Former Russian Bank Executive Secures Sanctions Removal After Suing State Dept.

The U.S. removed sanctions from a former board member of one of Russia’s largest private banks more than two years after he submitted a delisting petition and about 10 months after he sued the State Department for stalling a decision on that petition without explanation.

Ilya Borisovich Brodskiy, former first deputy chairman of Russia’s PJSC Sovcombank, was removed from the Office of Foreign Asset Control’s Specially Designated Nationals List on Aug. 28. OFAC didn’t provide a reason for the removal, although the decision came about one month after Brodskiy’s lawyer and the State Department told a federal Washington, D.C., district court that both parties were “implementing” a settlement to resolve their dispute.

The State Department, OFAC and Brodskiy’s lawyer didn’t respond to requests for comment.

The U.S. designated Brodskiy in March 2022 -- about one month after Russia invaded Ukraine -- for his leadership position at PJSC Sovcombank. The bank at the time was the third-largest privately owned financial institution in Russia by total assets, according to OFAC.

In a complaint filed last year, Brodskiy said he submitted a delisting petition in May 2022 to the State Department ‘s Office of Economic Sanctions Policy and Implementation after being told that agency, and not OFAC, would be handling the matter. Brodskiy told the office that he should be removed from the SDN List because he had resigned from Sovcombank after he was designated and said he had never worked for the Russian government or any state-owned entities.

The petition asked the government for an “expedited” decision because OFAC had removed sanctions from Ozon Bank, an entity subject to similar sanctions, just 35 days after it was originally designated. But the State Department offered “no explanation” for why Brodskiy’s petition “was taking substantially longer to adjudicate than the seemingly more complex cases of similarly situated parties,” Brodskiy said.

Instead, Brodskiy said the State Department sent him several questionnaires, including one that asked “irrelevant” questions, including where Brodskiy’s wife and children worked and whether he was involved in Sovcombank’s 2018 acquisition of Russia’s RosEvroBank. The State Department also asked whether he was involved in Sovcombank’s decision to accept the Central Bank of Russia’s recommendation “not to disclose the composition of its management bodies” and whether Brodskiy had or planned to receive any income from Russian entities following his resignation from Sovcombank.

Brodskiy said he responded to this questionnaire in December 2022, and the agency continued to review the petition for the next seven months. The agency sent another questionnaire in August 2023 that “sought information irrelevant to the basis of Plaintiff's designation.”

Brodskiy sued the agency in October, saying that “nearly a year and a half has passed since Plaintiff's resignation and submission of his delisting petition, and” the State Department hadn’t yet reached a decision on the petition despite “the simplicity of the question before them.” During that time, the U.S. had removed sanctions from “other similarly situated parties,” including another former Sovcombank board member and several former members of the management board of Russia-based Bank Otkritie (see 2308140034). The complaint said each of those delisting requests was processed in about a year.

Brodskiy’s delisting delay led to “devastating effects,” the complaint said, adding that European banks had refused to open accounts for his family members and that he faced restrictions accessing money held at non-U.S. financial institutions.

The complaint also said Brodskiy’s continued designation was “contrary to the U.S. Government's stated policy of imposing sanctions ‘not to punish, but to bring about a positive change in behavior.’” If Brodskiy couldn’t be removed from the SDN List based on his resignation from Sovcombank, “then there is effectively nothing he can do to end his status as a sanctioned individual, which is inconsistent with the U.S. Government's stated policy of using sanctions to compel behavioral changes,” the complaint said.

About three months after filing the complaint, Brodskiy and the State Department asked the court to stay all proceedings as they worked to settle the issue on their own. As of press time, neither party had officially asked the court to dismiss the case.