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The Department of the Treasury’s Office of Foreign Assets Control (OFAC) has designated 21 entities and 13 individuals as part of a crackdown on Kremlin illicit procurement networks and tech companies who are helping fuel the conflict in Ukraine by evading US sanctions.
With this latest batch of designations, OFAC is now focusing on the challenging job of enforcing sanctions – essentially using sanctions to enforce previous sanctions. Many of the entities targeted are front or shell companies based in other countries, used to procure equipment while sidestepping sanctions.
There is a particular focus on technology companies that are “instrumental to the Russian Federation’s war machine.” These include Serniya Engineering and Sertal, Moscow-based companies that are part of a procurement network accessing dual-use equipment and technology for Russia’s defense sector. Details from OFAC show how the network operates to obfuscate the Russian military and intelligence agency end-users that need western technology to operate.
“We will continue to target Putin’s war machine with sanctions from every angle, until this senseless war of choice is over,” Secretary of the Treasury Janet Yellen said.
Limiting Access to Western Technology
The US is also imposing sanctions on several technology companies that produce computer hardware, software and microelectronics that are used by Russia’s defense sector, in an attempt to limit Russian access to Western technology and the international financial system.
Among them are Joint Stock Company Mikron, Russia’s largest chip-maker, which exports more than 50% of Russian microelectronics; computer hardware firm T-Platforms; AO NII-Vektor, a Saint Petersburg-based software and communications tech company; and Molecular Electronics Research Institute (MERI), a research institute that makes computers, search and navigation equipment.
New Focus on Cybersecurity
Another focus for the new sanctions is cyber actors. While cyberattacks have arguably not featured as strongly in the Ukraine conflict so far as some analysts expected, these measures from the US show they remain a significant threat.
Earlier in April, Russia-based Hydra, the world’s largest darknet market, was sanctioned by OFAC, along with ransomware-enabling virtual currency exchange Garantex.
“The global threat of cybercrime and ransomware that originates in Russia, and the ability of criminal leaders to operate there with impunity, is deeply concerning to the United States,” said Secretary Yellen.
Further action has now been taken against employees at Russian research center TsNIIKhM, relating to a 2017 cyberattack on a petrochemical facility in the Middle East.
Further Sectors Could be Targeted
These latest sanctions freeze any assets held by the designees in the US and prohibit US entities conducting transactions with them. International sanctions by Western nations are thought to be crippling Russia’s economy.
OFAC has also extended sanctions pursuant to existing Executive Order 14024 to the aerospace, marine and electronics sectors. This enables the US to blacklist any person or entity operating in these sectors and paves the way for sanctions against further sectors.
A new round of sanctions has seen the US target Russia’s top public and private banks, along with
Vladimir Putin’s two daughters and Russian ministers and their families. “Full blocking” sanctions have been imposed on Sberbank and Alfa Bank, and all new US investment in Russia is now prohibited.
For compliance and sanctions teams, the renewed US focus on sanctions evasion is a reminder that assessing wider risk exposure to sanctioned Russian entities beyond direct clients is a major challenge. Teams need to monitor the increasing number of sanctions, ensure that they understand their firm’s risk exposure, and assess what staffing and resources may be needed to maintain compliance over the medium-to-long-term.
Keep up with the latest developments in Russia and Ukraine with our sanctions coverage.
Originally published April 8, 2022, updated May 6, 2022
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