Russia

During the reporting period, Russia sanctions efforts continued to focus on the oil price cap and, as part of the next sanctions package to be implemented on February 5, placing limits on high and low-value exports such as diesel and fuel oil, respectively.  In response, Russia will likely ban the sale of its crude oil, and high and low-value products that will likely go into effect on February 1, in advance of the G-7 restrictions. There are additional measures under consideration given the trajectory of Russia sanctions, particularly with respect to asset forfeiture. Estonia is considering legislation to allow the government to seize Russian assets, and it is under active discussion in the EU to include over $300 billion in Russian Central Bank reserves and billions more in frozen assets owned by sanctioned Russian individuals. The EU is also working on its 10th package of sanctions, which may include imposing sanctions or restrictions against Russian state nuclear energy company Rosatom. The primary question is whether the Biden Administration would also impose sanctions against Rosatom. Additionally, there is an active debate within the EU on whether to designate  Rosatom, which could also spill over into the U.S.  

The Administration also continued to impose sanctions and other restrictive measures on Russian individuals and entities. During the reporting period, the Financial Crimes Enforcement Network (FinCEN) designated Bitzlato, a virtual currency exchange, as a primary money laundering concern linked with Russian illicit financing in what was the first order is the first to be issued under Section 9714 of the Combating Russian Money Laundering Act. This is significant because it is the first exercise of new authorities provided to the Administration by Congress prioritizing specially Russia-associated money laundering that replicate those targeting anti-money laundering (AML) and counter-terror finance (CTF) generally. The Treasury Department also designated the Wagner Group as a Transnational Criminal Organization (TCO) in a likely attempt to broaden the types of assets that could be blocked in the future given two high-profile indictments: one regarding the operation of a yacht owned by sanctioned Russian oligarch Viktor Vekselberg and a second regarding a former senior FBI agent acting as an agent for Russian oligarch Oleg Deripaska.     

An area that the Administration or Congress may turn to in terms of additional sanctions and restrictive measures is to address attempts by the Russian central bank to start developing a cross-border payment settlement system using a central bank digital currency (CBDC).  According to public reports, Russia will examine either separate bilateral agreements with Russia to integrate their CBDC systems such as what they have discussed with Iran, or a singular platform for Russia to interact with other countries on CBDC-related matters. This is an area where we expect to see additional scrutiny given the emphasis on the part of the Administration, UK, EU, and other G-7 partners on targeting sanctions evasion networks. Another notable sector receiving additional scrutiny is the real estate sector; FinCEN recently issued an advisory for U.S. financial institutions to watch for Russian oligarchs seeking to evade sanctions by investing in commercial real estate through complex financing methods and opaque ownership structures to include offshore vehicles.