Introduction
In 2022, the United States, European Union (EU) and United
Kingdom, along with a significant number of other partners and
allies, imposed an unprecedented number of economic, financial and
trade sanctions on Russia and Belarus in connection with
Russia’s invasion of Ukraine. While those developments were a
key focus in 2022, both the United States Department of the
Treasury’s Office of Foreign Assets Control (OFAC) and the
United States Department of State also generally kept pace with
non-Russia related regulatory developments and enforcement actions
during 2022. Below is a summary of the most significant U.S.
sanctions actions and key takeaways from 2022. We have also
prepared similar summaries of significant developments in U.S. export controls, as well as U.S. and foreign investment, that occurred in
2022.
In the United States, sanctions developments in 2022
reflected:
- A demonstrated commitment by the Biden-Harris administration in
coordinating with U.S. allies on the imposition of sanctions to
pursue shared foreign policy goals and enforcement priorities. - U.S. inter-agency and multilateral collaboration on
implementation and enforcement of sanctions prohibitions. - A renewed focus on virtual currency in an attempt to curb
sanctions violations and illicit cross-border transactions, as well
as evasion of U.S. sanctions, by providing additional guidance
related to the regulation of virtual currencies and issuing several
public enforcement actions against companies in the industry. - OFAC action towards modernizing sanctions in response to the
agency’s 2021 Treasury Sanctions Review, including by
increasing multilateral coordination and by expanding
authorizations and carve outs for humanitarian activities. - A continued use of sanctions as a tool to address human rights
violations and egregious public sector corruption.
The EU and U.K. have historically used sanctions more
cautiously. However, Russia’s invasion of Ukraine was a
catalyst for the adoption of extensive sanctions restrictions
against Russia which, whilst generally aligned with those
implemented by partner countries, are in a number of ways broader
in scope.
EU and U.K. sanctions developments in 2022 included:
- Utilizing sanctions as a policy tool as a first resort in major
crisis, with both the EU and U.K. willing to absorb the economic
consequences of their decisions. - Enabling EU member states and the U.K. to assume a more forward
leaning position to address multilateral policy concerns, including
calling out human rights violations, addressing corruption and
recourse to nations requiring support. - Reinforcing the U.K.’s ability to introduce sanctions
autonomously, acting on its post-Brexit independence from the EU to
expedite decision making and action to expedite alignment with and
assert more leadership in coordination with U.K. allies. - Widening sanctions designation criteria to include the
facilitation of the circumvention of EU/U.K. sanctions, moving in
the direction of the U.S. secondary sanctions approach to sanctions
policy and enforcement.
The substantial sanctions developments of 2022 foreshadow a
continuing multijurisdictional reliance upon sanctions as a
preferred instrument of foreign policy and a tool to address a
range of threats to national security and foreign policy concerns
in the U.S., the EU and the U.K. Looking ahead, we expect further
new sanctions measures will be adopted by policy-makers in these
jurisdictions that will supplement those adopted in 2022.
Specifically, we anticipate sanctions will continue to evolve
through interagency processes in a more coordinated multilateral
context particularly with respect to Russia, but also with respect
to other countries and in other areas of common foreign and
national policy concern where the U.S., EU and U.K. have aligned
interests.
Russia and Belarus
U.S. Developments. Last year, the United States imposed
unprecedented sanctions on Russia following its invasion of Ukraine
in February 2022. The prohibitions imposed under the Russia
sanctions program, while short of a comprehensive embargo on
Russia, were very broad and went well beyond the more targeted
sanctions that had been imposed on Russia after its purported
annexation of the Crimean Peninsula in 2014. For example:
- A comprehensive embargo on certain areas of the
Donetsk and Luhansk oblasts of Ukraine subject to Russian control
akin to the embargo on Crimea in place since Russia’s purported
annexation in 2014. - A broad “new investment” prohibition which covers
purchases of Russian- and certain third-country-issuer securities,
acquisition of real estate in Russia, and participation in
royalties in Russia, among other prohibited “investment”
transactions. - A ban on the provision of certain covered services including accounting, trust and corporate formation,
management consulting, and quantum computing services, as well as a ban
on the provision of services related to the maritime transportation of crude oil and petroleum products of Russian origin (known as
the “Price Cap Policy”). - Expansion of prohibitions on dealings in “new debt or new equity” of certain
Russian entities and Russian sovereign debt, first introduced in the 2014
Ukraine-related sanctions program, and broad prohibitions on
transactions involving Russia’s Central Bank, National Wealth Fund, and Ministry
of Finance. - Bans on the exportation of U.S. dollar banknotes and luxury goods and on
the importation into the United States of Russian energy products, Russian gold, Russian-origin fish, seafood, alcoholic beverages
and non-industrial diamonds.
In addition, OFAC and the U.S. Department of State designated
approximately 1,716 individuals and entities, often in coordination
with the United Kingdom and European Union, imposing full blocking
sanctions on key individuals and many of Russia’s largest and
most economically significant entities, including:
- Russia’s largest financial institutions, including VTB Bank, Sberbank and Alfa Bank, and Belarussian banks and state-owned
enterprises. - Kremlin-linked “elites,” sanctions evaders, and supporters of President Vladimir Putin.
- Supporters of Russia’s “sham referenda” and purported annexation
of regions of Ukraine. - Entities and individuals operating in the microelectronics, financial services, defense, industrial, technology and manufacturing
sectors, and supporters of Russia’s military industrial complex. - Key Russian government officials, including the Russian Duma and its members, Belarussian
President Alyaksandr Lukashenka, and President Vladimir
Putin, and certain of their respective family members. - Prominent Russian business persons, such as Vladimir Potanin,
God Nisanov, Nikolay Tokarev and Alisher Usmanov, which have had a
significant impact on U.S. and global financial markets given the
extensive reach of their global holdings.
Another key sanctions measure deployed by OFAC, the Department
of State and the Department of Justice included targeting not only
prominent Russian business persons and Kremlin-linked
“elites,” but also their most valuable possessions,
including yachts and private aircraft. The United States worked
with governments across the world to identify and seize these
assets in an attempt to further impose costs on Russia’s
wealthiest persons. OFAC identified yachts linked to Putin and several aircrafts. The United States government also
worked with other jurisdictions, like Spain and Fiji, to effectuate seizures of assets. To
better identify assets for seizure, the Department of Justice
launched Task Force KleptoCapture, an interagency law
enforcement task force dedicated to enforcing sanctions, and the
United States led the creation of the Russian Elites, Proxies and Oligarchs Task
Force (REPO), an international coalition dedicated to
prioritizing resources and working together to find, restrain,
freeze, seize, confiscate or forfeit the assets of individuals
sanctioned in connection with Russia’s invasion of Ukraine.
The breadth of these prohibitions has been somewhat tempered by
the issuance of dozens of general licenses (GLs), including
licenses authorizing certain transactions related to energy that involve certain blocked
persons; administrative transactions involving Russia’s Central Bank, National Wealth Fund and Ministry of
Finance; transactions relating to telecommunications and certain Internet-based
communications; activities of international organizations and nongovernmental organizations; the export or
reexport of agricultural commodities, medicine and medical
devices; and civil aviation safety.
EU and U.K. Developments. In 2022, the EU and U.K. sanctioned 1,386 and 1,463 individuals as
well as 171 and 162 entities respectively, and implemented a broad
range of restrictions on trade in oil and gas, goods and services
as well as restrictions in investment, transport, and financial
services.
There are notable differences between the respective sanctions
regimes, both in terms of the type and scope of sanctions
restrictions as well as the individuals that have been designated.
Many oligarchs, for example, which have already been targeted by
EU/U.K. sanctions are yet to be designated by the U.S.
Moreover, whereas U.S. sanctions focus on the concept of
ownership to determine whether a particular non-listed entity
should be considered a sanctioned party, EU/U.K. sanctions adopt a
broader interpretation focusing on both ownership as well as
control. This divergence can lead to complications for
multinational companies where such companies may be permitted to
engage in dealings with a particular entity under U.S. sanctions
but not under EU/U.K. sanctions due to the same entity being
minority owned but nonetheless controlled by a sanctioned
party.
Another area of divergence between EU, U.K. and U.S. sanctions
is that of aggregation. Whereas EU and U.S. sanctions require
shareholdings of sanctioned parties to be aggregated when
determining whether an entity is owned by a sanctioned party, such
aggregation would only be required under U.K. sanctions if there is
a “joint arrangement” in place between shareholders on
the basis of which they commit to exercising (substantially) all
the rights conferred by their respective shares or rights jointly
in a way that is pre-determined by the arrangement.
Russian Countermeasures. In response to the
extraordinary imposition of sanctions by the U.S., EU and
U.K.—and other countries, including, but not limited to,
Switzerland, Australia and Canada—Russia implemented
substantial countermeasures, which in some cases restrict companies
operating in Russia from complying with third-country sanctions
regimes. Companies operating in Russia must now navigate a uniquely
difficult, and rapidly evolving, regulatory landscape.
Prospects for the Year Ahead. In 2023, we expect the
pace of new Russia-related sanctions to continue at the pace we
have seen over the last six months, though subject to the military
situation in Ukraine, and potentially the first significant OFAC
enforcement actions under the Russia sanctions program. We expect
to see further designations of individuals and entities operating
in Russia or otherwise supporting Russia’s invasion of Ukraine
or military industrial complex, as well as designations of
individuals and entities operating in the sectors identified in the
determinations pursuant to EO 14024 (e.g., the accounting and
quantum computing sectors of the Russian economy). We may also see
the addition of new categories of prohibited services to
individuals in or ordinarily resident in Russia.
Similar enforcement and sanctions developments are also expected
in the EU and U.K. And while enforcement in the EU currently
differs between the member states, at the end of 2022 the European
Commission put forward a proposal aimed at harmonizing criminal
offences and penalties for breaches of EU sanctions. If adopted,
this proposal will make it easier for regulators to investigate,
prosecute and punish violations of EU sanctions in all member
states alike.
It remains unlikely sanctions on Russia will evolve into a
comprehensive embargo akin to U.S. sanctions on Iran or North
Korea, absent a major escalation. In February, the ban on the
provision of services related to the maritime transportation of oil
under the Price Cap Policy took effect with respect to petroleum
products. Future sanctions by the U.S., EU and U.K. may depend in
part on how the global energy market responds to the Price Cap
Policy once fully implemented.
Finally, we may see increased congressional action or oversight,
as Russia-related provisions were introduced in the National
Defense Authorization Act. It remains to be seen, however, whether
congressional pushback on military funding to Ukraine will
encourage the implementation of tougher sanctions on Russia, in
connection with a potential shift away from the provision of aid to
Ukraine.
Iran
U.S. sanctions on Iran continued to expand modestly in 2022 as
the United States imposed sanctions on numerous individuals and
entities despite ongoing negotiations for the United States’
potential re-entry into the Joint Comprehensive Plan of Action
(JCPOA). Talks reportedly stalled in April 2022 over the foreign
terrorist organization designation of the Iranian Revolutionary
Guard Corps, but the European Union circulated a draft of the restored JCPOA in
August to which the United States and Iran responded in September 2022. Talks have
reportedly stalled once again amid Iran’s crackdown
on protests following the September 2022 death of Mahsa Amini in
Iranian police custody.
Iran-related sanctions designations by OFAC, the Department of
State, EU and U.K. this year typically fell into the following
categories:
In apparent response to the protests, OFAC expanded and
clarified GL D-1 (now D-2) which authorizes the provision of
certain services, software and hardware incident to communications,
to modernize this longstanding GL to better account for modern
communications technology. OFAC also extended the expiration date
of GL M-2 authorizing the exportation of certain
graduate level educational services and software through September
1, 2023.
It is unclear whether there is any realistic prospect of regime
change in Iran such that we may see sanctions on Iran lifted in the
near term. In such a case, the U.S. response could be informed by
the way in which they responded to similar situations, such as with
Libya. More likely, we will see continued designations targeting
human rights abusers, sanctions evaders and government or law
enforcement officials.
China
Against a backdrop of increased legislative and regulatory focus
on China and foreign policy and national security considerations,
there were only limited new U.S. sanctions developments associated
with China in 2022. Unlike in recent prior years, OFAC did not
identify any new Chinese entities as non-SDN Chinese
Military-Industrial Complex Companies (“Non-SDN CMIC”),
and also did not take designation actions pursuant to its
Hong-Kong-related sanctions authorities. OFAC did, however, designate two Chinese individuals, 10 related
entities and 157 related Chinese fishing vessels under the Global
Magnitsky Sanctions program pursuant to EO 13818 for engaging in
human rights abuses, and designated one Chinese entity under the
Russia Harmful Foreign Activities sanctions program for providing
support to a designated Russian entity.
In a significant coordinated international effort, in 2022, the
U.K. implemented asset freezes and travel bans against certain
Chinese government officials as well as a Xinjiang security body
under its Global Human Rights sanctions regime for alleged systemic
violations against Uyghurs and other minorities. This measure came
as part of the international condemnation and growing number of
countries holding China to account for its human rights record
(e.g., the EU which imposed similar measures in 2021 already).
Looking to the year ahead, in the U.S. the Biden-Harris
administration has not, to date, adopted a China specific sanctions
regime. China is, however, likely to be an area of significant
continuing and possibly increasingly hostile focus for the U.S.
Congress in the months ahead. Significantly, the House of
Representatives recently voted, with strong bipartisan
support, to establish a Select Committee on the strategic
competition between the United States and Chinese Communist Party.
While American politics remain highly polarized, mistrust and
hostility towards China appears to be one of the very few areas of
policy in which Republicans and Democrats in Congress can find
common ground. The Biden-Harris administration is also currently contemplating an EO to regulate outbound U.S.
investments in certain sectors of the Chinese economy, and has
continued to utilize other trade controls, such as export controls,
against Chinese entities and individuals. It is conceivable that
the Biden-Harris administration could, in response to congressional
or other stakeholder pressure, establish a new sanctions authority
for the designation of Chinese companies or individuals that raise
U.S. national security concerns. However, it is still unclear
whether or if so when U.S. foreign policy and political
considerations will evolve to a point where such action will
actually occur.
Views and public policy concerns of officials in the EU and U.K.
with respect to China appear to be evolving. However, it is still
unclear and remains to be seen how far the EU and U.K. may be
willing to go in terms of greater alignment with the U.S.,
including whether they might adopt similar sanctions or other
restrictive trade measures against China given China’s
importance to their economies.
Venezuela
U.S. sanctions with respect to Venezuela in 2022 were largely
static, with the exception of a modest easing of sanctions on
Venezuela’s oil sector specifically, where certain U.S.
companies are impacted. OFAC issued Venezuela-related GL 41 on November 26, which provides
authorization for Chevron Corporation to resume limited natural
resource extraction operations in Venezuela, and provided
accompanying guidance for U.S. and non-U.S. persons engaging in
associated activities. OFAC also issued Venezuela-related GL 8K on November 26, which extends the
authorization for U.S. companies to engage in certain limited
maintenance operations in Venezuela or involving Venezuela’s
national oil company, Petróleos de Venezuela, S.A. (PdVSA),
until May 26, 2023.
Absent a significant new crisis that forces a refocus on related
concerns, at the outset of 2023 it does not appear likely that U.S.
sanctions on Venezuela are a significant priority focus of the
Biden-Harris administration. However, the way in which talks
between the Venezuelan government and political opposition in the
country, Venezuela’s relationship and actions with respect to
Russia or other U.S. sanctioned countries, and the possibility of
some new humanitarian or political crisis in the country all remain
potential flashpoints for reconsideration of new sanctions measures
in the months ahead.
Cuba
The U.S. took limited actions somewhat easing sanctions on Cuba
in 2022. The most significant included a reversal on the June 9,
2022 of restrictions imposed under the Trump-Pence administration.
Specifically, OFAC:
- Restored the GL for professional research and professional
meetings in Cuba, which authorizes certain travel-related and other
transactions incident to travel to Cuba to attend or organize
professional meetings or conferences in Cuba (31 C.F.R. § 515.564). - Expanded authorized travel in support of the Cuban people by
reinstating the authorization for group People-to-People
educational travel and travel related to professional meetings and
research, while also removing certain prohibitions on authorized
academic educational activities (31 C.F.R. § 515.565). - Removed the $1,000 quarterly limit on family remittances and
authorizing donative (i.e., non-family) remittances (31 C.F.R. § 515.570).
Enforcement activity with respect to Cuba, however, did not
wane, with seven of the 16 enforcement actions in 2022 targeting
persons for apparent violations of sanctions against Cuba, as
described in more detail below.
Depending on developments within Cuba, including the Cuban
government’s response to popular protests and demonstrations or
political opposition in the country, the Biden-Harris
administration could adopt additional measures to engage with and
benefit the Cuban people in the months ahead. It also remains to be
seen whether the Cuba Remittance Working Group, first established
in the summer of 2021 in response to the Cuban government’s
response to demonstrations, will take further actions affecting the
ability of Cuban-Americans in the United States to provide
financial support to their families in Cuba.
Virtual Currency
There was significant activity in the virtual currency space in
2022 as regulators and agencies across the United States government
continued to emphasize to the virtual currency industry the need
for the industry to better implement existing sanctions
requirements. This increased scrutiny by the U.S. government
reflects inter- and intra-agency coordination, including between
OFAC and Treasury’s Financial Crimes Enforcement Network
(FinCEN). In 2022, OFAC designated darknet market, Garantex, and two virtual currency exchanges
and anonymizing blenders/mixers, Blender.io and Tornado Cash, the latter of which it listed in
August 2022, then delisted and redesignated in November 2022. The
designation of Tornado Cash prompted litigation in Texas and Florida challenging OFAC’s authority to
designate an anonymous currency mixer. While it remains to be seen
how the courts will rule in these pending cases, it is clear that
OFAC is focused on tracking and disrupting the use of virtual
currency and other digital assets as means to evade or otherwise
violate U.S. sanctions.
We expect to see continued focus on the challenges virtual
currency poses to the implementation and enforcement of sanctions
generally and on pressuring the virtual currency industry to
implement necessary compliance measures.
Nicaragua
OFAC took a notable action with regard to Nicaragua in June 2022
through the designation of a state-owned Nicaraguan mining
company, Empresa Nicaraguense de Minas (ENIMINAS), as well as the
president of ENIMINAS’ board of directors. At the time,
ENIMINAS played a significant role in regulating Nicaragua’s
gold mining industry.
OFAC continued its focus on the Nicaraguan gold sector through
its designation of Nicaragua’s General
Directorate of Mines (DGM) on October 24, 2022. OFAC noted that DGM
“managed most mining operations in Nicaragua on behalf of the
Nicaraguan government” after the designation of ENIMINAS and,
thus, became an “important piece of state-controlled gold
operations in Nicaragua.”
On October 24, 2022, President Biden also issued EO 14088, which authorized broad new sanctions
authorities on Nicaragua. It authorized the imposition of sectoral
sanctions on Nicaragua in two ways. First, it authorized the
designation of any person operating in the gold sector of the
Nicaraguan economy, and authorized the Secretary of the Treasury to
expand this authority to additional sectors. Second, it authorized
OFAC to prohibit new investment in any sector of the Nicaraguan
economy as may be determined by the Secretary of the Treasury.
Additionally, this EO provides OFAC with authority to prohibit
the importation into the United States of Nicaraguan-origin
products, and the export, reexport, sale or supply from the United
States, or by a U.S. person, of items to Nicaragua. The EO also
provided a new authority to designate persons responsible for
arresting or prosecuting members of the press or other persons
responsible for disseminating information to the public.
Moving forward, we expect further U.S. sanctions actions to
depend on how the political situation in Nicaragua develops.
U.S. Enforcement Actions
In 2022, 14 respondents paid a total of $42,664,006 to OFAC to
settle potential civil liability for apparent violations of OFAC
sanctions programs, up from a total of $20,896,739 in 2021, which
represents a 104 percent increase in settlement amounts. OFAC also
issued two Findings of Violation in 2022, up from one in 2021.
These 2022 enforcement actions involved violations or apparent
violations of the following OFAC sanctions programs: Cuba, Iran, Ukraine, Syria, Venezuela, North Korea, Non-Proliferation, Counter Narcotics, Sudan, and also included violations of the Reporting, Procedures and Penalty Regulations
for failing to maintain full and accurate records related to
blocked property. The following were the most notable developments
in the enforcement space in 2022:
- Debt & Equity Restrictions. OFAC’s settlement with S&P Global represents only the second time
that OFAC has taken a public enforcement action for an apparent
violation of a debt- or equity-related restriction. These
restrictions were first utilized by OFAC in 2014 in response to
Russia’s purported annexation of Crimea. These apparent
violations stemmed from activities that occurred in 2016 and
2017. - Venezuela. OFAC’s settlement agreement with Banco Popular, a Puerto Rican bank,
demonstrated the agency’s expansive understanding of the scope
of the term “Government of Venezuela” for purposes of
sanctions prohibitions in determining that the bank’s
transactions involving low-level Government of Venezuela employees
constituted apparent violations under EO 13884. - Virtual Currency. OFAC additionally settled with two virtual
currency exchanges, Bittrex Inc. and Payward, Inc. (d/b/a Kraken), for apparent
violations of Iran-related prohibitions. This settlement reflects
the focus by the agency on virtual currency, and emphasizes the
need to actively screen IP addresses for embargoed locations even
after users are on boarded. - “Causation” Theory. Finally, cases publicly settled
in 2022 reflected a continued enforcement emphasis on non-U.S.
persons “causing” U.S. banks to violate sanctions
prohibitions. In an action against Toll Holdings, for example, OFAC indicated that
by issuing invoices requesting payment into a U.S. bank account,
non-U.S. persons can “cause” the routing of payments
through the U.S. financial system thereby causing a violation of
U.S. sanctions. OFAC also found that Sojitz (Hong Kong) Limited engaged in apparent
violations of U.S. sanctions when routing a payment through the
U.S. financial system for Iranian-origin goods and CA Indoseuz Switzerland S.A. and CFM Indosuez Wealth engaged in apparent
violations of U.S. sanctions by routing transactions through the
United States on behalf of sanctioned customers. Finally, OFAC
found Danish company Danfoss A/S caused U.S. financial institutions
to facilitate prohibited transactions and export financial services
to sanctioned jurisdictions when its subsidiary directed customers
to make payments to its bank account at the UAE branch of a U.S.
financial institution. - Compliance Procedures. OFAC also settled with American Express National Bank, a subsidiary of
American Express Company, for apparent violations of OFAC’s
Kingpin sanctions. OFAC’s enforcement release highlighted the
importance of effective sanctions compliance procedures and
training. Similarly, OFAC issued a Finding of Violation to MidFirst Bank for violations of
non-proliferation-related regulations in that the bank processed
transactions on behalf of newly blocked persons for 14 days after
their designation. OFAC did not issue a civil monetary penalty in
connection with the MidFirst Bank settlement.
We expect to see a continued focus on enforcement actions
related to virtual currency as well as those involving non-U.S.
persons causing U.S. persons to violate U.S. sanctions by routing
prohibited transactions through U.S. financial institutions.
Additionally, given the time OFAC has historically taken to
investigate and conclude enforcement investigations, we could start
to see significant enforcement actions for violations of the
Russian Harmful Foreign Activities Sanctions Regulations,
particularly given the significant world-wide focus on enforcing
the Russia-related sanctions that started in 2022.
Other Notable Sanctions Developments in 2022
Sanctions Compliance Guidance for Instant Payment
Systems. On September 30, 2022, OFAC published its first ever
sanctions compliance guidance for instant payment
systems, which highlights the importance of managing sanctions
risks through risk-based approaches in the context of instant
payment systems and other new payment technologies. The guidance
encourages instant payment system developers to incorporate
sanctions compliance considerations as they continue developing
their systems, and illustrates OFAC’s continued efforts to
ensure its regulatory guidance stays current with emerging
technologies. OFAC concurrently announced a settlement with Tango Card, Inc.,
“a Seattle, Washington-based company that supplies and
distributes electronic rewards” that, as a result of
“deficient geolocation identification processes …
transmitted stored value products to individuals with Internet
Protocol (IP) and email addresses associated with Cuba, Iran,
Syria, North Korea, and the Crimea region of Ukraine.”
Significant Expansion of Humanitarian-related and Other
Authorizations. Over the last year, and likely in partial
response to the 2021 Treasury Sanctions Review, there was an
increased focus by OFAC on better assessing and accounting for
humanitarian-related activities that may be impacted by the
imposition of sanctions. This focus of the agency was reflected in
the issuance of humanitarian-related GLs in newly established
targeted programs (e.g., Ethiopia), whereas in the past, such
authorizations were typically only reserved for OFAC’s
comprehensive programs. In addition, in February 2022, OFAC issued
counterterrorism-related GL 20, which broadly authorizes U.S. persons to
engage in “all transactions involving Afghanistan or governing
institutions in Afghanistan” that are prohibited under
counterterrorism-related authorities as a result of the 2022
takeover of the Afghan government by the Taliban and associated
groups. This GL was intentionally broad in order to address
challenges that both humanitarian and commercial-related entities
were encountering for activities in or related to Afghanistan.
Most notably, on December 20, 2022, OFAC issued broad GLs in a
number of key areas, including principally with respect to humanitarian activities and official business of the U.S. government and
international organizations, and amending a number of related
existing GLs in other programs. The new GLs authorize certain
activities that fall within four categories, namely:
- The official business of the U.S. government.
- The official business of certain international organizations
and entities, such as the United Nations and the International Red
Cross. - Certain humanitarian transactions in support of nongovernmental
organizations’ activities, such as disaster relief, health
services and activities to support democracy, education,
environmental protection and peacebuilding. - The provision of agricultural commodities, medicine and medical
devices, as well as replacement parts and components and software
updates for medical devices.
The new GLs reflect continuing work by the agency over the last
several years both to harmonize existing authorizations across
sanctions programs and to expand humanitarian-related
authorizations on a cross-programmatic basis. These efforts by the
agency were intensified in connection with the 2021 Treasury
Sanctions Review, which included a recommendation for Treasury to
focus on “[c]alibrating sanctions to mitigate unintended
economic, political, and humanitarian impact” as one of its
five recommended areas of focus in order to modernize U.S.
sanctions. We expect to continue to see these four categories of
activities to be generally authorized under future sanctions
programs.
The new or amended GLs were added to virtually every (but not
all, for example no GLs were added to the Cuban regulations)
OFAC-administered sanctions programs. Because the GLs differ by
program and, in some instances include new restrictions, it remains
key to review closely the terms and conditions of the relevant GL
on a case-by-case basis to determine whether it applies to a
particular transaction or activity.
Conclusions and Outlook for 2023
There were numerous significant sanctions developments in 2022,
including the unprecedented imposition of expansive multilateral
sanctions on Russia in a highly coordinated manner by a host of
different agencies, regulators and international partners. Actions
undertaken by the European Union, United Kingdom and other allies
of the United States demonstrate that, while the imposition of
sanctions by the United States alone may not be significant enough
to impact a country as important to the global economy as Russia,
more impactful action on a multilateral basis is increasingly
possible and being pursued. Though we expect to see continued
multilateral coordination on sanctions under this administration,
we will be paying attention to see whether or not the unprecedented
level of coordination and joint effort seen in 2022 is a harbinger
of a longer term trend with respect to Russia or addressing issues
of shared national security and foreign policy concerns in other
areas. Russia’s invasion of Ukraine demonstrated that the
territorial integrity of sovereign states is a red line across a
broad cross-section of the international community. However, it
remains to be seen how much of the response to Russia’s
aggression is tied to its location on the European continent and
geopolitical importance.
We expect that policy-makers in the United States, European
Union and United Kingdom will continue to draw on and combine with
the deployment of sanctions measures tools in other areas of trade
regulation, including export controls, import and foreign
investment controls, to leverage these legal tools as instruments
for the pursuit of foreign and national security objectives. We
also anticipate that there will be continued increased multilateral
cooperation, including information sharing, consultation and
coordination, in these areas of regulation than in the past. In the
United States, it is foreseeable that U.S. agencies and regulators
operating in areas of oversight and administration that intersect
with international trade and investment will continue to allocate
resources and hire personnel in areas of particular focus, such as
in the virtual currency and Russian sanctions evasion enforcement
areas.
It remains to be seen which sanctions programs will receive the
most attention in 2023, and in what areas the foreign policy and
national security interests and objectives of various jurisdictions
will align, or to what degree, such that sanctions responses occur
on the basis of multinational coordination. The Biden-Harris
administration’s increased focus on China, including through
major export controls reforms and considerations of outbound
investment, may signal China as the country to watch in 2023.
However, with the precedent established in multilateral use of
sanctions as a preferred instrument of foreign and national
security policy in the United States, the European Union and United
Kingdom, 2023 appears to be another year of dynamic developments in
this and related areas of law.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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