Treasury Specifies “Services” Prohibited for Export to Russia under Executive Order 14071

Date: 05/09/2022

On May 8, 2022, the Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) issued a determination pursuant to Executive Order (“EO”) 14071. The determination specifies that the provision of the following activities to any person in Russia are prohibited: accounting services, trust and corporate formation services, and management consulting services. The prohibition takes effect on June 7, 2022 and does not apply to services provided to entities located in Russia owned or controlled by U.S. persons, or any services in connection with the wind down or divestiture of any entity in Russia not owned or controlled by a Russian person. The determination expands EO 14024 to prohibit such services.

 EO 14071, issued on April 6, 2022, prohibits, inter alia, the exportation, reexportation, sale, or supply, directly or indirectly, from the United States or by a U.S. person, wherever located, of any category of services as may be determined by the Secretary of the Treasury. In the intervening month before the recent OFAC determination, it was unclear what these services were. Now, with this guidance from OFAC, the international business community can work to review its operations and cease any activities that will be prohibited as of June 7.

In an FAQ OFAC expanded on the meaning of the determination of May 8 and added that OFAC interprets the following terms to include activities related to the following:

  • “Accounting sector” – includes the measurement, processing, and transfer of financial data about economic entities.
  • “Trust and corporate formation services sector” – includes assisting persons in forming or structuring legal persons, such as trusts and corporations; acting or arranging for another person to act as directors, secretaries, administrative trustees, trust fiduciaries, registered agents, or nominee shareholders of legal persons; providing a registered office, business address, correspondence address, or administrative address for legal persons; and providing administrative services for trusts.
  • “Management consulting sector” – includes strategic advice; organizational and systems planning, evaluation, and selection; marketing objectives and policies; mergers, acquisitions, and organizational structure; staff augmentation and human resources policies and practices; and brand management.

In addition to these newly banned services, OFAC added dozens of individuals and entities to the Specially Designated Nationals and Blocked Persons (“SDN”) List. The new designations include eight current or recent executive board members of Sberbank, the state-owned and largest financial institution in Russia; 27 members of the Board of Directors of Gazprombank, the Russian energy sector financing bank; Joint Stock Company Moscow Industrial Bank and ten of its subsidiaries; and state-supported defense entity LLC Promtekhnologiya, which produces weapons for the Russian military and intelligence services. Addition to the SDN List is Treasury’s most severe sanction on a party, prohibiting U.S. persons from transacting with such parties, blocking the U.S.-based assets of such persons, and preventing them from transacting in U.S. dollars.

If you have any questions regarding OFAC’s economic sanctions on Russia, please do not hesitate to contact the attorneys at Torres Trade Law, PLLC.