On June 6, 2022, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) released new and revised guidelines regarding the Russian investment ban established by Executive Orders 14071, 14066, and 14068. As a result of the executive orders, sanctions can be imposed on individuals or entities determined to have operated in the accounting, trust and corporate formation services, or management consulting sectors of the Russian Federation economy. OFAC has consistently been updating and revising the guidelines to keep the guidelines as clear and consistent as possible, in an attempt to keep Americans doing business in Russia out of legal trouble.
As the pace of Russia’s incursion into neighboring Ukraine escalated three weeks ago, starting with a massing of troops on Ukraine’s eastern Donbas border and expanding quickly into a full-fledged military invasion, so too did the response of the United States and its Western allies. Initially, the Biden Administration proceeded cautiously, deciding against levying its harshest sanctions over concerns of how they would impact European and global economies and that a stepped approach offered the best chance for de-escalation of tensions. The government began by blacklisting two major state-owned banks that are tied to the country’s defense sector and five Russian nationals with close links to the Kremlin. The U.S. and its European allies also banned the Kremlin from raising new money in the U.S. and Europe and trading new sovereign debt in U.S or European markets. In addition, Germany unilaterally halted certification of the Nord Stream 2 natural gas pipeline which was set to go ahead sometime later this year, an action applauded by the U.S. who had long argued against the project fearing that it would increase Europe’s dependence on Russian fuel.
Compliance standards in the United States come from the laws and policies enacted by the government and its related agencies. Administering U.S. standards on foreign institutions, public or private, poses a unique challenge. Our public and private companies are held accountable by federal, state, local, or agency rules, as well as the guidelines providedby the United States Sentencing Commission. But foreign organizations, in theory, have no real obligation to follow our lead. There have been several notable attempts in recent years to enact legislation on foreign organizations and impose sanctions for noncompliance, and it is likely a continuing trend as the compliance industry grows.
Following the 2016 Wells Fargo scandal in which the bank opened millions of unauthorized bank and credit card accounts to collect fees, federal regulators have worked to address and respond to the corporation’s illegal conduct. On February 2nd, 2018, the U.S. Federal Reserve imposed unprecedented restrictions against Wells Fargo & Co. when it capped the bank’s growth for 2018 such that it could not exceed the total assets owned at the end of 2017. This restriction marks a substantial departure from previous penalties issued for improper compliance. Changes in policies and procedures and this novel punishment reflect a notable shift in the national bank’s expectations of corporate directors.