October 6, 2022

Volume XII, Number 279

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US Imposes New Sanctions on Russia for Cyber-attacks

Five entities and six individuals were sanctioned for interference with the 2016 US election.

On December 29, 2016, President Obama issued a new executive order that expands the authority of the US Secretary of Treasury to impose sanctions on individuals and entities for cyber-attacks under Executive Order 12694. The new executive order also specifically sanctioned five entities and four individuals in Russia for cyber operations aimed at the US election.

Amended Sanctions Authority under EO 13694

The sanctions were imposed in response to cyber activities taken by the Russian government during the 2016 US election. Under the new executive order, “Taking Additional Steps to Address the National Emergency with Respect to Significant Malicious Cyber-Enabled Activities,” sanctions may now be imposed on individuals and entities that the US Secretary of Treasury, in consultation with the US Attorney General and US Secretary of State, determines are responsible for or complicit in, or have engaged in, directly or indirectly, cyber-enabled activities originating from or directed by persons outside the United States, that result in a significant threat to the United States, and have the purpose or effect of “tampering with, altering, or causing a misappropriation of information with the purpose or effect of interfering with or undermining election processes or institutions.”

Sanctioned Parties

In the annex to the new executive order, two Russian intelligence agencies, the Main Intelligence Directorate (GRU) and the Federal Security Service (FSB), four GRU officers, and three companies that provided material support to GRU’s operations were identified. These parties will be added to the Office of Foreign Assets Control (OFAC)’s list of Specially Designated Nationals and Blocked Persons (SDN List), along with two more individuals that OFAC identified for using cyber-enabled means to cause misappropriation of funds and personal identifying information. As a result, the assets of these parties are blocked and “US persons” are prohibited from dealing with them.

One notable consequence of the designation of the FSB specifically is that US persons may now be prohibited from applying to this agency to obtain licenses to distribute IT products containing encryption in Russia. Such an application by a US person, directly or indirectly, would appear to be a prohibited dealing with an SDN.

“US Persons” include any United States citizen or national, permanent resident alien, an entity organized under the laws of the United States (including its foreign branches), or any person within the United States. If a US person engages in prohibited dealings with an SDN, such person can face a maximum civil penalty of $284,582, or twice the value of the underlying transaction to which the violation relates, whichever is greater.

Conclusion

US persons must ensure through thorough screening and other due diligence that they are not engaging in any dealings, direct or indirect, with an SDN. 

Copyright © 2022 by Morgan, Lewis & Bockius LLP. All Rights Reserved.National Law Review, Volume VII, Number 3
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About this Author

Margaret Gatti, Securities Lawyer, Morgan Lewis
Partner

Margaret Gatti represents US and non-US companies, universities, and financial institutions in matters involving economic sanctions, export controls under the International Traffic in Arms Regulations (ITAR) and the Export Administration Regulations (EAR), customs and import regulations, free trade agreements, antiboycott regulations (EAR and IRS), anticorruption laws (FCPA and UKBA), anti-money laundering legislation, international commercial sales terms (INCOTERMS), international e-commerce, and Bureau of Economic Analysis (BEA) reporting, as well as national security...

202-739-5409
Louis Rothberg, Morgan Lewis, Regulations attorney
Of Counsel

Louis Rothberg represents US and international enterprises in export license compliance and national security-related matters. Clients seek his counsel in matters related to munitions and dual-use export controls, economic sanctions and embargoes, and acquisitions in the United States by foreign persons concerning the Committee on Foreign Investment in the United States (CFIUS). Louis has experience with ITAR and EAR export controls, and with domestic and non-US company compliance with Office of Foreign Assets Control (OFAC) regulations involving US embargoed countries...

202-739-5281
Katelyn Hilferty, investments management attorney, Morgan Lewis
Associate

Katelyn M. Hilferty helps clients navigate US export controls and customs laws, sanctioned country regulations, anti-money laundering regulations, and national security issues. She has experience with classification/jurisdiction analyses, license applications, compliance counseling, investigations, and voluntary disclosures under the International Traffic in Arms Regulations (ITAR), Export Administration Regulations (EAR), and Office of Foreign Assets Control (OFAC) regulations. Additionally, she has counseled clients on transactions before the Committee on Foreign...

202.739.5674
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