2022 Global Sanctions Updates: Navigating sanctions landscape

This article highlights key sanctions issued by global regulatory bodies, the United States (US), the European Union (EU), and the United Kingdom (UK), between February 2022 and October 2022. Significant global economic impact arises as a result of the imposition of sanctions on essential Russian economic sectors including; finance, energy, technology, and transportation in response to the ongoing geopolitical issue in Russia and Ukraine. Additionally, we note sanction changes relevant to Belarus, North Korea, and Iran.

The US and EU imposed sanctions on Russian Federation President Vladimir Putin and key members of the Russian government responsible for the destabilization activities in Ukraine

The US and EU designated Vladimir Vladimirovich Putin - the President of the Russian Federation and the head of Russia’s Security Council. Four individuals, Vladimir Sivkovich (Sivkovich) the former Deputy Secretary of the Ukrainian National Security and Defense Council, and Volodymyr Oliynyk (Oliynyk), engaged in the Russian government's direct influence of activities to destabilize Ukraine were designated by OFAC. Additional OFAC sanction designations were imposed on 12 members of the Russian Security Council, oligarchs linked to the Kremlin, 351 members of the Russian State Duma, numerous Russian defense companies, and the head of Russia’s largest financial institutions.

The US, EU, and UK impose combined sanctions on Russia’s largest banks and disconnect from the SWIFT network 

In a coordinated effort, the US with international allies, the EU and UK have taken unprecedented action against Russia’s largest financial institutions, imposing sweeping sanctions on Public Joint Stock Company Sberbank of Russia (Sberbank), VTB Bank Public Joint Stock Company (VTB Bank), Joint Stock Company Alfa-Bank (Alfa-Bank) and Credit Bank of Moscow. On a daily basis, Russian financial institutions conduct approximately $46 billion worth of foreign exchange transactions globally, 80 percent of which are in US dollars. This action creates severe economic costs to Russia.

From a US perspective, all US financial institutions maintaining correspondent banking accounts for the designated banks are required to exit those relationships, pursuant to Executive Order (E.O.) 14024 “Blocking Property With Respect To Specified Harmful Foreign Activities of the Government of the Russian Federation”.

Furthermore, the EU in coordination with the UK, US, and Canada imposed sanction restrictions on several Russian and Belarus banks from facilitating financial transactions via the SWIFT network. These actions further hold Russia accountable for its unprovoked war against Ukraine.

Treasury targets the world’s largest diamond mining company & Russia’s biggest shipbuilding company

OFAC issued sanctions on Public Joint Stock Company Alrosa, a Russian state-owned enterprise (SOE) and the world’s largest diamond mining company. In 2021 Russia generated revenues totaling over $4.5 billion from diamond exports, one of Russia’s top ten non-energy exports. Additionally, United Shipbuilding Corporation (USC) a major Russian SOE responsible for developing and building the Russian Navy’s warships was sanctioned by OFAC including 28 subsidiaries and eight board members. These sanctions significantly impact Russia’s commodity and mining sector, further restricting Russia’s access to the global economy.

Treasury Sanctions Russia-Based Hydra, World’s Largest Darknet Market, and Ransomware-Enabling Virtual Currency Exchange Garantex

OFAC designated 21 entities and 13 individuals as part of its crackdown on Russia's sanctions evasion networks and technology companies, which have been instrumental to the Russian Federation’s regime. This action was enhanced by international cooperation with the German Federal Criminal Police, which shut down Hydra servers in Germany and seized $25 million worth of bitcoin.

Global combined sanction restrictions on the import of Russian gold

Following the G7’s summit in June, the UK and US have taken unified measures to weaken Russia’s ability to finance the war on Ukraine by restricting the new export of Russian-origin gold. Russia can no longer benefit from the billions of gold-related revenues garnered through its international commodity trade, mainly from the UK generating over $15.45 billion in gold export. Similarly, pursuant to E.O. 14068, the importation of gold of Russian Federation origin into the US is prohibited, except to the extent provided by law, or unless licensed or otherwise authorized by OFAC. The EU, Canada, and Japan have taken similar measures by imposing asset freezes and restrictions on gold imports from Russia. 

G7 implements a price cap on Russian origin crude oil

G7 countries and allies have agreed on the restrictions of the purchase of Russian origin crude oil and petroleum products unless priced at or below a price determined by the countries implementing the price cap. The enforcement of this price cap prohibits services and maritime transportation of Russian oil and products, to discourage Russia’s use of nuclear weapons and military reserve assets in its war against Ukraine.

EU issues the 8th package of Russian related sanctions

The EU designated and issued asset freezes on individuals for involvement in Russia's illegal annexation of Ukraine, the spreading of disinformation about the war, a new ban on steel products, machinery, and products used in the jewelry industry. Additional restrictions have been imposed on the maritime transport of crude oil and petroleum products, the aviation sector, legal and IT consulting services to the Government of Russia, and a ban on crypto asset wallets, account or custody services to Russian persons and residents.

The UK expands financial and trade sanctions against Russia

To further its policy of ensuring peace, territorial integrity, and sovereignty for Ukraine, the UK expands restrictions including dealings in securities, lending activities, oil production, and mining equipment. Additional sanctions targeting advertising services to persons connected with Russia and senior commanders of Russian military forces have been imposed.

EU issues the 9th package of Russian-related sanctions

In response to the continued aggression and inhumane acts against the people of Ukraine, the EU imposed new sanctions on exports of dual-use goods and technology connected to Russia. This package includes asset freezes on a list of entities and individuals, restrictions on investments in the Russian Energy/Mining sectors, the addition of Russian Regional Development Bank to the list of prohibited entities, and the imposition of a no-fly zone over the union.

Global sanction regimes target Belarus's support of the Russian invasion of Ukraine

US and international allies have imposed sanctions on Belarus including key officials and entities, impacting several sectors of the Belarus economy attributable to its support of Russia’s war and invasion of Ukraine. A range of trade and embargo prohibitions related to imports of goods and technology, restrictions on air travel, no-fly zones over the UK, and financial sanctions related to debt, securities, money market, credit, foreign exchange activities involving Belarusian entities and officials of Belarus Ministry of Finance and the Central Bank of Belarus, have been implemented.

U.S. Treasury issues sanctions on a Virtual Currency Mixer, in response to DPRK Cyber Threats and connections to Russian malign ransomware groups

Virtual currency mixer Blender.io (Blender), utilized by Lazarus Group, a Democratic People’s Republic of Korea (DPRK) cyber hacking group, to facilitate malicious cyber activities and launder stolen virtual currency, was sanctioned by OFAC. Blender engaged in processing over $20.5 million of the illicit proceeds, in order to obfuscate the origin, destination, and counterparties involved in the largest virtual currency heist to date, worth almost $620 million, from a blockchain project connected to the online game Axie Infinity. Furthermore, Blender’s process of mixing transactions, both illicit and licit funds,  prior to transmission to its ultimate destination has created avenues to facilitate money laundering for Russian-linked ransomware groups, subject to OFAC sanctions.

OFAC sanctions an international network of companies for violation of Iran oil export restrictions

Pursuant to E.O. 13846, the OFAC imposed sanctions on Iranian brokers and several other companies involved in the export of Iranian petrochemicals to South and East Asia. Several Iranian brokers and front companies located in Hong Kong, India, and the UAE facilitated the transfer and shipment of Iranian petrochemical products to Asia. The US has utilized sanction measures to discourage Iran’s continued use of nuclear weapons and enforce pressure on Iran to return to the Joint Comprehensive Plan of Action (JCPOA) under which Iran agreed to eliminate or reduce its nuclear program.

In today’s changing global sanctions landscape, financial institutions are under significant regulatory scrutiny to ensure daily operations are in compliance with regulatory requirements. We leverage our strong skill sets in the sanctions compliance space to help financial institutions:

1. Design and enhance compliance programs, sanctions screening procedures, and processes 
2. Develop operational Know Your Customer (KYC) procedures, conduct due diligence to  identify beneficial owners, which is of key importance with the newly designated parties particularly related to Russia and Belarus sanctions, 
3. Identify sanctions violation red flags and conduct efficient screening leveraging innovative technology solutions in order to protect against potential sanctions violations.

Sanctions violations can be costly, however, with robust compliance programs and effective screening solutions in place, financial institutions can mitigate the risks of fines, and meet regulatory requirements and client expectations globally.