Over the past several weeks, President Obama has issued three separate Executive Orders (13660, 13661 and 13662) in response to the crisis in Ukraine. Each of these Executive Orders authorizes the US Treasury Department to designate individuals and entities (“Specially Designated Nationals, ” or “SDNs”) whose property and interests in property in the US are blocked, i.e., placed in frozen accounts. SDNs designated under these Executive Orders are also prohibited from entering the United States.
To date, 31 individuals (mostly Russian government officials and political
leaders) and one Russian bank (Bank Rossiya) have been designated under or
pursuant to Executive Orders 13660 and 13661. Because US banks are prohibited
from transferring their funds, such SDNs are effectively denied access to the US
banking system and cannot engage in US dollar transactions.
Each succeeding Executive Order has authorized the Treasury Department
to designate a wider range of individuals and entities. Executive Order 13660
permits designation of any individual or entity found:
(i) To be responsible for or complicit in, or to have engaged in, directly or
indirectly, any of the following:
(A) Actions or policies that undermine democratic processes or institutions
in Ukraine
(B) Actions or policies that threaten the peace, security, stability,
sovereignty, or territorial integrity of Ukraine
(C) Misappropriation of state assets of Ukraine or of an economically
significant entity in Ukraine
(ii) To have asserted governmental authority over any part or region of Ukraine
without the authorization of the Government of Ukraine
(iii) To be a leader of . . . an entity whose property and interests in property are
blocked pursuant to this order.”
Executive Order 13661 permits designation of any individual or entity found:
(i) To be an official of the Government of the Russian Federation
(ii) To operate in the arms or related materiel sector in the Russian Federation
(iii) To be owned or controlled by, or to have acted or purported to act for or on
behalf of, directly or indirectly [or] to have materially assisted, sponsored,
or provided financial, material, or technological support for, or goods or
services to or in support of any senior official of the Government of the
Russian Federation
Executive Order 13661 broadly defines “Government of the Russian Federation”
to include “any political subdivision, agency, or instrumentality thereof,
including the Central Bank of the Government of the Russian Federation,
and any person owned or controlled by, or acting for or on behalf of, the
Government of the Russian Federation.” Tellingly, Executive Order 13661
contains no definition of “senior official of the Government of the Russian
Federation, ” which suggests that SDNs designated thereunder could include
almost any person or entity acting as or on behalf of the Russian government
and/or military.
Broadest of all, Executive Order 13662, issued late last week, permits
designation of any person or entity found:
“to operate in such sectors of the Russian Federation economy as may
be determined by the Secretary of the Treasury, in consultation with the
Secretary of State, such as financial services, energy, metals and mining,
engineering, and defense and related material.”
Executive Order 13662 thus expands the scope of potential SDNs to ordinary
commercial actors and businesses that operate in the Russian economy,
whether or not they have any direct connection with the Russian government
or military, and whether or not they are involved with or contributing to the
situation in Ukraine.
Businesses and others who deal with SDNs designated under the Executive
Orders should exercise caution, as the Executive Orders also authorize the
blocking of property and interests in property of those found “to have materially
assisted, sponsored, or provided financial, material, or technological support
for, or goods or services to or in support of” SDNs designated thereunder. In
addition, the blocking requirement applies to entities determined “to be owned
or controlled by, or to have acted or purported to act for or on behalf of, directly
or indirectly” such SDNs. Thus, ensuring compliance requires screening not
only the list of SDNs but also identifying and screening for entities that may be
owned or controlled by SDNs.
