Sanctions Tracker – Further U.S. Responses to the Crisis in Ukraine

On June 9, 2022, the Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) published new guidance, which clarifies the scope of certain restrictions, pursuant to Executive Order (“E.O.”) 14071.

E.O. 14071 sets forth a framework for the Secretary of the Treasury to impose sanctions on the provision of certain categories of services to any person located in Russia. On May 8, 2022, OFAC issued a “Determination,” which provides that E.O. 14071 now prohibits “the exportation, reexportation, sale, or supply, directly or indirectly, from the United States, or by a United States person, wherever located, of accounting, trust and corporate formation, or management consulting services to any person located in the Russian Federation.”

OFAC’s new guidance clarifies the scope of these prohibitions. In particular, OFAC issued the following new Frequently Asked Questions (“FAQs”).

• FAQ 1068 clarifies that U.S. persons, wherever located, are prohibited from exporting, reexporting, selling, or supplying, directly or indirectly, “accounting services,” which includes tax preparation and filing services, to any person located in Russia, unless authorized by OFAC.
• FAQ 1067 provides that the Determination does not prohibit U.S. persons from exporting, reexporting, selling, or supplying, directly or indirectly, software to Russia. The Determination also generally does not prohibit U.S. persons from providing services associated with the export of such software, such as software design and engineering, provided that such associated services do not fall within the categories of “management consulting,” “accounting,” or “trust and corporate formation.”
• FAQ 1066 provides that the Determination generally does not prohibit the provision of educational services, such as online university courses, on the subjects of accounting, management consulting, or trust and corporate formation to persons located in Russia.
• FAQ 1065 clarifies that the Determination prohibits U.S. persons from serving as voting trustees on behalf of, or for shares of, persons located in Russia, unless authorized by OFAC.
• FAQ 1064 states that OFAC interprets the term “management consulting services” to include “services related to strategic business advice; organizational and systems planning, evaluation, and selection; development or evaluation of marketing programs or implementation; mergers, acquisitions, and organizational structure; staff augmentation and human resources policies and practices; and brand management.”
• FAQ 1063 clarifies that the Determination does not distinguish between new and existing trusts and companies. Accordingly, U.S. persons are prohibited from providing trust and corporate formation services to persons located in Russia, regardless of whether the services are performed as part of the formation of a new trust or company, or as part of the administration or maintenance of an existing trust or company.
• FAQ 1062 clarifies that the prohibitions outlined in the Determination apply to services provided to a parent company located in Russia by its U.S. subsidiary.
• FAQ 1061 explains that the prohibitions outlined in the Determination do not necessarily prohibit U.S. persons from working as employees of entities located in Russia. However, in their capacity as employees, U.S. persons are prohibited from providing management consulting, trust and corporate formation services, and accounting services to companies located in Russia.
• FAQ 1060 clarifies that the Determination does not necessarily prohibit U.S. persons from serving as directors of companies located in Russia. However, the Determination prohibits U.S. persons from providing nominee officer or director services in which a U.S. person is contracted to serve as a nominee officer, director, shareholder, or signatory of a legal person on behalf of a person located in Russia.
• FAQ 1059 states that the Determination does not prohibit U.S. persons from providing services to persons located outside of Russia, that are owned or controlled by persons located in Russia, provided that the provision of services is not an indirect export to a person located in Russia. FAQ 1059 further states, “OFAC interprets the ‘indirect’ provision of the prohibited services to include when the benefit of the services is ultimately received by a ‘person located in the Russian Federation.’”
• FAQ 1058 clarifies that OFAC interprets the term “person located in the Russian Federation” to include “persons in the Russian Federation, individuals ordinarily resident in the Russian Federation, and entities incorporated or organized under the laws of the Russian Federation or any jurisdiction within the Russian Federation.”

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