On February 22, 2022, the Office of Foreign Assets Control (OFAC) extended sanctions against Russia by blocking sanctions against two major Russian public financial institutions, additional restrictions on Russian sovereign debt, sanctions against five elites linked to Putin / Kremlin and the designation of several ships. This follows the issuance of comprehensive sanctions on the territory recognized by Russia as the “independent states” of the Donetsk People’s Republic (DNR) and the Lugansk People’s Republic (LNR) (see February 22 update 2022) and the movement of Russian troops in these regions of Ukraine.

Designation of Russian financial institutions

OFAC has designated the Corporation Bank for Development and Foreign Economic Affairs Vnesheconombank (VEB) and Promsvyazbank Public Joint Stock Company (PSB), along with 42 of their subsidiaries, and placed them on the Specially Designated Nationals (SDN) list. OFAC said that the VEB is essential to Russia’s ability to raise funds and that the PSB is essential to the Russian defense sector. The OFAC press release also provided the following on these entities:

• VEB is one of the five major financial institutions in Russia and funds most of Russia’s national development projects. In partnership with commercial banks, VEB finances large-scale projects to develop the country’s infrastructure and industrial production. OFAC also sanctioned 25 of VEB’s subsidiaries that represent a wide range of businesses. Designated subsidiaries of VEB include the Eximbank of Russia.




• PSB is the eighth largest financial institution in Russia and is a major Russian state-owned financial institution. According to OFAC, Russia nationalized the PSB in 2018 and “reused it to fund the defense industry and service major defense contracts as part of a program to help the government avoid new penalties. OFAC notes that PSB currently serves nearly 70% of state contracts signed by the Russian Defense Ministry. OFAC also sanctioned 17 of PSB’s subsidiaries, including various companies in the financial, technology and real estate sectors.

Designation of Russian elites

OFAC also named and placed on the SDN list some members of Putin’s inner circle “supposed to participate in the kleptocracy of the Russian regime”. These people include:

• Denis Aleksandrovich Bortnikov, vice-president of the Russian public financial institution VTB Bank Public Joint Stock Company (VTB Bank), and son of Aleksandr Vasilievich Bortnikov, previously designated and listed on the SDN list, who is the director of the Federal Service of security (FSB).




• Petr Mikhailovich Fradkov, Chairman and CEO of PSB, and son of Mikhail Efimovich Fradkov, former Prime Minister of Russia and former Director of the Russian Foreign Intelligence Service (SVR).




• Vladimir Sergeevich Kiriyenko, CEO of VK Group (the parent company of Russia’s leading social media platform, VKontakte), and the son of Sergei Vladilenovich Kiriyenko who is the first deputy chief of staff in the presidential office.

Additionally, the aforementioned Aleksandr Vasilievich Bortnikov and Sergei Vladilenovich Kiriyenko have been redesignated in accordance with President Biden’s recent EO 14065. OFAC has further designated five vessels connected to the PSB.

A full list with further identifying details of VEB, PSB and each subsidiary listed on the SDN list as well as additional personal identifying information on listed individuals from Putin’s inner circle can be found here. With these designations on the SDN List, all assets and interests in assets of the persons and entities identified above that are in the United States or in the possession or control of U.S. Persons (or their foreign branches) are blocked and must be reported to OFAC. In addition, all entities owned, directly or indirectly, individually or collectively, 50% or more by one or more blocked persons are also blocked.

Unless authorized by a general or specific license issued by OFAC, or exempted, all transactions by U.S. Persons or within (or in transit through) the United States that involve property or interests in property of blocked are generally prohibited. Transactions with blocked persons may also trigger reporting requirements pursuant to 31 CFR §§ 501.603 and 501.604.

Sovereign Debt Restrictions

OFAC has also imposed restrictions on Russia’s sovereign debt transactions to further cut Russia off from sources of revenue to fund its government or President Putin’s priorities. According to OFAC, these restrictions “significantly cut off an essential means for Russia to raise funds. This type of measure creates a strain on the resources of the Russian state and an increased risk for its ability to manage its finances” . Specifically, OFAC issued Russia Directive 1A under EO 14024, “Prohibitions on Certain Sovereign Debts of the Russian Federation” which amends and replaces an earlier Directive 1 under EO 14024 issued on 15 April 2021. This replacement directive extends debt prohibitions to cover secondary market participation in bonds issued after March 1, 2022 by the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation or the Ministry of Finance of the Russian Federation.

OFAC General Licenses

Finally, OFAC has issued two General Licenses (GLs) to address certain aspects of these new sanctions and designations. General License 2 authorizes certain services of bonds involving VEB issued before March 1, 2022. General License 3 authorizes the liquidation of transactions involving VEB for transactions prohibited by these new sanctions; all now prohibited transactions that are ordinarily incidental and necessary to complete are permitted until March 24, 2022. No general license has been issued regarding the PSB.

OFAC has also published related FAQs to assist the financial services industry with compliance – see FAQ 964 and FAQ 965. And, where necessary, other Ukraine/Russia related FAQs have been updated.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.