U.S Actions to Russia-Ukraine War: OFAC Guidance on Russian Oil Price Cap

September 2022

KPMG Insights.  As part of ongoing, increasing, and evolving U.S. sanctions activity directed toward the Russia-Ukraine war, OFAC has published preliminary guidance for complying with a price cap related to transactions in Russian oil. Treasury has indicated that financial services providers, including insurers, will be integral to the effectiveness of, and compliance with, the price cap and has sought the industry’s input in developing a compliance regime that is “as simple as possible.” Beyond the preliminary guidance, OFAC intends to publish more guidance related to the services permitted subject to the price cap as well as how the price cap will be published and updated. Impacted entities, including traders, financial institutions, and insurers, should begin to review their business operations, identify potential risk areas, and address the steps needed to implement compliance with the price cap through additional measures within their existing sanctions compliance program. Notably, these latest prohibitions require greater due diligence from those in the impacted industries; when assessing these new measures, consideration should be given to each of OFAC’s essential components, including management commitment, risk assessment, internal controls, testing and auditing, and training.