Crimea Region Sanctions SDN List and Blocked or Frozen Assets

Do the sanctions targeting the Crimea region of Ukraine have a blocking, frozen asset, or SDN component?

Yes. Section 2 of Executive Order 13685 (pdf) establishes a blocking, frozen asset, or SDN component of the sanctions targeting the Crimea region of Ukraine.  SDN stands for Specially Designated National and Blocked Persons, and refers to the list of nationals and persons specifically designated by the U.S. government whose property and interests in property are blocked or frozen.

Any person determined by the Secretary of the Treasury, in consultation with the Secretary of State:

• To operate in the Crimea region of Ukraine;
• To be a leader of an entity operating in the Crimea region of Ukraine;
• To be owned or controlled by, or to have acted or purported to act for or on behalf of, directly or indirectly, any person whose property and interests in property are blocked pursuant to this order; or
• To have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, any person whose property and interests in property are blocked pursuant to this order.

The four categories above create very broad and general grounds for placing people on the SDN List.  For example, simply operating in the Crimea region of Ukraine can subject a person to the devastating effects of being placed on the SDN List.  Furthermore, being a leader of any entity operating in the Crimea region of Ukraine can also subject that person to being placed on the SDN List.

Fortunately, for those people living and working in Ukraine, being placed on the SDN List is not automatic.  Most people who operate or are leaders of entities in Crimea will not be placed on the SDN List.  To be placed on the SDN List the Secretary of the Treasury (through OFAC) must actively designate the person.  Such designation will presumably be made pursuant to U.S. foreign policy and national security objectives as they relate to the crisis in Ukraine.

What’s the difference between a person who is simply present in Crimea and a person who is designated as an SDN from Crimea?

U.S. persons are prohibited from transacting with people and entities located in the Crimea region of Ukraine.  This means that any attempted transaction with such a person must be rejected or turned down.  In contrast, if the person is designated pursuant to Section 2 of Executive Order 13685, U.S. persons are legally obligated to freeze any property or interests in property that are in the United States, that hereafter come within the United States, or that are or hereafter come within the possession or control of any United States person.

For example, a shipment of goods from the United States to a non-listed person in Crimea must be rejected and sent back to the sender.  A shipment of goods from the United States to a Crimea-related SDN must be blocked or frozen, and a subsequent report detailing the circumstances of the blocked property must be filed with OFAC.  In addition, the blocking provisions associated with a person designated as an SDN are applicable even if the person is no longer located or residing in Crimea.  Such a person may want to seek the assistance of counsel and request removal from the SDN List.