Banks Frustrated by Lack of Treasury Guidance on New Investment in Russia Ban
Some banks are avoiding legal trouble by refraining from conducting possibly permissible business in Russia while they wait for guidance.
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Treasury has not yet issued guidance, a department spokesperson confirmed. While banks wait, they are proceeding based on "the limited hint" that officials at the U.S. Department of the Treasury's Office of Foreign Assets Control, or OFAC, will interpret this ban similarly to a new investment ban related to energy, which likely did not apply to maintenance of activities, Shoyer said.
It is unclear what constitutes new investment in the context of the order, though the term appears in other sanctions programs, Anthony Rapa, a partner who leads the national security team at Blank Rome LLP, said in an interview.
"One of the main fault lines, for example, is the interpretation of new investment in the context of an existing operation in Russia, and funding that, and whether that's new investment or not," Rapa said, adding that guidance from OFAC "would be helpful there."
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Some transactions with Russia are still allowed for now. However, since other types of services have been banned, it seems like "a logical step" for banking services to be eventually banned, Shoyer said.
The likelihood of such a move is hard to predict, Rapa said.
"Practically speaking, there already are significant constraints on this activity given the sanctions already in place (including, notably, as directed against the Russian financial sector), and many U.S. persons choose not to engage in this activity for prudential reasons, but there is still room for the Biden Administration to ramp up sanctions in this regard," Rapa said in an email. "This remains difficult to predict."
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"Banks Frustrated by Lack of Treasury Guidance on New Investment in Russia Ban," by Zoe Sagalow was published in S&P Global on May 25, 2022.