukrainian territory. However, it should be noted that even before Vladimir Putin announced the invasion of Ukraine, the U.S. and the European Union (“EU”) had already been adopting economic sanctions on trade and commerce involving Russia and the separatist regions of Donetsk and Luhansk in eastern Ukraine (the latter two hereinafter referred to as the “Covered Regions”), as well as restrictive measures against individuals and entities directly related to financing the hostility against Ukraine.
In this regard, on February 21, 2022, U.S. President Joe Biden issued an executive order enacting the first economic sanctions, which prohibited (i) investments in the Covered Regions by “US Persons”, being any person who is domiciled in the US or holds a green-card; (ii) importation into the U.S. of any goods or services originating in the Covered Regions; (iii) exportation, sale or supply from the U.S. to the Covered Regions; and (iv) any approval, financing, facilitation, or guarantee by a U.S. person of prohibited transactions. Moreover, the U.S. Department of the Treasury, Office of Foreign Assets Control (“OFAC”) was authorized to add to the Specially Designated Nationals (“SDN”) list, consisting of individuals and corporations located around the world who are blocked under the various sanctions programs administered by OFAC, any person determined by the Secretary of the Treasury, in consultation with the Secretary of State who: (i) operate in the Covered Regions; (ii) is a leader, official, senior executive officer, or member of the board of directors of an entity operating in the Covered Regions; (iii) is owned or controlled or acting on behalf of any person blocked under the executive order; or (iv) has materially assisted or supported any person blocked under the executive order. On the same day, the EU imposed travel bans and asset freezes on five new individuals “for actively supporting actions and implementing policies that undermine or threaten the territorial integrity, sovereignty and independence of Ukraine”. On February 22, 2022, President Biden announced new sanctions, by adding to the SDN list the two major Russian banks, along with 42 of their subsidiaries, and three close associates of President Putin, as well as restrictions on transactions involving Russian sovereign debt. On February 23, 2022, the EU adopted a new package of regulations and decisions that implement travel ban and an asset freeze, specifically against senior Russian government officials and close associates to President Putin, financial restrictions limiting Russia’s access to the EU’s capital and financial markets and commercial restrictions targeting economic relations with the Covered Regions
In response to Russia’s ongoing attack on Ukraine, the U.S., the EU and others countries, continued building pressure on Russia through additional rounds of sanctions. On March 15, 2022, the U.S. added new names to the SDN List, specially alleged human rights violators, as well as Belarusian government members, including Alyaksandr Lukashenka, President of Belarus, and his wife. Russian defense officials and companies, 328 members of the Russian State Duma, and numerous companies and individuals related to the Kremlin’s sanctions evasion networks and technology companies were also included on the SDN List in March 2022. Additionally, the U.S. determined that the aerospace, marine, and electronics sectors of the Russian economy are subject to sanctions, meaning the U.S. government may impose sanctions on any individual or entity determined to operate or have operated in any of those sectors.
On the same day, in turn, the EU has added new names, in particular Russian oligarchs, businessmen and propagandists, to the Council of the European Union restriction list, which subjects individuals to an asset freeze and a prohibition from making funds and economic resources available as well as a travel ban in the EU. At the same time, the EU introduced a new restrictive measure targeting certain government-related transactions, meaning that they prohibited any transactions with specific Russian state-owned entities. Furthermore, sanctions have been adopted in specific sectors of the economy, for example in relation to the luxury goods sector, which prohibited to sell, supply, transfer or export luxury goods with a value exceeding 300 euros per item to any person in Russia, or for use in Russia.
On April 6, 2022, the U.S. imposed new measures to the Kremlin government, among those are: (i) full blocking sanctions on Russia’s largest public and private banks, which were added to the OFAC’s SDN List; (ii) sanctions on members of the family of President Putin once it is believed that the Russian President would be placing his assets in the care of his family in order to evade sanctions in his name; (iii) sanctions on other relevant individuals of the Russian war against Ukraine; (iv) inclusion of members of Russia’s Security Council to OFAC’s SDN List; and (v) a new Executive Order banning new investment and certain services in Russia by any U.S. persons to any person located in the Russian Federation.
Similar to the U.S., on April 8, 2022, the EU imposed further restrictive measures on Russia. The European Union Council included 216 individuals and 18 entities to the EU Council restricted parties list, among them are Russian oligarchs and other prominent businesspeople involved in the energy, aviation, finance, media, defense and arms industries, as well as major Russian financial institutions, including four major Russian banks, a company active in the transport sector and companies in the military-defense industry. President Putin’s relatives have also been included on this list. Moreover, Regulation N. 2022/576 of the EU Council included a new restriction on coal by preventing the import of this mineral or any other fossil fuel originating in Russia into the EU. The same type of ban has also been applied to aviation fuel and its additives.
Subsequently, on April 9, 2022, the U.S. continued with its objective of economically pressuring Russia for its invasion of Ukraine and thus decided to expand its sanctions on Russia and Belarus. This rule expanded U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) license requirement on the export and reexport of U.S.-origin and certain foreign-produced commodities, software, and technologies to Russia and Belarus to include all items on the Commerce Control List (“CCL”). The rule also revokes the availability of the License Exception AVS (Aircraft, Vessels, and Spacecraft) for aircraft registered in, owned, or controlled by, or under charter or lease by Belarus or a national of Belarus. Most recently, on April 20, 2022, the U.S. imposed new sanctions on dozens of Russian people and entities, including a Russian commercial bank and companies operating in Russia’s virtual currency mining industry.
Regarding the private sector, it is worth noting that since the beginning of the war in Ukraine, large multinationals from various sectors have decided to abandon or suspend their business with Russia. Among them are food companies, technology companies, automakers, and oil companies. This move on the part of the world’s largest corporations explicitly illustrated the international repudiation of Russian hostility that is currently taking place. The pressure for this business discontinuation in Russia comes from many sides, both from top management and employees of the companies, as well as from investors themselves. Increasingly concerned about Environmental, Social, and Governance (“ESG”) issues, shareholders are pressing company management for incisive answers.
Finally, the economic sanctions imposed by several countries and by the EU against Russia also generate a significant impact on the compliance sector, especially concerning the internal policies of companies and financial institutions to prevent money laundering. It is worth noting that the DOJ has a long history of prosecuting foreign companies and individuals in U.S. courts for violations of international sanctions and money laundering-related crimes when there is a nexus to the U.S. As a result, it is recommended that Brazilian entities and individuals review and strengthen their internal compliance programs, especially from an anti-money laundering (AML) perspective and due diligence policy, such as KYC (“Know Your Customer”) and sanctions and |boycotts procedures.
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