OFAC to carry out a 2021 executive order barring transactions with Russian entities, including crypto

The US Treasury’s Office of Foreign Assets Control (OFAC) is solidifying a Russia-related executive order the Biden Administration issued last year by issuing new rules on transacting with Russian entities.

The April 2021 order, “Blocking Property With Respect To Specified Harmful Foreign Activities of the Government of the Russian Federation,” sought to block the movement of funds to Russian Federation controlled entities designated by the US Treasury. The executive order details modes in which an account might be connected and therefore blocked, and pointed out that digital assets were included in the sanctions, and shouldn’t be used to circumvent the order.

The order included “deceptive or structured transactions or dealings to circumvent any United States sanctions, including through the use of digital currencies or assets or the use of physical assets,” among its list of prohibited activities.

To implement the order, OFAC is issuing the Russian Harmful Foreign Activities Sanctions Regulations. The rules are currently in draft form on the Treasury’s website but will take effect tomorrow when they hit the public register. Because the regulations relate to an executive order relating to a national emergency, the usual procedure of proposed rule making and comment period do not apply.

The rules reiterate the parameters in the executive order, specifically targeting the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation and the Ministry of Finance of the Russian Federation. In its directive, the sanctions authority indicated that unless the activity is licensed or otherwise authorized by the office, transacting with these entities is barred, “including any transfer of assets to such entities or any foreign exchange transaction for or on behalf of such entities.”

OFAC’s rules do not single out crypto assets, but it does reiterate the executive order, which establishes that digital transactions circumventing the rules are prohibited.

OFAC plans to firm up these regulations in the future, since the current rules are in “abbreviated” format for the sake of providing immediate guidance, according to the sanctions watchdog. 

“OFAC intends to supplement this part 587 [the regulations] with a more comprehensive set of regulations, which may include additional interpretive guidance and definitions, general licenses, and other regulatory provisions,” said the notice.

The measures come amid a larger effort by the US and other nations to levy sanctions against the Russian Federation as it continues its assault on Ukraine. At the close of last week, the US and the EU announced a plan to cut a group of Russian banks from the international payments messaging system, SWIFT.