WorldECR | US warns: Russia evades sanctions through new measures

The U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) has issued an advisory warning foreign jurisdictions and financial institutions that Russia is suspected of attempting to evade international sanctions by establishing new branches and subsidiaries overseas.

The warning highlights growing concerns in the United States and the European Union that Russia is using third countries to circumvent sanctions and continue to finance its war in Ukraine.

The U.S. Office of Foreign Assets Control said in a Sept. 4 alert that Russia is “redirecting resources throughout its economy and government” to support its military operations, including through the financial sector.

The U.S. Office of Foreign Assets Control warned that foreign regulators and financial institutions should be cautious about Russian financial institutions establishing new branches or subsidiaries overseas, or engaging in any transactions with them.

It also noted that even if these newly established branches or subsidiaries are not themselves sanctioned, they should be considered as potential tools for evading sanctions.

OFAC warned that financial institutions working with these new entities — including activities such as maintaining accounts, transferring funds or providing financial services such as payment processing, trade finance and insurance — face “significant sanctions risk arising from assisting Russian sanctions evasion.”

However, the alert also clarified that facilitation of existing financial relationships for permitted transactions (such as those related to food, agriculture, pharmaceuticals, energy, and telecommunications) remains authorized. Despite this permission, OFAC stressed that attempts to open new branches or subsidiaries are a clear “red flag” that Russia may be evading sanctions.