On April 6th, 2018, the Office of Foreign Asset Control (OFAC) made a controversial decision in designating seven Russian oligarchs and 12 companies that they own or control. This included Oleg Deripaska, who was designated under Executive Order 13661 for acting on behalf of the Russian government, being a close ally of President Putin, and for accusations of money laundering, corruption, extortion and racketeering, and bribery.

Mr. Deripaska is a Russian oligarch with ties to various multinational business entities, particularly in the aluminum industry. Various businesses that he held majority ownership in, including the EN+ Group, EuroSibEnergo, and Rusal, were designated by OFAC. This led to turbulent aluminum markets and backlash with the international business community.

The Barker Plan

Many thought that these sanctions were too broad and too abrupt, and it is apparent that Deripaska and his companies quickly attempted to cooperate with OFAC to remove themselves from the SDN list. Within a few months, the Barker Plan was formulated. This plan allowed the companies to be removed from the SDN list if Deripaska’s ownership was reduced to less than 50%.

The deal also included certain oversight by US persons and compliance measures to ensure Mr. Deripaska did not retain ownership and control. Bipartisan opposition to this plan grew due to the Special Council Investigation into Trump campaign ties to the Russian government, as well as a lack of familiarity with effective sanctions policy.

With the underlying reasons for designation being Deripaska’s ownership and control of these entities, his ownership was substantially reduced to under 50 percent, and certain extra measures were put in place. His voting rights in the EN+ Group were reduced substantially, and a new independent board of directors was put into place. The underlying reasons for the designation were eliminated, but US politicians still broadly opposed removing the entities from the SDN list.

Congress Votes on Sanction Removal

OFAC stated that certain measures for auditing, certification, or reporting were put in place as a requirement for the agreement through the Barker Plan, and that OFAC was going to continue to monitor and source the terms of removal for these entities. The Department of Treasury’s Office of Foreign Asset Control provided this information in detail to Congress when it came time to vote on the removal of the sanctions.

The Senate voted 53:47 on allowing OFAC’s removal of sanctions to proceed, while the House voted 362:53 on January 17th against the easing of these sanctions. This was a rebuke of the Trump administration in a bipartisan manner, but due to the Senate’s vote, it ultimately failed.

Recent Developments

At this point, these companies, including Rusal and EN+, will be removed from the SDN list. Although US persons should still be diligent in their business dealings, transactions with these companies will be permitted after they are removed from the SDN list. However, it is important to keep up to date with any further designations for companies in the aluminum industry or in Russia.

Russian Financial Society Designations

OFAC designated a Russian financial institution for facilitating transactions for the benefit of North Korean persons and entities. It was determined that Russian Financial Society was providing support to Dandong Zhongsheng, an entity controlled by North Korea’s foreign exchange bank. Russian Financial Society created a bank account for the designated entity in violation of US and UN sanctions.

Previously, in August 2018, Agrosoyuz Commercial Bank was designated facilitating transactions and providing financial services to an individual designated under the North Korea sanctions regime. The Russian financial institution is now on the STN list, which means that all dealings with this entity by US and non-US persons are prohibited.

It is important for persons and entities engaged in business in Russia, specifically with the Russian Financial Society, to evaluate their business transactions and take the necessary steps to wind down their dealings. Failure to comply with the sanctions regime could potential blockings by OFAC.

How an OFAC Attorney Could Help

If a person or company continues to have ties with the designated entities, they should consider consulting with sanctions counsel. Knowledgeable OFAC attorneys could make sure there are no violations of US sanctions in the past or future and keep a company up-to-date on sanctions compliance measures.