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Publication of Russia-related Determinations and Frequently Asked Questions

Release date

09/15/2022

Body

Today, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) has published a Determination Pursuant to Section 1(a)(i) of Executive Order 14024, a Determination Pursuant to Section 1(a)(ii) of Executive Order 14071, four related Frequently Asked Questions (FAQs) (1083-1086), and five amended FAQs (1033, 1034, 1059, 1061, 1062).

OFAC Recent Action of September 15, 2022

And, before I post the FAQs – here is my response from OFAC:

Thank you for your email. Please see today’s recent action notice that includes the determinations issued pursuant to Executive Order 14024 section 1(a)(i) and Executive Order 14071 section 1(a)(ii).

Kind regards,

Sanctions Compliance & Evaluation

Office of Foreign Assets Control (OFAC)

U.S. Department of the Treasury

1500 Pennsylvania Ave. NW

Washington, DC 20220

Toll Free: 1-800-540-6322

Local: 1-202-622-2490

Email: OFAC_Feedback@treasury.gov

Website: www.treasury.gov/ofac

Email response from OFAC

New FAQs:

Russian Harmful Foreign Activities Sanctions

1086. For the purposes of the determination of September 15, 2022 made pursuant to Executive Order (E.O.) 14024, what is meant by the term “quantum computing sector of the Russian Federation economy”?

For the purposes of the determination of September 15, 2022 made pursuant to E.O. 14024, OFAC interprets the term “quantum computing sector of the Russian Federation economy” to include activities related to products and services in or involving the Russian Federation in research, development, manufacturing, assembling, maintenance, repair, sale, or supply of quantum computing, quantum computers, electronic assemblies thereof, or cryogenic refrigeration systems related to quantum computing.  OFAC also interprets the term “quantum computing sector of the Russian Federation economy” to include any of the following services when related to quantum computing:  infrastructure, web hosting or data processing services; custom computer programming services; computer systems integration design services; computer systems and data processing facilities management services; computing infrastructure, data processing services, web hosting services, and related services; repairing computer, computer peripherals, and communication equipment; other computer-related services; as well as the exportation, reexportation, sale, or supply, directly or indirectly, of quantum computing, quantum computers, electronic assemblies thereof, or cryogenic refrigeration systems related to quantum computing to or from the Russian Federation.

The determination regarding this sector pursuant to E.O. 14024 takes effect immediately.
 

Released on 09/15/2022

Russian Harmful Foreign Activities Sanctions

1085. Does the determination of September 15, 2022 made pursuant to Executive Order (E.O.) 14024 with regard to the quantum computing sector of the Russian Federation economy mean that all persons that operate or have operated in these sectors of the Russian Federation economy are sanctioned by OFAC?

No.  The Director of OFAC, in consultation with the State Department, has issued a determination pursuant to E.O. 14024 that authorizes the imposition of economic sanctions against persons that operate or have operated in the quantum computing sector of the Russian Federation economy.

A sector determination pursuant to E.O. 14024 exposes persons that operate or have operated in an identified sector to sanctions risk; however, a sector determination does not automatically impose sanctions on all persons who operate or have operated in the sector.  Only persons determined, pursuant to E.O. 14024, by the Secretary of the Treasury in consultation with the Secretary of State, or by the Secretary of State in consultation with the Secretary of the Treasury, or their delegates, to operate or have operated in the above-identified sectors are subject to sanctions.

Persons sanctioned pursuant to E.O. 14024 for operating or having operated in an identified sector are added to one or more OFAC sanctions lists based on the type of sanction, including the Specially Designated Nationals and Blocked Persons List (SDN List), the List of Foreign Financial Institutions Subject to Correspondent Account or Payable-Through Account Sanctions (CAPTA List), and the Non-SDN Menu-Based Sanctions List (NS-MBS List).
 

Released on 09/15/2022

Russian Harmful Foreign Activities Sanctions

1084. For the purposes of the determination of September 15, 2022 made pursuant to Executive Order (E.O.) 14071, “Prohibitions Related to Certain Quantum Computing Services” (“the determination”),  what is meant by the term “quantum computing services”?

For the purposes of the determination, OFAC anticipates publishing regulations defining this term to include any of the following services when related to quantum computing, quantum computers, electronic assemblies thereof, or cryogenic refrigeration systems related to quantum computing:  infrastructure, web hosting, or data processing services; custom computer programming services; computer systems integration design services; computer systems and data processing facilities management services; computing infrastructure, data processing services, web hosting services, and related services; repairing computer, computer peripherals, or communication equipment; other computer-related services; as well as services related to the exportation, reexportation, sale, or supply, directly or indirectly, of quantum computing, quantum computers, electronic assemblies thereof, or cryogenic refrigeration systems related to quantum computing to any person located in the Russian Federation.  

For the purposes of the determination, OFAC also anticipates publishing regulations defining the term “person located in the Russian Federation” as set forth in FAQ 1058, as well as regulations defining the term “Russian person” to mean an individual who is a citizen or national of the Russian Federation, or an entity organized under the laws of the Russian Federation. 
 

Released on 09/15/2022

Russian Harmful Foreign Activities Sanctions

1083. What actions were taken on September 15, 2022 related to certain quantum computing services? 

On September 15, 2022, the Director of OFAC, in consultation with the Department of State, issued a determination pursuant to Executive Order (E.O.) 14071, “Prohibitions Related to Certain Quantum Computing Services,” prohibiting the exportation, reexportation, sale, or supply, directly or indirectly, from the United States, or by a United States person, wherever located, of certain quantum computing services to any person located in the Russian Federation.  This determination takes effect on October 15, 2022.  This determination excludes from the scope of the prohibited services: (1) any service to an entity located in the Russian Federation that is owned or controlled, directly or indirectly, by a United States person; and (2) any service in connection with the wind down or divestiture of an entity located in the Russian Federation that is not owned or controlled, directly or indirectly, by a Russian person.  For more information, please see FAQ 1084.  

On September 15, 2022, the Director of OFAC, in consultation with the Department of State, also issued a sectoral determination pursuant to E.O. 14024 that authorizes the imposition of economic sanctions on individuals and entities that are determined to operate or have operated in the quantum computing sector of the Russian Federation economy.  The determination regarding this sector pursuant to E.O. 14024 takes effect immediately.
 

Released on 09/15/2022

Amended FAQs:

Russian Harmful Foreign Activities Sanctions

1062. Do the prohibitions imposed by the determinations made pursuant to Executive Order (E.O.) 14071 on May 8, 2022, “Prohibitions Related to Certain Accounting, Trust and Corporate Formation, and Management Consulting Services,” and on and on September 15, 2022, “Prohibitions Related to Certain Quantum Computing Services,” apply to services provided to a parent company located in the Russian Federation by a U.S. subsidiary?

Yes.  The prohibitions apply to services provided to a company located in the Russian Federation (the “Russian company”) by any U.S. person, including the Russian company’s U.S. subsidiary.

Date Updated: September 15, 2022 

Updated on 09/15/2022

Russian Harmful Foreign Activities Sanctions

1061. Do the determinations made pursuant to Executive Order (E.O.) 14071 on May 8, 2022, “Prohibitions Related to Certain Accounting, Trust and Corporate Formation, and Management Consulting Services,” and on September 15, 2022, “Prohibitions Related to Certain Quantum Computing Services” (“the determinations”), prohibit U.S. persons from working as employees of entities located in the Russian Federation?

Not necessarily.  Under the determinations, U.S. persons are prohibited from exporting, reexporting, selling, or supplying, directly or indirectly: management consulting; trust and corporate formation services; accounting services; or quantum computing services to persons located in the Russian Federation.  Thus, U.S. persons are prohibited from providing these services to companies located in the Russian Federation (“Russian companies”) in their capacity as employees.  However, the determinations do not prohibit U.S. persons from providing other services not covered by these determinations as part of their employment by Russian companies.

In addition, please note that the determinations exclude from the scope of the aforementioned services:  (1) any service to an entity located in the Russian Federation that is owned or controlled, directly or indirectly, by a United States person; and (2) any service in connection with the wind down or divestiture of an entity located in the Russian Federation that is not owned or controlled, directly or indirectly, by a Russian person.

Date Updated: September 15, 2022 

Updated on 09/15/2022

Russian Harmful Foreign Activities Sanctions

1059. Do the determinations made pursuant to Executive Order (E.O.) 14071 on May 8, 2022, “Prohibitions Related to Certain Accounting, Trust and Corporate Formation, and Management Consulting Services,” and on September 15, 2022, “Prohibitions Related to Certain Quantum Computing Services” (“the determinations”), prohibit U.S. persons from providing services to persons located outside of the Russian Federation that are owned or controlled by persons located in the Russian Federation?

No, provided that the provision of services is not an indirect export to a person located in the Russian Federation.  For the purposes of these determinations, 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.”

In contrast, OFAC would not consider to be prohibited the provision of services to a non-Russian company that has a physical presence and operations outside of the Russian Federation, including such a company owned or controlled by persons located in the Russian Federation, provided that the services will not be further exported or reexported to persons located in the Russian Federation.

For example, the following scenarios describe services that would be prohibited under the determination:

  • A U.S. corporate service provider administers a trust established under the laws of a U.S. state, where the trust exists predominantly to hold, sell, or purchase assets on behalf of a settlor, trustor, or beneficiary who is an individual ordinarily resident in Russia. 
  • A U.S. corporate service provider registers a limited liability company in a third country on behalf of an individual ordinarily resident in Russia for the purpose of holding real estate assets, and this company has no other physical presence or operations in the third country. 

The following scenarios illustrate services to a non-Russian subsidiary of a Russian person that would not be prohibited under the determination:

  • A U.S. accounting firm provides tax advisory and preparation services to the U.S. subsidiary of a Russian company.  This U.S. subsidiary has an office and employees in the United States and conducts business in the United States, and the services will not be exported or reexported to the Russian parent company.
  • A U.S. management consulting firm provides strategic business advice to the subsidiary of a Russian company located in a third country.  This subsidiary has an office and employees in the third country and conducts business in this third country, and the services will not be reexported to the Russian parent company.

Date Updated: September 15, 2022 

Updated on 09/15/2022

Russian Harmful Foreign Activities Sanctions

1034. For the purposes of the determination of May 8, 2022 made pursuant to Executive Order (E.O.) 14071, “Prohibitions Related to Certain Accounting, Trust and Corporate Formation, and Management Consulting Services,” what is meant by the terms “accounting,” “trust and corporate formation,” and “management consulting” services?

For the purposes of the determination of May 8, 2022 made pursuant to E.O. 14071, OFAC anticipates publishing regulations defining these terms to include the following:

  • “Accounting services” – includes services related to the measurement, processing, and evaluation of financial data about economic entities.  Please note that OFAC has issued General License 35 to authorize certain transactions ordinarily incident and necessary to the exportation, reexportation, sale, or supply, directly or indirectly, from the United States, or by a United States person, wherever located, of credit rating or auditing services to any person located in the Russian Federation through 12:01 a.m. eastern daylight time, August 20, 2022.  See FAQ 1035.
  • “Trust and corporate formation services” – includes services related to assisting persons in forming or structuring legal persons, such as trusts and corporations; acting or arranging for other persons 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.  Please note that all of these activities are common activities of trust and corporate service providers (TCSPs), although they may be provided by other persons.
  • “Management consulting services” – includes 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.

This determination excludes from the scope of the aforementioned services:  (1) any service to an entity located in the Russian Federation that is owned or controlled, directly or indirectly, by a United States person; and (2) any service in connection with the wind down or divestiture of an entity located in the Russian Federation that is not owned or controlled, directly or indirectly, by a Russian person.

For the purposes of the prohibitions set forth in in the determination of May 8, 2022 made pursuant to E.O. 14071, OFAC anticipates publishing regulations defining the term “person located in the Russian Federation” as set forth in FAQ 1058.  For the purposes of the exclusion set forth in the determination of May 8, 2022 made pursuant to E.O. 14071, OFAC anticipates publishing regulations defining the term “Russian person” to mean an individual who is a citizen or national of the Russian Federation, or an entity organized under the laws of the Russian Federation.

Date Updated: September 15, 2022

Updated on 09/15/2022

Russian Harmful Foreign Activities Sanctions

1033. What actions were taken on May 8, 2022 related to certain accounting, trust and corporate formation, and management consulting services?

On May 8, 2022, the Director of OFAC, in consultation with the Department of State, issued a determination pursuant to Executive Order (E.O.) 14071, “Prohibitions Related to Certain Accounting, Trust and Corporate Formation, and Management Consulting Services,” prohibiting the exportation, reexportation, sale, or supply, directly or indirectly, from the United States, or by a United States person, wherever located, of certain accounting, trust and corporate formation, and management consulting services to any person located in the Russian Federation.  This determination takes effect June 7, 2022.  For more information, please see FAQ 1034.

On May 8, 2022, the Director of OFAC, in consultation with the Department of State, also issued a sectoral determination pursuant to E.O. 14024 that authorizes the imposition of economic sanctions on individuals and entities that operate or have operated in the accounting, trust and corporate formation services, or management consulting sectors of the Russian Federation economy.  This determination takes effect on May 8, 2022.  For further information, please see FAQ 1037.  

Date Updated: September 15, 2022

Updated on 09/15/2022

Links:

OFAC notice

New FAQs

Amended FAQs

Categories: E.O. 14071 Determinations Frequently Asked Questions (FAQ) Guidance OFAC Updates Russian Harmful Foreign Activities Sanctions

eric9to5

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