The Biden administration announced plans on Friday to target financial institutions that facilitate payments for Russian weapons in an attempt to thwart President Vladimir Putin‘s ability to fund the war in Ukraine.
President Joe Biden is slated to amend two executive orders that will allow the United States to impose so-called secondary sanctions on financial institutions for doing business with firms already sanctioned for their links to Russia.
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Many international banks do not do business directly with Russia to avoid direct sanctions and penalties, but they do work with financial institutions in third-party countries that act as conduits to Russia.
Under the new rule, some U.S. banks may now run afoul of sanctions for indirectly engaging with the Russian regime.
“We expect financial institutions will undertake every effort to ensure that they are not witting or unwitting facilitators of circumvention and evasion,” Treasury Secretary Janet Yellen said in a statement.
The executive order allows the Treasury Department to investigate American and European banks that have relationships with foreign financial institutions facilitating trade in high-value military components, including semiconductors, machine tools, chemical precursors, ball bearings, and optical systems.
The order will also give U.S. authorities the ability to implement bans on products that initiated in Russia but were substantially transformed outside of Russian soil.
Senior administration officials told reporters that they will be working with banks in the U.S. and Europe in the coming weeks to warn them of the steps necessary to prevent themselves from experiencing unnecessary headaches under the new policy.
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European Union leaders earlier this week supported sanction legislation that undermines Russia’s lucrative diamond industry, restricts Russian gas imports, and limits imports of processed metals and machinery that are used to make weapons.
“We will not hesitate to use the new tools provided by this authority to take decisive, and surgical, action against financial institutions that facilitate the supply of Russia’s war machine,” Yellen said.
