OFAC employs further sanctions on Russian financial sector

OFAC has designated the Corporation Bank for Development and Foreign Economic Affairs Vnesheconombank (VEB) and Promsvyazbank Public Joint Stock Company (PSB), along with 42 of their subsidiaries, and placed them on the Specially Designated Nationals (SDN) List. OFAC stated that VEB is crucial to Russia’s ability to raise funds and PSB is critical to Russia’s defense sector. The OFAC press release also provided the following on these entities:

VEB is one of Russia’s top five financial institutions and finances most of Russia’s domestic development projects. In partnership with commercial banks, VEB provides financing for large-scale projects to develop the country’s infrastructure and industrial production. OFAC also sanctioned 25 of VEB’s subsidiaries which represent a wide range of businesses. VEB’s designated affiliates include the Eximbank of Russia.

PSB is a Russian state-owned financial institution. According to OFAC, Russia nationalised PSB in 2018 and ‘repurposed it to finance the defense industry and service large defense contracts as part of a scheme to assist the government in avoiding new sanctions.’ OFAC notes that PSB currently services nearly 70% of state contracts signed by the Russian Ministry of Defense. Sanctions also came down on 17 of PSB’s subsidiaries, including a variety of companies in the financial, technology, and real estate-related sectors.