OFAC Moscow Exchange Sanctions Target Russia's Financial Core

US Treasury Targets Russia’s Financial Infrastructure with Comprehensive Sanctions

In a significant escalation of economic pressure, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced sweeping sanctions on June 12, 2024, targeting the core of Russia’s financial system. The action designated the Public Joint Stock Company Moscow Exchange Group (MOEX), Russia’s largest public market, along with its key subsidiaries. These **OFAC Moscow Exchange sanctions** are designed to further isolate Russia from the international financial system and impede its ability to fund its war against Ukraine.

The designations were made pursuant to Executive Order 14024, which authorizes sanctions against entities operating in sectors of the Russian Federation economy determined to support its military-industrial base. Treasury identified MOEX and its affiliates as critical components of that financial architecture.

Key Designated Entities

The action places three pillars of Russia’s financial markets on the Specially Designated Nationals and Blocked Persons (SDN) List:

* **Public Joint Stock Company Moscow Exchange Group (MOEX):** Russia's primary exchange for equities, fixed income, derivatives, and foreign exchange. It is the central hub for Russia’s capital markets.

* **National Clearing Centre (NCC):** A MOEX subsidiary that acts as the central counterparty and clearing agent for Russia’s currency, derivatives, and stock markets. Its designation paralyzes on-exchange foreign currency clearing.

* **Non-Bank Credit Institution Joint Stock Company National Settlement Depository (NSD):** Russia's central securities depository, a critical piece of infrastructure for settling and servicing securities.

In its press release, the Treasury stated these entities were designated for operating in the financial services sector of the Russian Federation economy. The move directly followed a G7 commitment to intensify pressure on Russia.

Market Impact and Evasion Tactics

The immediate consequence of the **OFAC Moscow Exchange sanctions** was MOEX’s announcement that it would suspend all trading in the U.S. dollar and the euro starting June 13, 2024. This action effectively halts centralized exchange trading for Russia's two most important foreign currencies, forcing transactions into the less transparent over-the-counter (OTC) market. This is expected to increase volatility, reduce liquidity, and complicate the establishment of a reliable exchange rate.

OFAC noted that these measures build on previous efforts to curtail Russia's access to international financial services, forcing the Kremlin to seek alternative payment mechanisms and financial nexuses. The action aims to raise transaction costs and cut off access points for foreign currency and international investment, which are vital for importing critical technologies and goods for Russia's defense industry.

In addition to the financial infrastructure, the wider sanctions package designated over 300 other individuals and entities, including those involved in Russia's technology, defense, and energy sectors, as well as transnational networks used for sanctions evasion in countries like China, Kyrgyzstan, and Turkey.

Compliance Implications for Financial Institutions

For U.S. persons and entities, the legal directive is unambiguous: all property and interests in property of MOEX, NCC, and NSD that are in the United States or in the possession or control of U.S. persons are blocked and must be reported to OFAC. All transactions involving these entities are prohibited unless authorized by a general or specific license.

Crucially, OFAC also expanded the scope of secondary sanctions risk. Foreign financial institutions may now face sanctions for conducting or facilitating significant transactions, or for providing any service, involving any person designated for operating in Russia's technology, defense, manufacturing, or other specified sectors. This explicitly includes providing services to any blocked Russian financial institution, raising the compliance stakes for non-U.S. banks that continue to deal with the Russian market.

To allow for an orderly exit, OFAC issued three general licenses concurrently with the designations:

* **General License 98:** Authorizes the wind-down of transactions involving MOEX, NCC, and NSD through 12:01 a.m. EDT on August 13, 2024. * **General License 99:** Authorizes the wind-down of debt or equity issued or guaranteed by the designated entities through August 13, 2024. * **General License 100:** Authorizes the wind-down of certain derivative contracts entered into before June 12, 2024, that involve the designated entities, also through August 13, 2024.

These licenses do not permit any debit to an account of the blocked entities on the books of a U.S. financial institution.

Compliance Takeaway

Compliance officers at financial institutions globally must take immediate action. This includes updating all sanctions screening systems with the newly designated entities (MOEX, NCC, NSD) and their subsidiaries. U.S. firms must ensure any relevant assets are blocked and reported. Non-U.S. institutions must urgently reassess their exposure to the Russian financial sector to avoid falling foul of secondary sanctions. All firms with exposure must carefully review OFAC General Licenses 98, 99, and 100 to ensure any wind-down activities are completed before the August 13, 2024 deadline.