On July 30, 2015, The US Treasury Department’s Office of Foreign Assets Control (OFAC) issued an advisory highlighting practices used to circumvent or evade US sanctions involving Crimea. The guidance follows a near comprehensive trade embargo imposed by the US and EU on Crimea in December 2014.
According to the advisory, OFAC is aware of transactions involving individuals or entities in Crimea where location information is omitted or obfuscated from SWIFT messages and trade documents. In some cases, beneficiaries in Crimea are identified as located in Russia and not Crimea, Ukraine. The US does not recognize Russia’s annexation of Crimea, and OFAC advises US persons that third-country distributors could be unaware of this distinction or deliberately exploiting confusion over Crimea’s status in order to sell US goods and services in Crimea.
OFAC recommends updating transaction monitoring systems with appropriate terms corresponding to major geographic locations in Crimea. Additionally, OFAC advises US persons to request additional information from parties that have previously attempted to violate the sanctions and to clearly communicate the US sanctions obligations to international partners.
In furtherance of the steps advised by Treasury, depending on a firm’s risk profile, Camstoll recommends consideration of the following:
- Foreign Investment — Crimea is actively pursuing foreign investment in the region. In assessing exposure to Crimea risk, financial institutions may consider the activities of international firms engaged in or pursuing investment projects in Crimea.
- Local Business Registration — Crimea has introduced a free economic zone to encourage economic activity. Financial institutions may consider screening for transactions involving businesses registered in Crimea and their affiliates.
- Trading Partners — Financial institutions may consider expanding filters with search terms to address major Crimean trading, transport, import and export firms.
- Correspondent Banking — Following annexation, a number of financial institutions, primarily from Russia, opened new operations in Crimea. Financial institutions may consider Crimea-related downstream correspondent banking risk and Crimea-related customer risk in discussions with international correspondent banking and trade partners.
The Camstoll Group is a leading advisory firm focused on addressing illicit finance and economic sanctions-related challenges. Our team draws on decades of combined experience examining the financial and support networks of illicit actors to assist financial institutions, multinationals, and governments to effectively understand, address, and manage complex risk.
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