On November 21, 2024, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) imposed sanctions on Gazprombank, the last largest Russian financial institution that remained unsanctioned, as well as other small-to-medium Russian banks, corporate securities registrars, and finance officials. OFAC also issued an alert on the risks of joining Russia’s System for Transfer of Financial Messages.

Gazprombank and other sanctioned persons

OFAC designated Gazprombank for operating or having operated in the financial services sector of Russia’s economy pursuant to Executive Order (EO) 14024.¹  OFAC also designated six of its foreign subsidiaries (namely, those in Luxembourg, Hong Kong, Cyprus, Switzerland, and South Africa) for being owned or controlled by, or for having acted or purported to act for or on behalf of Gazprombank.

Furthermore, OFAC designated the following entities and individuals for operating or having operated in the financial services sector of Russia’s economy pursuant to EO 14024:

• Over 50 small-to-medium Russian banks headquartered in various Russian cities;
• Over 40 local Russian registrars to where corporate securities previously held at the National Settlement Depository (a blocked person since June 12, 2024) in Russia were transferred pursuant to the Russian Decree 840; and
• Russian Central Bank officials.

As a result of these designations, the property and interests in property within US jurisdiction of the sanctioned entities and individuals (as well as entities owned 50% or more by such sanctioned persons) are blocked (frozen), and US persons are prohibited from doing business with them. Non-US persons are also prohibited from causing or conspiring to cause US persons to violate US sanctions, as well as from engaging in conduct that supports evasion of US sanctions.

OFAC reminded foreign financial institutions (FFIs) that continuing to maintain correspondent relationships with the sanctioned banks entails significant sanctions risk. In addition, it clarified that any securities in the possession or control of US persons held at the sanctioned registrars, as well as any income received via the registrars, should be treated as blocked.

The US issued limited authorizations related to the newly designated banks, including authorizing the wind down of transactions and exiting of relationships with the entities until December 20, 2024.

New guidance for FFIs

Additionally, OFAC published an alert for FFIs warning about the sanctions risks of joining the Russian financial messaging system “System for Transfer of Financial Messages” (Sistema Peredachi Finansovykh Soobscheniy or SPFS).² The Russian Central Bank designed SPFS as an alternative to the Society for Worldwide Interbank Financial Telecommunication (SWIFT) network in 2014.

OFAC explained that any FFI that joins or has already joined SPFS may be designated for operating or having operated in the financial services sector of the Russian economy pursuant to EO 14024.

OFAC highlighted that it views joining SPFS as a “red flag” and will more aggressively target FFIs that do so. Further, OFAC cautioned FFIs about their exposure to institutions that have joined SPFS, as such banks may be conduits for Russian sanctions evasion.

In addition, OFAC reminded FFIs of its authority to sanction FFIs that conduct or facilitate any significant transaction(s) or provide any service involving Russia’s military-industrial base, which can include persons that support the sale, supply, or transfer of certain critical items to Russia.

Dentons will continue to monitor these developments and provide updates.

1. Australia, Canada, New Zealand, and the United Kingdom have previously sanctioned Gazprombank. ↩
2. The European Union imposed sanctions on SPFS in June 2024. ↩