The US Treasury’s Office of Foreign Assets Control (OFAC) has expanded the scope of its guidance concerning letters of credit (L/Cs) involving Russian entities subject to US sanctions.

OFAC previously indicated that US persons may, ‘advise or confirm a letter of credit issued on behalf of a non-sanctioned entity’ in which a sanctioned entity is the beneficiary – the exporter or seller of the underlying goods – because the subject L/C does not represent an extension of credit to the SSI entity.

Applicant allowed
The SSI entity refers to the Sectoral Sanctions Identifications List, which catalogues persons determined by OFAC to be operating in proscribed sectors of the Russian economy.

OFAC has now revised its frequently asked questions (FAQs) to state that US persons may ‘deal in (including act as the advising or confirming bank or as the applicant) or process transactions under a letter of credit’ in which a sanctioned entity is the beneficiary because the subject L/C does not represent an extension of credit to the SSI entity.

Issuing banks
The scope of the FAQs has also been expanded so it contemplates SSI entities not only as beneficiaries, but also as issuing banks.

OFAC cautioned that if an SSI entity is the issuing bank, US persons seeking payment or reimbursements from the SSI entity under an L/C should ensure that the payment terms do not exceed 30 or 90 days, as applicable.

The full FAQ on Ukraine/Russia-related Sanctions (Sectoral Sanctions under Executive Order 13662) can be found here.