The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced a significant new set of sanctions aimed at Russia’s financial network. This action is part of the ongoing efforts to enforce commitments made by G7 leaders to prevent Russia from using the global financial system to support its military aggression in Ukraine. The sanctions announced today target key Russian financial institutions and individuals, alongside a warning regarding Russia’s alternative financial messaging system, SPFS, which it has been using to bypass international sanctions.
Key Actions Taken by OFAC:
- Gazprombank Designation:
- OFAC has sanctioned Gazprombank, one of Russia’s largest banks that has remained outside prior sanctions. The bank is a critical player in facilitating Russia’s ability to purchase military materials and pay soldiers, including combat bonuses and compensation to the families of those killed in the war against Ukraine.
- This designation also extends to Gazprombank’s six foreign subsidiaries operating in Luxembourg, Hong Kong, Cyprus, Switzerland, and South Africa. These subsidiaries have been used as financial conduits for Gazprombank’s operations, allowing the Russian government to bypass restrictions.
- This move adds pressure on Russia by isolating its financial capabilities, particularly in the critical banking sector. The U.S. will block any assets held by Gazprombank in the U.S., and further actions will be taken against entities indirectly owned by the bank.
- General Licenses and Authorizations:
- In addition to the sanctions, OFAC issued two general licenses that provide U.S. persons with a wind-down period for transactions involving Gazprombank and similar financial institutions. These licenses allow for transactions to be concluded or for investments in Gazprombank to be divested, but they do not offer blanket exemptions.
- OFAC also amended Russia-related General License 53, ensuring that diplomatic transactions involving Gazprombank continue without disruption, especially for foreign embassies and international organizations.
- SPFS (System for Transfer of Financial Messages):
- OFAC issued an alert regarding Russia’s SPFS, a messaging system developed by the Kremlin to replace SWIFT for transferring financial messages. The SPFS system allows Russian financial institutions to continue to operate despite global sanctions by maintaining communication with international financial systems, circumventing the widespread use of SWIFT, which Russia was previously cut off from.
- OFAC warns foreign financial institutions that joining or being involved in SPFS could lead to sanctions under Executive Order 14024, which targets those operating in Russia’s financial sector. The U.S. government views SPFS as an active measure used by Russia to evade sanctions and finance its war. The alert serves as a red flag for international banks considering joining the network.
- Additional Designations of Russian Banks:
- Over 50 small-to-medium-sized Russian banks were also sanctioned, which further isolates Russia’s financial system. These banks are primarily involved in facilitating transactions for Russian entities, including for the military. OFAC emphasizes that foreign institutions maintaining correspondent relationships with these banks are at significant risk of violating U.S. sanctions.
- This move aims to prevent Russia from accessing the global financial system and further isolates it from international financial markets.
- Russian Securities Registrars:
- OFAC designated more than 40 Russian securities registrars involved in the country’s efforts to sidestep sanctions on securities, particularly those related to the National Settlement Depository, a key institution in Russia’s financial infrastructure. Russian President Putin’s decree required some securities to be transferred to these registrars, effectively circumventing Western sanctions.
- These designations will make it more difficult for Russia to maintain its financial markets and execute transactions without detection by U.S. authorities.
- Russian Central Bank (CBR) Officials:
- OFAC sanctioned 11 additional officials from the Central Bank of the Russian Federation (CBR). These individuals are part of Russia’s financial technocracy and have been facilitating or enabling Russia’s war effort by supporting or establishing alternative financial mechanisms to bypass sanctions and ensure Russia has access to the necessary resources for its military aggression.
- This follows previous sanctions on CBR leadership, including Governor Elvira Naibullina and Deputy Governor Olga Skorobogatova, who were designated in September 2022. The latest round targets those who are directly linked to maintaining Russia’s international financial connections or promoting financial systems designed to fund its military needs.
- Designations of Russian Bank Officials in Foreign Branches:
- OFAC also targeted Russian officials working at Russian banks’ foreign branches, including staff from VTB Bank in Shanghai and Sberbank in New Delhi. These individuals are being designated for their involvement in operations that support Russia’s financial network and military efforts.
- The individuals named in this action are involved in maintaining relationships with foreign financial institutions and ensuring that Russia continues to operate within the global banking system despite sanctions.
Impact of Sanctions:
- The sanctions are designed to tighten the financial noose around Russia, further restricting its access to international capital and increasing the economic cost of its war in Ukraine. By targeting Russia’s largest remaining financial institutions and key officials, these measures aim to disrupt the flow of funds that Russia needs to sustain its military operations.
- The designation of Gazprombank and other financial institutions makes it more difficult for Russia to procure military supplies and pay its soldiers, which could directly impact the Russian war effort.
- The U.S. government’s continuous efforts to isolate Russian financial systems will force Russia to seek alternative, often riskier, methods to fund its activities. These sanctions send a clear message to international institutions that facilitating Russia’s financial activities will expose them to penalties under U.S. law.
- The alert on SPFS further signals U.S. intent to monitor and aggressively target foreign financial entities that engage with Russia’s alternative financial infrastructure.
Banks
- Aktsionernoe Obshchestvo Bank Agroros is a bank headquartered in Saratov, Russia.
- Bank Iturup LLC is a bank headquartered in Yuzhno-Sakhalinsk, Russia.
- BBR Bank Joint Stock Company is a bank headquartered in Moscow, Russia.
- BCS Bank AO is a bank headquartered in Moscow, Russia.
- Bratsky Narodny Bank JSC is a bank headquartered in Bratsk, Russia.
- Centrocredit Bank is a bank headquartered in Moscow, Russia.
- Commercial Bank Energotransbank Joint Stock Company is a bank headquartered in Kaliningrad, Russia.
- Commercial Bank Khlynov Joint Stock Company is a bank headquartered in Kirov, Russia.
- Commercial Bank Kremlyovskiy is a bank headquartered in Moscow, Russia.
- Commercial Joint Stock Bank Viking is a bank headquartered in Saint Petersburg, Russia.
- Corporate Finance Bank LLC is a bank headquartered in Moscow, Russia.
- Evrofinance Mosnarbank is a bank headquartered in Moscow, Russia. Evrofinance Mosnarbank was previously designated pursuant to E.O. 13850.
- Fora Bank Joint Stock Commercial Bank is a bank headquartered in Moscow, Russia.
- Garant Invest Bank Joint Stock is a bank headquartered in Moscow, Russia.
- Interstate Bank is a bank headquartered in Moscow, Russia.
- Joint Stock Commercial Bank National Reserve Bank Joint Stock Company (NRB)is a bank headquartered in Moscow, Russia. Daniel Haindl (Haindl) is the Senior Vice President of NRB. In his role at NRB, Haindl has been involved in a sanctions evasion scheme.
- Joint Stock Commercial Bank Slavia Joint Stock Company is a bank headquartered in Moscow, Russia.
- Joint Stock Commercial Mortgage Bank Akibank Public Joint Stock Company is a bank headquartered in Naberezhnye Chelny, Russia.
- Joint Stock Company Auto Finance Bank is a bank headquartered in Moscow, Russia.
- Joint Stock Company Bank Accept is a bank headquartered in Novosibirsk, Russia.
- Joint Stock Company Bank Dom RF is a bank headquartered in Moscow, Russia.
- Joint Stock Company Bank Finservice is a bank headquartered in Moscow, Russia.
- Joint Stock Company Bank United Capital is a bank headquartered in Saint Petersburg, Russia.
- Joint Stock Company Coalmetbank is a bank headquartered in Chelyabinsk, Russia.
- Joint Stock Company Commercial Bank Ural FD is a bank headquartered in Perm, Russia.
- Joint Stock Company Guta Bank is a bank headquartered in Moscow, Russia.
- Joint Stock Company NS Bank is a bank headquartered in Moscow, Russia.
- Joint Stock Company Public Trust Bank is a bank headquartered in Moscow, Russia.
- Joint Stock Company Royal Credit Bank is a bank headquartered in Vladivostok, Russia.
- Joint Stock Company Severgazbank is a bank headquartered in Vologda, Russia.
- Joint Stock Investment Commercial Bank Eniseisk United Bank is a bank headquartered in Krasnoyarsk, Russia.
- JSC Exi Bank is a bank headquartered in Saint Petersburg, Russia.
- JSCB Energobank is a bank headquartered in Kazan, Russia.
- Kamsky Commercial Bank is a bank headquartered in Naberezhnye Chelny, Russia.
- Limited Liability Company Bank Orange is a bank headquartered in Saint Petersburg, Russia.
- Limited Liability Company Bank Round is a bank headquartered in Moscow, Russia.
- Limited Liability Company Krona Bank is a bank headquartered in Irkutsk, Russia.
- MB Bank is a bank headquartered in Moscow, Russia.MB Bank, also known as Mir Business Bank, is the Russia-based wholly-owned subsidiary of Iran’s Bank Melli Iran. MB Bank was previously designated previously designated pursuant to E.O. 13224 and E.O. 13582.
- National Standard Bank Joint Stock Company is a bank headquartered in Moscow, Russia.
- New Moscow Bank is a bank headquartered in Moscow, Russia.
- NK Bank Joint Stock Company is a bank headquartered in Moscow, Russia.
- Primorsky Territorial Commercial Bank Society with Limited Liability is a bank headquartered in Vladivostok, Russia.
- Public Joint Stock Commercial Bank Derzhava is a bank headquartered in Moscow, Russia.
- Public Joint Stock Company Bank Alexandrovsky is a bank headquartered in Saint Petersburg, Russia.
- Public Joint Stock Company Bank Sinara is a bank headquartered in Yekaterinburg, Russia.
- Public Joint Stock Company Finstar Bank is a bank headquartered in Saint Petersburg, Russia.
- Public Joint Stock Company Metkombank is a bank headquartered in Kamensk-Uralskiy, Russia.
- Public Joint Stock Company National Bank Trust is a bank headquartered in Moscow, Russia.
- Public Joint Stock Social Commercial Bank of Primorye Primsotsbank is a bank headquartered in Vladivostok, Russia.
- Rossita Bank is a bank headquartered in Moscow, Russia.
- Russian Public Joint Stock Commercial Roads Bank is a bank headquartered in Moscow, Russia.
- Russian Universal Bank is a bank located in Moscow, Russia.
- Vitabank PJSC is a bank headquartered in Podolsk, Russia.
- Waybank JSC is a bank headquartered in Moscow, Russia.
