On July 23, 2024, the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) issued a notice about new reporting requirements (the OFAC Reporting Notice) under the Rebuilding Economic Prosperity and Opportunity for Ukrainians Act (REPO for Ukrainians Act). As discussed in our previous client alert, the REPO for Ukrainians Act authorizes the President to seize Russian sovereign assets subject to U.S. jurisdiction and transfer them to a fund that can be used to support Ukraine.
OFAC now requires financial institutions that hold Russian sovereign assets to report them to OFAC by August 2, 2024, or within 10 days of the detection that a financial institution holds such Russian sovereign assets.
Who Must File Reports with OFAC?
Certain categories of entities defined as "financial institutions" in the Bank Secrecy Act, 31 USC § 5312(a)(2), specifically:
- FDIC-insured banks
- Commercial banks or trust companies
- Agencies or branches of foreign banks in the U.S.
- Private bankers
- Credit unions
- Thrifts
- Brokers or dealers registered with the SEC
- Brokers or dealers in securities or commodities
- Investment bankers or investment companies
- Currency exchanges
- Insurance companies
- Any other business as designated by the Secretary of the Treasury
See OFAC Reporting Notice at 2.
What Assets Must Be Reported to OFAC?
Russian sovereign assets located at the financial institution, whether blocked or not, including:
- funds and other property of (i) the Central Bank of the Russian Federation, (ii) the Russian National Wealth Fund, or (iii) the Ministry of Finance of the Russian Federation; or
- "any other funds or other property that are owned by the Government of the Russian Federation, including by any subdivision, agency, or instrumentality of that government."
OFAC Reporting Notice at 2.
Notably, financial institutions are not required to report to OFAC Russian sovereign assets previously reported to OFAC by the financial institution (1) as blocked property or (2) pursuant to Directive 4 under Executive Order (E.O.) 14024. Financial institutions may rely on these reports previously filed with OFAC to comply with the OFAC Reporting Notice. Id. at 1.
What Information Must Be Reported to OFAC?
Reports should be submitted to OFAC by email (ofacreport@treasury.gov), with the subject line, "[Name of Financial Institution] REPO for Ukrainians Act Report," and enclose a completed OFAC REPO Report Form. Reports should include, among other things:
(1) The name and address of the person (e.g., the specific financial institution) in possession or control of the Russian sovereign asset;
(2) The date the Russian sovereign asset was detected as coming into possession or control of the financial institution;
(3) The actual, or if unknown, estimated value of the property in U.S. dollars. Foreign currencies must be reported in U.S. dollars with the foreign currency amount and notional exchange rate in the narrative;
(4) The person who legally owns the account or property;
(5) For each Russian sovereign asset reported, a description of the property and its location in the United States or otherwise, including asset type, any relevant account types, account numbers, reference numbers, dates, or other information necessary to identify the property;
(6) A copy of the most recent relevant account statement or other documentation to support the estimated value of the property.
See OFAC Reporting Notice at 1; OFAC REPO Report Form.
Implications
Financial institutions, including those maintain correspondent or payable-through accounts for foreign financial institutions, should undertake a review of their touchpoints with Russian clients to assess if they hold Russian sovereign assets, and report them to OFAC within the required time periods.
Assets reported under the OFAC Reporting Notice, unless blocked separately under a sanctions program, do not themselves become blocked because of this OFAC Reporting Notice. Under the REPO for Ukrainians Act, OFAC must report such Russian sovereign assets to Congress starting in October 2024, and annually thereafter for 3 years.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.