Sanctions Watch

Roundup: August 1 - August 23, 2023

August 23, 2023

 The Administration continued to engage in actions aimed at maintaining but not expanding Russia and Iran sanctions. China also continued to factor considerably into the Biden Administration’s calculus, particularly with the issuance of outbound investment restrictions. Congress was in recess during the reporting period but conducted activities to prepare for its return.  

The Administration (through the Department of Justice (DOJ), the Department of Commerce (Commerce), and the Department of the Treasury (Treasury)) published a Tri-Seal Compliance Note, joint guidance to encourage parties that could be affected by potential breaches of sanctions and the export control restrictions in the United States to self-disclose such violations.


Russia sanctions and related enforcement actions continued during the reporting period, and there remain areas to watch such as Russia’s progression to the digital ruble and additional Russia-adjacent targeting. There were multiple sanctions during the reporting period directly relevant to Russia’s continued invasion of Ukraine.     

The Administration designated a number of sanctions evasion networks.  This included sanctioning the companies Verus, Defense Engineering, and Versor as part of a sanctions evasion network tied to North Korea and Russia. It also designated Russian nationals and an organization for operating businesses that support the Russian government. The Administration continued to implement sanctions against Russian allies and facilitators, sanctioning eight individuals and five entities identified in facilitating the Belarusian government and Russian nationals involved in the poisoning of Aleksei Navalny, an opposition politician imprisoned by the Russian government.  The Administration also continued to pursue law enforcement actions, with a former Federal Bureau of Investigation special agent admitting to providing services to sanctioned Russian oligarch Oleg Deripaska.   

The two critical areas to focus on will be additional sanctions targeting Russian allies and facilitators and Moscow’s attempts to test its new digital ruble, the country’s proposed central bank digital currency (CBDC). During the reporting timeframe, Serbian President Aleksandar Vucic said that the Russian-aligned Serbian government will ignore U.S. sanctions recently imposed on top Bosnian Serb officials and treat the designations “as if they do not exist.” These statements may result in the development and issuance of additional sanctions packages or other enforcement actions to reinforce the integrity of the sanctions regime.  

On August 15, the Russian government reportedly started testing operations for Russia’s digital ruble, a move that will likely facilitate Russia to evade sanctions and avoid strict banking regulations, including establishing and funding digital ruble accounts and managing digital ruble transactions among individuals. This will likely lead the Administration to take specified actions to challenge this move.  

China/Export Controls

China witnessed significant actions tied to economic restrictions during the reporting period.  The Administration issued an Executive Order placing requirements and restrictions on outbound investment to China, Hong Kong, and Macau with respect to semiconductors and microelectronics, quantum information technologies, and artificial intelligence. Bipartisan calls to strengthen and expand this framework have already started, along with differing congressional reactions (see below). Similarly, U.K. Prime Minister Rishi Sunak is reportedly considering tightening rules on outbound investments into China following the release of the Executive Order and associated policy. 

The reporting period was also active for export controls for both the U.S. and China. China’s Ministry of Commerce imposed restrictions on the export of long-range civilian drones, citing concerns that the drones could be converted to military use. The Biden Administration extended for one year the national emergency regarding the implementation of the Export Control Reform Act of 2018. The Department of Commerce also lifted restrictions on dozens of Chinese companies ahead of Secretary Raimondo’s visit to Beijing in a move that was reportedly designed to ease tensions between the U.S. and China.  


The U.S. and Iran reportedly reached an agreement during the reporting period to return five American citizens being held in Iran in return for approximately $6 billion in sanctions relief. Shortly after that report, Secretary of State Blinken noted that the United States would not offer sanctions relief to Iran, and the funds would be transferred to restricted accounts and reserved to be used for humanitarian purposes.


Biden Administration officials are reportedly considering a proposal that would ease sanctions on Venezuela’s oil sector, allowing more companies and countries to import its crude oil. Consistent with the policy articulated by the U.S., E.U., and Canada in August 2021, sanctions relief would be tied to a free and fair presidential elections. The White House is contemplating temporary “sanctions relief” if Venezuela takes “concrete actions toward restoring democracy, leading to free and fair elections.” This relief could remain in place, but sanctions could also snap back if election interference is evident. The first sign of progress could come with the impending announcement of a new electoral board to oversee the presidential election.


During the reporting period, Lebanon’s interim central bank governor froze the accounts of the former central bank governor Riad Salameh and his associates following sanctions imposed by the United States and others for corruption. This action preceded the Biden Administration’s imposition of visa prohibitions on over 100 officials in Nicaragua based on their human rights track record. As an additional measure to crack down on corrupt activities and money laundering, Treasury will reportedly soon propose a rule that would end the anonymous purchase of luxury houses domestically, requiring real estate professionals to report the identities of the beneficial owners of companies buying real estate in cash to the Financial Crimes Enforcement Network (FinCEN). 

During the reporting period, the Administration also sanctioned Roman Semenov, Tornado Cash’s founder, for providing support to Tornado Cash and to the Lazarus Group, a North Korea cyber theft and crypto-based money laundering network. The sanctions designation was coordinated with the Justice Department, which unsealed an indictment against Semenov and a second co-founder of Tornado Cash, Roman Storm, who was arrested. This took place immediately after a Texas judge found that Tornado Cash is an entity that can be subject to U.S. sanctions.

Even with Congress in recess, Members of Congress have been engaged in preliminary negotiations over the National Defense Authorization Act (NDAA), the annual defense policy bill, which is slated to accelerate this fall for passage by the end of the year.  The sanctions and restrictive measures contained in the NDAA – such as fentanyl-related sanctions and outbound investment screening – are the most important to watch, as any sanctions within appropriations measures will likely be very limited.


With the Biden Administration’s issuance of outbound investment restrictions, it is important to recall that the Senate has passed the Outbound Investment Transparency Act as an amendment to the NDAA. This legislation requires screening U.S. investments in national security sectors for countries of concern, such as China, to include advanced semiconductors and microelectronics, artificial intelligence, quantum information science and technology, hypersonic technology, satellite-based communications, and networked laser scanning systems with dual-use applications. Passage of the bill would likely require the Administration to revisit its Executive Order, which House Financial Services Committee Chairman Patrick McHenry (R-NC) welcomed as a “more thoughtful and targeted approach” in regulating the flow of capital to China. Also passed as part of the NDAA was legislation aimed at preventing China, Russia, Iran, and North Korea from investing in, purchasing, leasing, or otherwise acquiring U.S. farmland.  

During the reporting period, House Foreign Affairs Committee Chairman Michael McCaul (R-TX), Rep. Young Kim (R-CA), and House China Committee Chairman Mike Gallagher (R-WI) asked  the State Department and Commerce Department to provide information on China’s demands to lift sanctions related to human rights abuse allegations in the Xinjiang region before resuming coordination with the U.S. on narcotics.


During the reporting period, the House and Senate issued two letters pushing back against the Administration’s Iran policy. The first was led by Sen. Tim Scott (R-SC) with 25 other Republican senators requesting that the Administration provide information on the $6 billion made available to Iran as a result of the detainee release. The second letter was led by Foreign Affairs Committee Chairman McCaul, House Majority Leader Steve Scalise (R-LA), and House Republican Conference Chair Elise Stefanik (R-NY) expressing concern over reports that the Administration concurrently negotiated a $6 billion prisoner deal and a nuclear understanding with the Iranian regime that are indirectly linked without submitting it for Congressional review under existing law.  

Sanctions/Money Laundering

During the reporting period, Senators Bill Cassidy (R-LA), Mark Warner (D-VA), Bob Casey (D-PA), Marco Rubio (R-FL), and Bill Hagerty (R-TN) wrote to the Administration expressing concern that the illegal tobacco trade serves as a way for transnational criminal organizations to finance crimes, including money laundering, human trafficking, and weapons trade. During the reporting period, the Senate Homeland Security and Governmental Affairs Committee approved the Vessel Tracking for Sanctions Enforcement Act, which requires Customs and Border Protection to establish a pilot program at their National Targeting Center to identify vessels that support foreign adversaries.


Senate Foreign Relations Committee Chairman Bob Menendez (D-NJ) stated his intent to introduce Venezuela-related legislation that, among other measures, authorizes several Executive Orders 13808, 13835, and 13850 on transactions related to Venezuelan debt and Venezuela’s gold sector; codifies Executive Order 13827 on digital currencies in Venezuela; codifies a humanitarian waiver for U.S. sanctions; adds Venezuela to the jurisdiction of the Foreign Claims Settlement Commission to ensure an orderly process of adjudication for legal claims of U.S. nationals against the Venezuelan Government; and requires the U.S. to develop and implement a strategy to counter disinformation in the hemisphere, including by the Maduro regime. 

Watch for developments with the NDAA conference negotiations at the recess ends and additional information begins to flow with respect to the disposition of certain provisions, particularly in the Senate bill. There remain other sanctions regimes that would require statutory reauthorization, for which any appropriations legislation in the House and Senate could be used.