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December 28, 2023

Biden Administration Grants Treasury Department New Authority to Target Foreign Financial Institutions Facilitating Russian Military-Industrial Base


On December 22, President Biden signed an Executive Order (E.O.) granting the U.S. Department of the Treasury (Treasury Department) additional authority to impose sanctions on foreign financial institutions (FFIs) that directly or indirectly aid Russia’s military-industrial base. The E.O., titled “Executive Order on Taking Additional Steps With Respect to the Russian Federation’s Harmful Activities,” amends existing E.O.s targeting certain sectors of Russia’s economy in light of its ongoing war against Ukraine, E.O. 14024 and E.O. 14068.

Alongside the E.O., the Treasury Department’s Office of Foreign Assets Control (OFAC) published several new measures implementing its new authority to target FFIs, discussed in further detail below. Together with the E.O., these new measures send a clear message to FFIs that they may face sanctions for conducting or facilitating transactions involving Russia’s military-industrial base.

In the Treasury Department’s press release announcing the new actions, Treasury Secretary Janet Yellen cautioned that the Treasury Department “expect[s] financial institutions will undertake every effort to ensure that they are not witting or unwitting facilitators of circumvention and evasion” and “will not hesitate to use the new tools provided by this authority to take decisive, and surgical, action against financial institutions that facilitate the supply of Russia’s war machine.”

FFIs, including U.S. banks with foreign affiliates, should carefully review OFAC’s new actions and corresponding guidance given OFAC’s ongoing and seemingly heightened commitment to scrutinizing financial transactions involving Russian individuals and entities.

“Secondary Sanctions” Authorized by the New E.O.

The E.O. allows for the imposition of “secondary sanctions” on FFIs, which are intended to discourage persons outside of the United States’ jurisdictional reach from engaging in certain specified activities. In other words, OFAC can now sanction FFIs for facilitating transactions that support Russia’s military-industrial base, even if those transactions have no nexus to the United States.

More specifically, the E.O. grants the Treasury Department authority to impose sanctions on FFIs where FFIs are (1) facilitating significant transactions on behalf of persons designated for operating in certain key sectors of the Russian economy that support the country’s military-industrial base, including, for example, the technology, defense and related materiel, construction, aerospace, or manufacturing sectors (the Specific Sectors) or (2) facilitating significant transactions or providing services involving Russia’s military-industrial base, including those relating to specific manufacturing inputs and technological materials that Russia is seeking to obtain from foreign sources (the Specified Items).

The E.O. allows the Treasury Department to impose full blocking sanctions on, or prohibit or restrict the maintenance of correspondent accounts in the United States for, FFIs that run afoul of these restrictions. Importantly, the E.O. broadly defines “foreign financial institution” as any foreign entity that is engaged in the business of accepting deposits; making, granting, transferring, holding, or brokering loans or credits; purchasing or selling foreign exchange, securities, futures, or options; or procuring purchasers or sellers thereof, as principal or agent. The E.O. identifies several entities that would qualify as FFIs, including but not limited to depository institutions, banks, savings banks, insurance companies, securities brokers and dealers, investment companies, and employee benefit plans.

Additionally, separate from the new FFI-related sanctions, the E.O. grants the Treasury Department expanded authority to prohibit the importation of certain goods into the United States, such as Russian seafood and diamond products, even if they have been substantially transformed in third countries.

OFAC Measures Accompanying the New E.O.

The E.O. was accompanied by several OFAC actions, including the issuance of three Determinations pursuant to E.O.s 14024 and 14068, three General Licenses (GLs), twelve new and three amended Frequently Asked Questions (FAQs), and a Sanctions Advisory.

The three Determinations include:

  • A Determination pursuant to Section 11(a)(ii) of Executive Order 14024 (the Russia Critical Items Determination), identifying the Specified Items subject to the new restrictions identified in the E.O. These Specified Items include semiconductor and manufacturing equipment, certain electronic test equipment, and chemical precursors for propellants and explosives, among others.
  • A Determination pursuant to Section 1(a)(i)(B) of Executive Order 14068 (Prohibitions Related to Imports of Certain Categories of Fish, Seafood, and Preparations Thereof), prohibiting the importation into the United States of certain categories of fish or seafood from Russia, including where the fish or seafood has been incorporated or substantially transformed into another product outside of Russia
  • An amended Determination pursuant to Section 1(a)(i)(A) of Executive Order 14068 (Prohibitions Related to Imports of Gold of Russian Federation Origin (as Amended)), prohibiting the importation into the United States of Russian-origin gold, excluding gold of Russian-origin that was located outside of Russia prior to June 28, 2022

The new GLs include:

  • General License 83, authorizing certain transactions related to the importation into the United States of fish, seafood, or seafood-derivative products until February 21, 2024
  • General License 84, authorizing certain transactions related to closing a correspondent or payable-through account maintained by U.S. financial institutions for FFIs
  • General License 85, authorizing the wind down of transactions and the closure of accounts involving Expobank Joint Stock Company

OFAC also published several new and amended FAQs describing the contours of the new measures pursuant to the E.O. Those FAQs are available here: new FAQs 1146 through 1157 and amended FAQs 973, 1070, and 1126. Most notably, FAQ 1151 defines “significant transaction or transactions” for purposes of the new E.O. restrictions on FFIs. FAQ 1151 explains that OFAC will consider the “totality of the facts and circumstances” when determining whether a transaction involving the Specific Sectors or Specified Items is “significant,” such that the FFI would be exposed to secondary sanctions risk. Some of the factors OFAC may consider in that determination include the size, number, and frequency of the transaction(s); the nature of the transaction(s); the level of awareness of management and whether the transactions are part of a pattern of conduct; the nexus of the transaction(s) to persons sanctioned under E.O. 14024 or to persons operating in Russia’s military-industrial base; whether the transaction(s) involve deceptive practices; and the impact of the transaction(s) on U.S. national security objectives.

OFAC Guidance for Financial Institutions

Finally, along with the new authority, OFAC published a Sanctions Advisory that provides guidance to financial institutions on the new measures. In addition to laying out the general framework of the new restrictions on FFIs, the Sanctions Advisory provides examples of activities that could expose FFIs to sanctions risk pursuant to the new E.O. These activities include:

  • Maintaining accounts, transferring funds, or providing other financial services for any persons already designated for operating in the Specific Sectors
  • Maintaining accounts, transferring funds, or providing other financial services for any persons, whether inside or outside Russia, that support Russia’s military-industrial base, including those that operate in the Specific Sectors
  • Facilitating the sale, supply, or transfer, directly or indirectly, of the Specified Items to Russian importers or companies shipping Specified Items to Russia
  • Helping companies or individuals evade U.S. sanctions of Russia’s military-industrial base, including by facilitating alternative or non-transparent payment mechanisms, obscuring customer names or other relevant payment information, or otherwise concealing the purpose of transactions to evade sanctions

The Sanctions Advisory also outlines several recommendations for financial institutions to identify and mitigate sanctions risks. The advisory notes that these steps should be taken in conjunction with baseline customer due diligence procedures and other anti-money laundering (AML) controls. OFAC recommends that financial institutions, among other safeguarding measures:

  • Review their customer base to determine exposure to customers who may be involved in the Specific Sectors or with the Specified Items
  • Communicate compliance expectations to customers, including advising customers on the sanctions restrictions
  • Take appropriate mitigation measures for customers or counterparties engaged in high-risk activity, including restricting accounting, limiting permissible activity, and placing customers on watchlists
  • Incorporate risks related to Russia’s military-industrial base into sanctions risk assessments and customer risk rating criteria
  • Implement enhanced trade finance controls related to the Specified Items

Further, the Sanctions Advisory directs FFIs to one of OFAC’s previously-published guidance documents, “A Framework for OFAC Compliance Commitments.”1 This framework sets forth several expectations and best practices for effective risk-based sanctions compliance programs. The framework encourages financial institutions to adopt certain safeguarding measures including, but not limited to, conducting training on sanctions risk and common red flags, ensuring effective reporting mechanisms are in place and promoting a “culture of compliance,” and communicating effectively and efficiently with U.S. and other correspondent banks on due diligence expectations and requests for information.


Financial institutions, both FFIs and U.S. entities with foreign affiliates, should remain vigilant in the wake of the new E.O. and OFAC’s new actions. These actions underscore the importance of global and robust risk-based sanctions compliance programs and reporting mechanisms. Financial institutions should carefully review OFAC’s new measures and consider whether their existing compliance programs adequately capture the safeguarding measures identified by OFAC.

Financial institutions seeking advice on sanctions compliance requirements and processes, or seeking assistance in responding to an OFAC investigation, are encouraged to contact any of the authors of this Advisory or their usual Arnold & Porter contact.

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On February 8, 2024, from noon to 2 p.m. EST, please join Arnold & Porter for our annual discussion of regulatory and enforcement trends in the year ahead for AML and sanctions, drawing on insight and experiences from attorneys in our Financial Services, White Collar Defense & Investigations, Anti-Corruption, Securities & Enforcement, and Litigation practices. Discussion topics will include the Treasury Department’s new authority to target foreign financial institutions, regulatory compliance challenges in 2024, trends and predictions in global enforcement and investigations, changes in the sanctions landscape, and much more. Register for the webinar here.

© Arnold & Porter Kaye Scholer LLP 2023 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.

  1. Arnold & Porter previously authored an Advisory on this framework when it was first published by OFAC in 2019.