OFAC Eases Maintenance/Wind-Down and Divestment Restrictions in New General Licenses

On May 1, OFAC issued two amended general licenses under the Ukraine-Related Sanctions Regulations (URSR). General License No. 12B, superseding General License No. 12A, authorizes additional activities necessary to the maintenance and winding down of operations or existing contracts. General License No. 13A, superseding General License No. 13, authorizes certain additional transactions necessary to divest from certain blocked persons. OFAC also issued three new FAQs (583-585) and revised four others (570, 571, 578, and 582). Under General License No. 12B, funds of identified blocked persons may be used for maintenance or wind-down activities, and US financial institutions are now permitted to process funds related to these maintenance/wind-down activities. Under General License No. 13A, US persons now have until June 6, 2018 to divest from holdings covered by the license. This is one month longer than the previous May 7, 2018 deadline. US persons may also take actions to divest from entities meeting the following criteria: (a) they are owned (50 percent or more) by EN+ Group plc, GAZ Group, and United Company Rusal and (b) their holdings were issued by Irkutskenergo, GAZ Auto Plant, or Rusal Capital Designated Activity Company. Read our advisory to learn more about the April 6, 2018 sanctions and original general licenses. General License No. 12B on Maintenance/Wind-Down Activities As noted in our previous blog post, General License No. 12 authorized US persons, until June 5, 2018, to wind down dealings with all SDN entities designated under the April 6, 2018 sanctions, except for Rosoboroneskport OAO and Russian Financial Corporation. It did not authorize winding down for those two entities, or any of the 24 individuals designated as SDNs. On April 23, 2018, General License No. 12 was superseded by General License No. 12A to provide a cross-reference to General License No. 14, which specifically addresses the maintenance and winding down of United Company Rusal plc. Information on General License Nos. 12A and 14 is covered here. General License No. 12B was issued in order to address difficulties that blocked US persons are having in accessing funds necessary for authorized wind-down and maintenance activities. The license now states that:

 “Any such payment that is directly or indirectly to the account of a blocked US person identified [in the general license] at a US financial institution may be processed in accordance with the original wire transfer instructions, provided that those instructions are consistent with this general license.”

And:

“All funds in accounts of blocked persons identified [in the general license], including funds originating from authorized payments to such accounts received on or after April 6, 2018, may be used for maintenance or wind-down activities authorized by this general license.”

 FAQ 583 clarifies that General License No. 12B makes the following adjustments:

• It explicitly permits originating and intermediary US financial institutions to process funds transfers that they would otherwise block to an account held by a blocked US person at a US financial institution.
• It clarifies that US financial institutions can release such funds only for authorized maintenance and wind-down purposes.

General License No. 13A on Divestment Activities General License No. 13 originally authorized US persons until May 7, 2018, to divest or transfer debt, equity or other holdings in EN+ Group plc, GAZ Group, and United Company Rusal. It did not authorize divestment from any other SDN entities, nor did it authorize the unblocking of blocked property; selling of holdings in the covered entities back to those entities; the purchase of any holdings in such entities; or any dealings with SDNs, including the SDNs identified in the general license. Under General License No. 13A, US persons now have until June 6, 2018 to divest, transfer debt, equity or other holdings. It newly authorizes such transactions related to debt, equity or other holdings in entities in which EN+ Group plc, GAZ Group, or United Company Rusal have a direct or indirect ownership of 50 percent or more, provided that such holdings were issued by one of the following:

• Irkutskenergo
• GAZ Auto Plant
• Rusal Capital Designated Activity Company

It also clarifies that the general license does not prohibit U.S persons from making “purchases of or investments in debt, equity, or other holdings” in persons listed under the general license “including the settlement of purchases or sales that were pending on April 6, 2018, “that are ordinarily incident and necessary to the divestment or transfer of debt, equity, or other holdings” of those same listed persons. OFAC’s FAQ 584 explains:

• US persons are authorized to engage in certain intermediate purchases of or investments in debt, equity, or other holdings that are “ordinarily incident and necessary” to divestment authorized by the general license. For example, US persons may purchase securities to be delivered to a counterparty to close out a short position.
• The general license authorizes certain trades involving the purchase of securities in the blocked persons listed in General License 13A that were executed prior to the sanctions date but were not settled due to the sanctions.
• It does not authorize any transactions with any blocked persons that are not listed in General License 13A.