Russian sanctions and their impact on credit unions
I am sure everyone reading this blog is aware of Russia’s invasion of Ukraine and the devastation it is causing there. In response to this invasion the United States and other nations have imposed sanctions against Russia. But what are sanctions and what does this mean for your credit union?
What are Sanctions?
Generally, sanctions are economic penalties levied against individuals or entities wherein others are penalized if they transact with the sanctioned individual/entity. For example, if the U.S. sanctions John Doe and a credit union carries out a wire transfer into a bank account owned by John Doe, the credit union could be penalized. Credit unions should also remember that sanctions can target banks or other entities. Thus, if a bank is sanctioned and Jane Doe requests a wire transfer to an account at the sanctioned bank, the credit union could be penalized for carrying out such a transaction even though Jane Doe is not sanctioned. Finally, sanctions can target countries in general. For example, according to OFAC FAQ #456 the United States prohibits the “exportation and reexportation of goods, services (including financial services)” to North Korea.
Now that we know that credit unions can be penalized for transacting with sanctioned individuals/entities, how do credit unions determine whether an individual or entity has been sanctioned? Fortunately, the Office of Foreign Asset Control (OFAC), the organization that oversees U.S. sanctions, maintains a list of sanctioned individuals/entities. Here is a link to OFAC’s page on specially designated nationals and blocked persons list (SDN list) and here is a link to OFAC’s page on non-SDN lists. Fortunately, for those who are not sure whether to look at the SDN list or non-SDN list, OFAC provides a consolidated search tool for all SDN and non-SDN lists. However, credit unions should still be careful, as OFAC states that the “use of Sanctions List Search is not a substitute for undertaking appropriate due diligence.” For help with assessing OFAC name matches, OFAC has published this FAQ and interactive questionnaire that credit unions may find useful.
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