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On December 22, 2023, President Biden signed a new Executive Order (E.O. 14114) containing the latest round of sanctions against the Russian Federation. Shortly thereafter, Treasury Secretary Janet Yellen stated that the Office of Foreign Assets Control (OFAC) will take “decisive” and “surgical” action when enforcing sanctions against financial institutions involved in transactions that support Russia’s military-industrial base. Under the new sanctions, non-U.S. financial institutions may be denied access to U.S. correspondent accounts or payable-through accounts, effectively denying access to the U.S. financial system. OFAC may also block an offending institution’s property in the United States. The sanctions build on the Russian Harmful Foreign Activities Sanctions promulgated in 2021 and 2022 (E.O.s 14024 and 14066).

Focus on Foreign Financial Institutions

Readers of this blog will know that, in response to Russia’s invasion of Ukraine, the United States imposed several rounds of direct sanctions designed to hamstring Russian military procurement by targeting Russian entities and Russian financial institutions. Russia has increasingly used third countries to evade these sanctions and continues to procure military equipment.

The new Executive Order intensifies the focus on “foreign financial institutions”[1] that conduct or facilitate transactions on behalf of the Russian military-industrial base. In so doing, the new action expands the reach of so-called “secondary sanctions” against parties that do business with Russia.

Compliance Takeaway

Non-U.S. financial institutions should immediately take steps to mitigate their sanctions risk by screening their transactions and customers, and halting transactions that may support the Russian military-industrial base.

Under the new rule, OFAC may sanction any foreign financial institution involved in “significant transactions” in specific industry sectors[2] or involving specific items[3] that support the Russian military. The specific sector and item lists are designed to assist foreign financial institutions in identifying transactions that will subject them to sanctions, and thus help them mitigate their sanctions risk.

The term “significant transactions” is defined to include even a single transaction, depending on the circumstances. OFAC may consider the totality of the facts and circumstances when determining whether a transaction is (or multiple transactions are) “significant.” Relevant factors include size, number, and frequency of the transactions; the nature of the transactions; management’s level of awareness; and any other factors that OFAC deems relevant.

Foreign financial institutions may wish to review their customer base and identify customers that could create exposure based on association with one of the specified industry sectors or transactions that may involve the specified items. Based on the risk assessment, the institution should follow up with these identified customers and transactions to either ensure customer accounts are not facilitating the sanctioned activity or restricting high-exposure accounts and customers. As explained in OFAC’s Compliance Advisory, these steps should supplement, not replace, an institution’s baseline customer due diligence and anti-money laundering controls.

OFAC has issued two General Licenses to support financial institution compliance with these new sanctions. General License No. 84 permits U.S. financial institutions to process transactions through the end of 2023 to close correspondent accounts or payable-through accounts that are prohibited by the new E.O.

General License No. 85 permits transactions through March 21, 2024, in order to wind down business with Expobank Joint Stock Company or any entity in which Expobank has a majority interest.


The new Executive Order is another step in the global effort to target Russia’s evasion of sanctions and export restrictions to support its military-industrial base. Rather than target the bad actors themselves, this set of sanctions places the burden on foreign third parties to identify and stop transactions that may support what Secretary Yellen calls Russia’s “war machine.” While U.S. banking institutions are intimately familiar with sanctions and export compliance, the new Executive Order follows the extraterritorial model for sanctions and export controls that we’ve seen more and more of recently. Keep an eye on this space as we continue to track these developments.


[1] Section 11(f) of the amended E.O. 14024 defines “foreign financial institution” as “any foreign entity that is engaged in the business of accepting deposits; making, granting, transferring, holding, or brokering loans or credits; purchasing or selling foreign exchange, securities, futures or options; or procuring purchasers and sellers thereof, as principal or agent.” This covers many types of entities such as “depository institutions; banks; savings banks; money services businesses; operators of credit card systems; trust companies; insurance companies; securities brokers and dealers; futures and options brokers and dealers; forward contract and foreign exchange merchants; securities and commodities exchanges; clearing corporations; investment companies; employee benefit plans; dealers in precious metals, stones, or jewels; and holding companies, affiliates, or subsidiaries of any of the foregoing.”

[2] The covered sectors can include any industry sector that is determined to support Russia’s military-industrial base, and includes “technology, defense and related materiel, construction, aerospace, or manufacturing sectors of the Russian Federation economy.” Section 11(a) of the amended E.O. 14024.

[3] Specific item categories listed in the EO include certain semiconductor manufacturing tools, machine tools, test equipment, lubricants, bearings, optical systems, and navigational instruments. Other items restricted for trade includes the Common High Priority Item List.