The U.S. Department of the Treasury Office of Foreign Assets Control ("OFAC") replaced two existing General Licenses covering several entities previously placed on the Specially Designated Nationals and Blocked Persons list ("SDN list"). The intent of the amended General Licenses is to mitigate potential disruptions to international financial and commodities markets caused by the latest round of Ukraine-/Russia-related sanctions.
General License 12B, which replaces General License 12A, authorizes maintenance or wind-down transactions and activities with specified entities as they relate to operations, contracts or other agreements in effect prior to April 6, 2018. The General License now explicitly permits funds in accounts of blocked U.S. persons identified in the General License to be used for such activities. In addition, a covered "maintenance or wind-down" transaction that is directly or indirectly paid to the account of a blocked U.S. person identified in the General License at a U.S. financial institution may be processed, provided the wire transfer instructions are consistent with the General License. General License 12B remains effective through 12:01 a.m., Eastern Daylight Time, on June 5, 2018.
General License 13A, which replaces General License 13, permits additional transactions necessary to divest or transfer debt, equity or other holdings of three named companies: (i) EN+ Group, (ii) GAZ Group and (iii) United Company RUSAL PLC. In particular, the General License authorizes such transactions and activities of the three companies, or in any entity in which those companies own (directly or indirectly) a 50 percent or greater interest, provided that such debt, equity or other holdings were issued by one of three other companies: (i) IIrkutskenergo, (ii) GAZ Auto Plant or (iii) Rusal Capital Designated Activity Company.
In addition, General License 13A clarifies that U.S. persons are authorized to engage in certain intermediate purchases of, or investments in, debt, equity or other holdings that are ordinarily incident and necessary to divestment activities covered by the General License. This includes, for example, the purchase of securities in EN+ Group, GAZ Group or United Company RUSAL PLC, to be delivered to a counterparty to close out a short position. Finally, General License 13A extends the effective period of the previous General License 13 by one month, through 12:01 a.m., Eastern Daylight Time, on June 6, 2018.
In addition to issuing the amended General Licenses, OFAC provided additional guidance by releasing three new FAQs and updating several previous FAQs.
Commentary / James Treanor
OFAC's recent General License amendments and guidance reflect the agency's willingness to calibrate and fine-tune Ukraine-/Russia-related sanctions in order to minimize collateral consequences. The repeated and increasingly technical refinements are testament to the unprecedented impact these measures are having on global markets, including in ways that may have been difficult to predict at the outset. Financial institutions should continue to monitor developments closely, and consider raising to OFAC specific questions or concerns they may confront.
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