Accounting services, trust and business formation, or management consulting services are now prohibited for Russian nationals in accordance with the Office of Foreign Assets Control (“OFAC”) announcement of May 8, 2022 of the U.S. Department of the Treasury of a determination pursuant to Section 1(a)(ii) of Executive Order 14071 (issued April 6, 2022). Effective 12:01 a.m. ET, June 7, 2022, U.S. persons are prohibited from exporting, re-exporting, selling, or providing, directly or indirectly, accounting, trust, and business formation services, or management consulting to anyone located in the Russian Federation. That said, it is very important that any party doing business with Russia review their sanctions exposure and ensure that an effective OFAC sanctions compliance program is in place to minimize exposure to enforcement of sanctions by OFAC.
Who are the American people?
Section 4 of Executive Order 14071 states that for the purposes of the Executive Order, the definitions of terms are as follows:
- ”USA person” means any citizen of the United States, lawful permanent resident, entity organized under the laws of the United States, or any jurisdiction in the United States (including foreign branches), or any person in the United States.
- ”the person” signifies an individual or an entity.
- ”entity” means a partnership, association, trust, joint venture, corporation, group, sub-group or other organization.
Who is a Russian person?
OFAC plans to issue regulations defining the term “Russian person” as meaning an individual who is a citizen or national of the Russian Federation, or an entity organized under the laws of the Russian Federation.
What is excluded in the determination?
- any service to an entity located in the Russian Federation owned or controlled, directly or indirectly, by a U.S. Person.
- Any service related to the liquidation or disposal of an entity located in the Russian Federation that is not owned or controlled, directly or indirectly, by a Russian person.
OFAC FAQ 1034 Provides definitions of “accounting”, “trust and business formation” and “management consulting” services as follows:
- “Accounting services” – includes services related to the measurement, processing and evaluation of financial data on economic entities. Please note that OFAC has issued General License 35 to authorize certain transactions usually incidental and necessary to the export, re-export, sale or supply, directly or indirectly, from the United States, or by a person of the United States United States, wherever located, providing credit scoring or auditing services to anyone located in the Russian Federation until 12:01 a.m. Eastern Daylight Time on August 20, 2022. See FAQ 1035 .
- “Fiduciary and business creation services– includes services related to assisting individuals in the formation or structuring of legal persons, such as trusts and corporations; act or cause others to act as directors, secretaries, administrative trustees, fiduciary trustees, registered agents or registered shareholders of legal entities; provide a registered office, a business address, a mailing address or an administrative address for legal persons; and the provision of administrative services for trusts. Please note that all of these activities are standard activities of Trust and Company Service Providers (TCSPs), although they may be provided by others.
- “Management consulting services” – includes services related to strategic business advice; organizational and system planning, assessment and selection; development or evaluation of marketing programs or implementation; mergers, acquisitions and organizational structure; staff augmentation and human resource policies and practices; and brand management.
OFAC 1035 FAQs
For the purposes of Russian General License 35, what do the terms “credit rating services” and “auditing services” mean?
The term “credit rating services” means services relating to assessments of a borrower’s ability to meet its financial commitments, including analysis of general creditworthiness or in respect of a debt or specific financial obligation.
“Audit Services” means the examination or inspection of business records by an auditor, including verification and verification of accounts, statements or other representation of the financial condition or regulatory compliance of the auditee.
General License 35 authorizes certain transactions usually incidental and necessary to the export, re-export, sale or supply, directly or indirectly, from the United States, or by a United States person, wherever located. , credit rating or auditing services to anyone located in the Russian Federation until 12:01 a.m. Eastern Daylight Time on August 20, 2022.
General License 35
Authorization of transactions involving credit rating and audit services
(a) Except as provided in paragraph (b) of this General License, all transactions customarily incidental and necessary to the export, re-export, sale or supply, directly or indirectly, of the United States, or by a person of the United States, wherever located, credit rating or auditing services to any person located in the Russian Federation which is prohibited by Section 1(a)(ii) of Executive Order 14071 are permitted until 12:01 a.m. Eastern Daylight Time on August 20, 2022.
(b) This general license does not authorize any transactions otherwise prohibited by the Russian Harmful Foreign Activities Sanctions Regulations, 31 CFR part 587 (RuHSR), including transactions involving any person blocked under the RuHSR, unless separately authorized .
The OFAC Sanctions Compliance Program applies to all
In order to avoid any type of OFAC enforcement, continued attention should be given to having policies and procedures in place to comply with US sanctions and an OFAC sanctions compliance program.
OFAC compliance applies to all US persons; including, all U.S. citizens and permanent resident aliens, regardless of residency, all persons and entities in the United States, all entities incorporated in the United States and their foreign branches, all organizations subject to the jurisdiction American, foreign entities that do business in the United States or with the United States or persons of the United States, or that use goods or services of American origin and organizations that facilitate or engage in the trade online or process transactions using virtual currency.
Although OFAC Sanctions Compliance Programs (SCPs) are bespoke programs designed around the uniqueness of a specific organization, there are certain fundamental “mindsets” applicable across the organization. business environment that can be taught. According to OFAC, the existence of an effective OFAC sanctions compliance program at the time of a violation will be considered by OFAC’s Office of Compliance and Enforcement when determining civil monetary penalties. Seeking the assistance of a professional third party in the development and implementation of an SCP within the framework of OFAC can be a practical step in the right direction.