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Trade Sanctions Update
Forensic Foresight: February 2017
This article summarises some of the recent key changes to international trade sanctions, which involve Myanmar, Cote d’Ivoire, Russia, Ukraine, Iran, Sudan, and Burundi.
On 7 October 2016, Barack Obama signed an Executive order entitled, ‘Termination of Emergency With Respect to the Actions and Policies of the Government of Burma.
According to a related factsheet issued by the U.S. Treasury, the sanctions on Burma/Myanmar administered by OFAC are no longer in effect, including:
- All individuals and entities blocked pursuant to the Burmese Sanctions Regulations (BSR) have been removed from OFAC’s SDN List
- All property and interests in property blocked pursuant to the BSR are unblocked
- The ban on the importation into the United States of Burmese-origin jadeite and rubies, and any jewellery containing them, has been revoked1
- All OFAC-administered restrictions under the Burma sanctions program regarding banking or financial transactions with Burma are no longer in effect
- OFAC will remove the BSR from the Code of Federal Regulations
- Compliance with the State Department’s Responsible Investment Reporting Requirements is no longer required by OFAC’s regulations and is now voluntary.2
FinCen also issued an exception to the prohibition imposed by s 311 of the USA PATRIOT Act.3 The ‘exception’ permits U.S. financial institutions to maintain correspondent accounts for Burmese banks under certain conditions.
Australia’s autonomous sanctions regime in relation to Myanmar remains in force, which includes an arms embargo. In addition, a number of individuals and entities associated with Myanmar remain on the SDN list.
Cote d’Ivoire (Ivory Coast)
In late April 2016 the United Nations adopted Resolution 2283 terminating the sanctions regime against Cote d'Ivoire, including restrictions on exports to Cote d'Ivoire of arms and related materials. This change has been implemented in the U.S via an Executive Order dated September 14, 2016 entitled, "Termination of Emergency with Respect to the Situation in or in Relation to Côte d’Ivoire.”4
The U.S regulator charged with controlling the export of defence articles, the DDTC, will publish a Federal Register notice to implement a conforming update to ITAR 126.1.5
In line with the UN, Australia ceased all sanctions related to Cote d’Ivoire on 28 April 2016.6
On September 1, OFAC added 37 entries to the Specially Designated Nationals List. According to Treasury’s press release, the ‘action is part of OFAC’s ongoing efforts to counter attempts to circumvent sanctions on Russia, to assist the private sector with sanctions compliance, and to foster a diplomatic resolution to the conflict in Ukraine’. The designation also targets 18 construction, transportation, and defence entities pursuant to Executive Order 13685, including entities Involved in the construction of the Kerch Bridge, which would span the Kerch Strait to connect the Crimean peninsula with Russia.
OFAC also identified a number of subsidiaries that are owned 50 percent or more by previously sanctioned Russian companies and added these 95 entries to the Sectoral Sanctions List.7
A number of individuals and entities were also designated under Executive Order 13694 which concerns malicious cyber activities.8
On 7 October 2016 OFAC updated its FAQs relating to Lifting of Certain U.S. Sanctions under the Joint Comprehensive Plan of Action (JCPOA).9
This update will focus on the updated FAQs concerning U.S dollar processing by non-U.S. financial institutions (FI), specifically FAQ ‘C7’. C7 states:
Foreign financial institutions (non-U.S FIs), including foreign-incorporated subsidiaries of U.S. financial institutions, may process transactions denominated in U.S. dollars or maintain U.S. dollar-denominated accounts that involve Iran or persons ordinarily resident in Iran, or in which there is an interest of a person whose property and interests in property are blocked solely pursuant to Executive Order 13599 and section 560.211 of the Iranian Transactions and Sanctions Regulations, including National Iranian Oil Company, the Central Bank of Iran, and other individuals and entities that meet the definition of the Government of Iran or an Iranian financial institution
C7 then further specifies the limits of U.S dollar clearing by non-U.S FIs:
Provided that such transactions or account activities do not involve, directly or indirectly, the United States financial system or any United States person, and do not involve any person on the SDN List or conduct described in FAQ A.3.ii-iii. FAQ A.3.ii-iii describes the remaining sanctions concerning certain SDN regimes, such as terrorism and WMD designations, as well as secondary sanctions that target dealings by non-U.S. persons with Iran-related persons remaining on the SDN List after Implementation Day or involving trade in certain materials involving Iran.
The FAQ update may prompt non-U.S FIs to commence opening USD accounts for Iranian customers however, the FAQs run for 45 pages and FIs should carefully review the guidance and underlying regulations before resuming business with Iran. In addition, FIs should consider whether they can adequately quarantine their Iranian business from the U.S. financial system and any impact that resuming this business may have on their relationship with their U.S. nostro account holders. These changes follow the recent grant of a number of specific licenses for the sale of commercial aeroplanes to Iran.
On January 13 OFAC issued an amendment to the Sudanese Sanctions Regulations, 31 C.F.R. part 538 (SSR) to authorize all transactions prohibited by the SSR and by Executive Orders 13067 and 13412, and to unblock previously blocked property in which the Government of Sudan has an interest. The amendments take effect from Tuesday, January 17, 2017.
OFAC is also publishing a Fact Sheet and a number of new and updated Frequently Asked Questions pertaining to this regulatory amendment. The changes effectively remove all prohibitions that were in place under the SSR but leave in place other sanctions programs, such as the Darfur sanctions implemented pursuant to EO 13400. Not all export restrictions have been removed, and exporters, particularly those in the defence industry should review the amendments in detail prior to exploring potential export opportunities.
On November 22, 2015 Executive Order 13712 was signed and added ‘certain persons contributing to the situation in Burundi’ to the OFAC SDN list. Implementing regulations were enacted in April 2016.10 The European Union has enacted similar measures.11
In early September the U.S. OFAC announced a $4million dollar settlement with an American agricultural company. The alleged violations involve the exporting of seeds to Iran According to OFAC’s web notice, the company shipped the seeds to third country consignees who arranged for the re-exportation of the seeds to Iran.
OFAC determined that the company did not voluntarily self-disclose the Alleged Violations to OFAC, and that the alleged violations constitute an egregious case. Both the statutory maximum and base penalty civil monetary penalty amounts for the alleged violations were $12,000,000.
The matter demonstrates that organisations, even those that deal in goods that are not military or dual-use goods, and would have likely been granted an export licence, should continually review their sanctions and export control compliance programs, and ensure that they effectively respond to regulatory inquiries. The matter also demonstrates the importance of having system based controls that ensure end-users are accurately recorded and subjected to screening.
1. Noting that certain procedural requirements relating to this ban have not yet been complied with.
2. OFAC, https://www.treasury.gov/resource-center/sanctions/Programs/Documents/burma_fact_sheet_20161007.pdf
3. FinCen, https://www.fincen.gov/sites/default/files/shared/Burma%20311%20Exception%20-%20Final%20for%20Publication.pdf
4. OFAC, https://www.treasury.gov/resource-center/sanctions/Programs/pages/coted.aspx
5. DDTC, https://www.pmddtc.state.gov/embargoed_countries/
6. DFAT, http://dfat.gov.au/international-relations/security/sanctions/pages/sanctions.aspx
7. OFAC, https://www.treasury.gov/resource-center/sanctions/Programs/Pages/ukraine.aspx;
8. OFAC, https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20161229.aspx
9. OFAC, https://www.treasury.gov/resource-center/sanctions/Programs/Documents/jcpoa_faqs.pdf
10. OFAC, https://www.treasury.gov/resource-center/sanctions/Programs/Pages/burundi.aspx
11. EU Sanctions, https://eeas.europa.eu/headquarters/headquarters-homepage/8442/consolidated-list-sanctions_en
Forensic Foresight: February 2017
Forensic Foresight: February 2017