What Do OFAC’s Crimea-related Prohibitions Mean?

An OFAC sanctions attorney explains what the new prohibitions against Crimea-related activity mean.

What does the prohibition against new investment in Crimea mean?

No new investments may be made in the Crimea region of Ukraine by a United States person, wherever located.  Although the executive order itself does not define “new investment,” OFAC has defined the term in other sanctions programs.  For example, in the Iranian Transactions and Sanctions Regulations (ITSR), OFAC defines “new investment” as “a transaction . . . that constitutes . . . a commitment or contribution of funds or other assets . . . or a loan or other extension of credit.”  This is a fairly broad definition, and can include a simple deposit into a savings or checking account at a bank located in the Crimea region of Ukraine.  In short, one should not contribute any funds to persons or entities located in the Crimea region.

What does the prohibition against imports from Crimea mean?

The importation into the United States of any goods, services, or technology from the Crimea region of Ukraine is prohibited.  The prohibition makes clear that both direct and indirect importation of Crimea-origin goods, services, or technology is also prohibited.  The language of this prohibition is very similar to other OFAC-administered sanctions programs, and therefore indicates that the prohibition will be construed fairly comprehensively.

To illustrate, take the following example of a prohibited importation of a Crimea-origin service:  A United States company maintains a business account with a bank located in Crimea to handle local transactions.  In this situation the United States company is in receipt (or importing) a Crimea-origin financial service from the Crimean bank.  The very act of maintaining the account is prohibited as an importation of a Crimea-origin service.

What does the prohibition against exports to Crimea mean?

The exportation, reexportation, sale, or supply from the United States, or by a United States person, wherever located, of any goods, services, or technology to the Crimea region of Ukraine is prohibited.  The prohibition makes clear that both the direct and indirect exportation, reexportation, sale, and supply of United States origin goods, services, or technology is also prohibited.  Again, this language is very similar to the language contained in other OFAC sanctions programs, and therefore indicates that the prohibition will be construed fairly comprehensively.

To illustrate how comprehensive this prohibition is, consider the following:

Generally, no U.S. products or goods should be reaching the Crimea region of Ukraine.  United States persons and companies need to make sure their exports and reexports of goods and services are not ultimately destined for the Crimea region.  Even inadvertent or accidental violations of this rule can be prosecuted civilly by OFAC.  Additionally, no person or company in Crimea should be benefiting from the provision of any service from a U.S. person or U.S. company.  This means that companies like Visa and MasterCard can no longer provide payment services to merchants in Crimea.  It also means that U.S. citizens or permanent residents residing in Crimea are no longer permitted to be employed in Crimea (i.e., exporting their U.S.-origin services to their Crimean employers).

What does the prohibition against approval, financing, facilitation, or guarantee of a transaction involving Crimea mean?

The approval, financing, facilitation, or guarantee by a United States person, wherever located, of a transaction by a foreign person where the transaction by that foreign person would be prohibited by this section if performed by a United States person or within the United States is prohibited.  In essence, this means that someone subject to the jurisdiction of the United States cannot in any way be involved in facilitating a transaction between a foreign person (not subject to the jurisdiction of the United States) and Crimea if that transaction would be prohibited if performed directly by the U.S. person.

For example, a U.S. exporter of goods who is no longer permitted to export those goods to Crimea cannot introduce his former Crimean customer to a foreign company exporting the same goods.  Nor can the U.S. exporter earn a commission for referring the Crimean customer to a foreign exporter of such goods.  This prohibition is designed to isolate Crimea from the benefit of any direct or indirect commercial interaction with the United States or any business or person subject to the jurisdiction of the United States.

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