The escalating conflict between Russia and Ukraine, marked by Russia's alleged use of chemical weapons, has led to a new wave of US sanctions aimed at undermining Russia's military-industrial capabilities. 

These OFAC Russia sanctions target the materials, technologies, and chemicals vital for sustaining Russia’s military aggression. Additionally, the sanctions target entities in other regions, such as the People’s Republic of China (PRC), Belgium, and the United Arab Emirates (UAE), that facilitate sanction evasion.

So, let’s discuss these new sanctions and why international businesses require denied party screening systems to reduce the risk of fines and penalties, and stay in full compliance.

Key Takeaways:

  • Russia's deployment of chemical weapons against Ukrainian forces has prompted these latest sanctions.
  • The focus of the new OFAC Russia sanctions is on degrading elements of Russia’s military industrial complex, notably chemical production.
  • The sanctions also target contributors to Russia's future energy projects, particularly those in natural gas, along with international players suspected of aiding in sanction evasion.
  • All global businesses must develop or enhance their denied party screening processes to mitigate the risk of non-compliance with OFAC Russia Sanctions.

New OFAC Russia Sanctions Aiming to Restrict Military and Chemical Manufacturing and Disrupt Sanctions Evaders

The latest OFAC Russia sanctions continue the international push to limit access to essential materials and technologies for Russia's conflict with Ukraine. Of the nearly 300 new sanctions that were imposed, about 200 were issued by The Treasury Department. These sanctions are aimed at entities contributing to Russia’s military capabilities and efforts to bypass sanctions.

These sanctioned entities have been added to OFAC’s Specially Designated Nationals and Blocked Persons List (OFAC SDN list).

Here is a breakdown of the new OFAC Russia sanctions and the targeted sectors:

  • Military Industrial Complex: Approximately 100 of the new Russia sanctions specifically target the nation's military-industrial complex, including sectors like technology, defense materials, manufacturing, and transportation. The sanctions also affect third-party countries that facilitate the procurement of essential materials and technologies for Russian military production.
  • Chemical and biological weapons: Entities aiding Russia's chemical and biological weapons programs have been sanctioned. These measures align with the State Department’s enforcement of the 1991 Chemical and Biological Weapons Control and Warfare Elimination Act (CBW Act) following Russia's use of chloropicrin poison gas against Ukrainian forces.
  • Explosive precursors: Russia relies on imported explosive precursors like cotton cellulose and nitrocellulose, which are essential for making a wide variety of weaponry.
  • Disruption of Russia’s natural gas projects: Strategic sanctions aim to cut future energy revenues and stall natural gas projects, undermining Russia’s military manufacturing capabilities. 
  • Preventing sanctions evasion: The latest OFAC Russia sanctions also focus on stopping the circumvention of restrictions by targeting roughly 60 entities facilitating Russia’s access to technology and equipment from countries, including those in:
    • Belgium
    • Azerbaijan
    • The People’s Republic of China
    • The United Arab Emirates (UAE)
    • Slovakia

What Are the Implications of These New OFAC Russia Sanctions for Businesses?

These sanctions impact pivotal players that support Russia's military production and those aiding in evading sanctions. But what are the implications for organizations?

Every company within the targeted industries and financial channels that could facilitate sanction evasion must comply with OFAC Russia sanctions. With the expanding scope of these new measures and the wide network of sanctions evaders, businesses and individuals face higher risk of exposure to vulnerabilities that may result in sanctions violations.

All organizations with international operations must undertake adequate due diligence in all their activities. So, let's discuss what businesses should understand regarding potential fines and penalties for failing to comply.Complying with OFAC Russia Sanctions is Mission Critical

Compliance with OFAC Russia sanctions is mandatory for any international business, including those involved in imports.

Non-compliance can happen with or without intent to evade sanctions; unintentional violations can still lead to substantial fines and severe penalties. Deliberate breaches could even result in criminal charges.

Violations typically lead to reputational damage, potential operational disruptions, asset freezes, and loss of suppliers, which could further disrupt business activities.

Investing in appropriate denied party screening platforms, processes, and personnel is crucial to maintain compliance. This not only helps avoid various negative consequences but also contributes to global security and stability efforts.The Necessity of OFAC Sanction Screening

Organizations must identify any entities subject to global sanctions within their supply chain to stay compliant. Denied party screening helps identify any individuals or entities affected by Russia sanctions before engaging with them. Given the dynamic nature of sanctions lists, this screening should be conducted regularly.

It is important to note that under the OFAC sanctions program, you are responsible for the compliance posture of any third party you engage with, as such ensuring that all partners commit to stringent compliance measures is essential for legal and operational security.Best Practices for Denied Party Screening

Here are a few best practices to help your organization design and implement an effective denied party screening program that reduces the risk of non-compliance, safeguarding your business from regulatory and financial repercussions:

  • Comprehensive controls and guidelines: Establish and enforce clear compliance policies, procedures, and controls to prevent lapses in sanction screenings.
  • Automated Screening Processes: Screening against denied party lists manually can be overwhelming and impractical. Automated systems are essential for maintaining continuous OFAC compliance. Solutions like those from Descartes provide the capabilities to conduct both initial and recurring denied party screenings efficiently, reducing the need for manual intervention.
  • Alert Verification and Analysis: Although automated tools streamline the bulk of the screening process, the outcomes require further analysis to ensure accuracy. Employ or train specialists proficient in interpreting these results and can make well-informed decisions based on their findings.
  • Personnel Training: It is important to offer regular training for all staff involved in compliance-related activities, ensuring they possess the necessary expertise to perform their duties effectively.

Equip Your Teams with Fast and Accurate Global Sanctions Screening

Complying with OFAC Russia sanctions necessitates thorough and efficient denied party screening solutions. Manual screening is time consuming and susceptible to errors, which can lead to significant repercussions. 

Descartes is a provider of an industry-leading suite of denied party screening, 3rd-party risk management, export classification and documentation automation solutions, as well as trade content for leading business systems.

Our OFAC sanctions screening solutions provide accurate search results for restricted and denied parties against OFAC's SDN list. We also provide additional resources to help you  stay on top of new developments related to OFAC Russia Sanctions. Book a demo today to learn more about how Descartes keeps you compliant.