The U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”) last week issued updated guidance for various U.S. sanctions programs. These included a planned expiry of temporary sanctions relief for the Venezuelan oil and mining sectors, new authority to impose sanctions on foreign persons or entities that threaten peace and security in the West Bank, and new guidance for industry in ensuring compliance with the Russian Oil Price Cap. A summary of each of these announcements is provided below.
On February 2, 2024, OFAC released updated guidance indicating that, absent progress to ensure a free and competitive 2024 presidential election, the United States will not renew General License (GL) 44, “Authorizing Transactions Related to Oil of Gas Sector Operations in Venezuela,” when it expires on April 18, 2024. Combined with the January 29, 2024, revocation of GL 43, “Authorizing Transactions Involving CVG Compania General de Mineria de Venezuela CA,” OFAC will effectively snap back sanctions on the Venezuelan oil and mining sectors.
OFAC issued both GL 43 and GL 44 in October 2023, following the announcement of a political agreement between representatives of Nicolás Maduro and the opposition Unitary Platform. However, the United States has since determined that recent actions by Maduro and his representatives in Venezuela, including the arrest of members of the opposition and barring of candidates from competing in the 2024 presidential election, are inconsistent with those agreements.
GL 44 temporarily authorizes transactions relating to oil and gas sector operations in Venezuela, including transactions involving Petróleos de Venezuela, S.A. (PdVSA). These operations include:
- The production, lifting, sale, and exportation of oil or gas from Venezuela, and provision of related goods and services;
- The payment of invoices for goods or services related to oil or gas sector operations in Venezuela;
- New investment in oil or gas sector operations in Venezuela; and
- Delivery of oil and gas from Venezuela to creditors of the Government of Venezuela, including creditors PdVSA entities, for the purpose of debt repayment.
Unless the representatives of Maduro take continued concrete steps toward a democratic election by the end of 2024, particularly with respect to allowing all presidential candidates to compete in the election, the United States will not renew GL 44. As a result, all transactions related to the Venezuelan oil and gas sector that are prohibited by the Venezuela Sanctions Regulations, will snap back into effect.
On January 29, 2024, OFAC also issued GL43A “Authorizing the Wind Down of Transactions Involving CVG Compania General de Mineria de Venezuela CA,” which provides U.S. persons 14 days to wind down any transactions with the Venezuelan state-owned mining company that were previously authorized by GL 43.
West Bank-Related Sanctions
On February 1, 2024, President Biden signed Executive Order (E.O.) 14115, “Imposing Certain Sanctions on Persons Undermining Peace, Security, and Stability in the West Bank,” declaring a national emergency to deal with the threat to “the peace, security, and stability of the West Bank and Gaza, Israel, and the broader Middle East Region.”
E.O. 14115 gives the U.S. Department of State and the U.S. Department of the Treasury the authority to sanction foreign persons or entities that have directly or indirectly engaged in actions that threaten the peace, security, or stability of the West Bank. Such actions include:
- Violence or threats of violence targeting civilians;
- Efforts to place civilians in reasonable fear of violence with the purpose or effect of necessitating a change of residence to avoid such violence;
- property destruction; or
- seizure or dispossession of property by private actors.
Transactions by U.S. persons that involve any property or interests in property of persons designated under E.O. 14115 are prohibited. This includes the making or receiving of any contribution or provisions of funds, goods, or services to or from such persons.
In addition, Treasury’s Financial Crimes Enforcement Network (FinCEN) issued alert FIN-2024-Alert001 providing select red flags to assist U.S. financial institutions in identifying and reporting suspicious activity that finances violence in the West Bank. FIN-2024-Alert001 notes four red flags that financial institutions should consider:
- Payments to any organizations or groups, including nonprofit organizations (NPOs), that are now or have been previously linked to violent extremist groups in the West Bank;
- Information included in a transaction between customers that indicate support for violent extremist groups or campaigns;
- Transactions with no apparent economic, business, or lawful purpose associated with a rapid movement of funds and linked to NPOs active in supporting violent extremists in the West Bank;
- Purchases of tactical military gear for resale overseas and destined for non-government Israeli end-users in the West Bank.
In its alert, FinCEN emphasizes that legitimate charities “should have access to financial services and can transmit funds through legitimate and transparent channels.” FinCEN also reminds banks to apply a risk-based approach to customer due diligence requirements when developing risk profiles of charities and NPOs. These requirements are spelled out in the November 2020 Joint Fact Sheet on Bank Secrecy Act Due Diligence Requirements for Charities and Non-Profit Organizations.
New Oil Price Cap (OPC) Guidance
On February 1, 2024, OFAC published a new Oil Price Cap (OPC) Compliance and Enforcement Alert, which provides guidance for industry stakeholders in complying with the OPC. The alert builds upon previous guidance issued by the Price Cap Coalition, which is comprised of the G7, European Union, and Australia. The Price Cap Coalition introduced the OPC in December 2022 with two key objectives: (1) constraining Russian revenues that could otherwise be used to fund Russia’s war of aggression against Ukraine; while (2) maintaining global oil flows and protecting energy security.
The alert includes:
- An overview of key OPC evasion methods and recommendations for identifying such methods and mitigating their risks and negative impacts.
- Information on how to report suspected OPC breaches across the Price Cap Coalition.
The specific OPC evasion methods covered by the alert relate to:
- Falsified documentation and attestations, which can be used to disguise the true price paid for Russian oil and oil products and obscure the origin of a vessel, its goods, or destination.
- Opaque shipping and ancillary costs, which could be bundled to conceal purchases of Russian oil and oil products above the price cap.
- Use of third country supply chain intermediaries and complex and irregular corporate structures to deliberately evade the OPC.
- Flagging and reflagging of vessels to obfuscate true ownership and/or affiliation with Russia.
- The “shadow” fleet, consisting of older vessels that are anonymously owned and/or have opaque corporate structures that are deployed solely to trade in sanctioned oil or oil products and engage in deceptive shipping practices.
- Voyage irregularities that disguise the ultimate destination, origin of cargo, or recipients.
The alert encourages stakeholders involved in the trade of Russian oil and oil products to review and adopt the recommendations provided to improve compliance with the OPC and reduce exposure to possible risks associated with circumvention and evasion of the measure.
Additional information about the price cap can be found in OFAC’s Guidance on Implementation of the Price Cap Policy for Crude Oil and Petroleum Products of Russian Federation Origin, which was last updated in December 2023.
Contact us if you have questions about these new sanctions developments or their potential impact on your business.