December 19, 2018: Finally, Deripaska firms to be delisted by OFAC

OFAC Notifies Congress of Intent to Delist En+, Rusal, and EuroSibEnergo

Agreed Upon Framework Severs Oleg Deripaska’s Control of These Entities and 

Substantially Decreases His Ownership Interest

Washington – The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) today notified Congress of its intention to terminate the sanctions imposed on En+ Group plc (“En+”), UC Rusal plc (“Rusal”), and JSC EuroSibEnergo (“ESE”) in 30 days.  OFAC has determined that the significant restructuring and corporate governance changes will enable them to meet the criteria for delisting.  Russian oligarch Oleg Deripaska will remain sanctioned, and his property will remain blocked.

“Treasury sanctioned these companies because of their ownership and control by sanctioned Russian oligarch Oleg Deripaska, not for the conduct of the companies themselves. These companies have committed to significantly diminish Deripaska’s ownership and sever his control.  The companies will be subject to ongoing compliance and will face severe consequences if they fail to comply,” said Treasury Secretary Steven T. Mnuchin.  “OFAC maintains the ability under the terms of the agreement to have unprecedented levels of transparency into operations.”

On April 6, 2018, OFAC designated En+ for being owned or controlled by, directly or indirectly, Oleg Deripaska and other entities he owns or controls.  In that same action, OFAC designated Rusal for being owned or controlled by, directly or indirectly, En+.  ESE, a wholly owned subsidiary of En+, was also designated.

En+, Rusal, and ESE have agreed to a framework to undertake significant restructuring and corporate governance changes to address the circumstances that led to their designation, including, among other commitments:  (i) reducing Deripaska’s direct and indirect shareholding stake; (ii) overhauling the composition of the En+ and Rusal boards of directors; (iii) taking other restrictive steps related to their corporate governance; and (iv) committing to full transparency with Treasury by undertaking extensive, ongoing auditing, certification, and reporting requirements.  This framework has been documented in a “Terms of Removal,” which, when executed, will be a binding agreement between these companies and OFAC.

OFAC will continue to aggressively enforce its sanctions on Deripaska, including by closely monitoring these companies’ compliance with the terms of their removal from OFAC’s List of Specially Designated Nationals and Blocked Persons (“SDN List”).  OFAC reserves the right to relist one or all of these companies should they fail to comply with the agreement.

Deripaska will remain on the SDN List.  All of Deripaska’s property and interests in property, including entities in which he holds a fifty percent or greater interest, will remain blocked.  Deripaska’s investment in these companies is effectively frozen and Deripaska cannot obtain cash either in return for his shares or from future dividends issued by En+, Rusal, or ESE.  Foreign persons will continue to be subject to secondary sanctions should they knowingly facilitate a significant transaction for or on behalf of Deripaska.  U.S. persons will continue to be prohibited from dealing, directly or indirectly, with Deripaska or any other designated person.  OFAC’s civil enforcement authorities and processes are described in detail in OFAC’s Economic Sanctions Enforcement Guidelines, 31 C.F.R. part 501, app. A.

Links:

Treasury Press Release

Treasury Notice to Congress

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