Articles Posted in OFAC Sanctions

For other sanctions regimes not as active as Burma, Iran, Cuba and Russia.

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The U.S. Treasury Department has issued sanctions designations against Turkey’s Ministry of National Defense, Ministry of Energy and Natural Resources, and the Ministers of Defense, Energy and Interior pursuant to a new Executive Order issued on October 14, 2019 by President Trump in response to Turkey’s military operation in northern Syria. The Executive Order authorizes secondary sanctions and can expose non-U.S. companies and financial institutions interacting with designated Turkish parties to risk of penalties.

All property and interests in property of these government agencies and officials are blocked and transactions and services are prohibited. This includes any entities in which the ministries or individual ministers have a 50 percent or more interest (individually or in the aggregate). U.S. sanctions jurisdiction applies to:

  • Persons, activity and property in the United States;
  • U.S. persons wherever they are located in the world; and
  • Transactions in U.S. dollars that clear the U.S. financial system.

U.S. persons and non-U.S. persons in the United States may not facilitate activity with blocked persons or property outside the United States that would be prohibited for them directly.

There are three general licenses issued with the Executive Order that (1) allow the official business of the U.S. government to continue with the sanctioned parties (which would include military cooperation and foreign military sales); (2) authorize until November 13, 2019 certain activities necessary for the wind down of existing contracts relating to the Ministry of National Defense and Ministry of Energy and Natural Resources; and (3) permit certain activities by international organization.

The Executive Order provides for secondary sanctions on persons not subject to U.S. jurisdiction that materially assist, provide financial, material or technological support, or goods or services to persons designated under the Executive Order. In addition, for non-U.S. financial institutions determined to knowingly conduct or facilitate a significant financial transaction for, or on behalf of, a person blocked by the Treasury Department, the Executive Order authorizes secondary sanctions to prohibit or restrict correspondent and payable-through accounts with U.S. banks.

The Executive Order provides broad authority to the U.S. Treasury Secretary to make additional sanctions designations for persons determined to engage in actions that threaten peace, security, stability or territorial integrity of Syria; commission of human rights abuses; being a Government of Turkey official or subdivision / agency / instrumentality; or operate in a sector of the Turkish economy (making any Turkish company or foreign company operating in the country a potential target). The Secretary of State is given authority to designate (i) persons engaging in activity or finance that disrupts peace, ceasefire, resettlement and other ongoing or future diplomatic efforts in Syria; (ii) an adult family member of such persons; or (iii) persons responsible for or complicit in the expropriation of property, including real property, for personal gain or political purposes in Syria. The Executive Order provides for a menu of sanctions including procurement and visa bans; limitations on access to loans, finance, foreign exchange or transfers of credits and payments; equity and investment prohibitions; import/trade prohibitions; and sanctions on officers of legal entities.

In addition to sanctions pursuant to the Executive Order, the U.S. Congress is actively working on legislation that could apply additional sanctions to Turkey and parties in Syria. Legislative drafts and related negotiations are moving quickly, and it is not yet clear what form these sanctions will take.

The conflict along the Turkey-Syria border is ongoing and unpredictable, as is the course of U.S. policy. Turkey is a NATO ally and the Turkish economy is integrated with the west. Companies doing business in or with Turkey, companies in the energy or defense industries operating in Europe or the Middle East, and all banks should be aware of and monitor for exposure to these existing sanctions and for any developments.

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On June 5, 2019, the Department of Commerce Bureau of Industry and Security (BIS) amended an important license exception which generally permitted the temporary sojourn of civil aircraft and vessels to Cuba. Specifically, BIS eliminated the license exception for use by non-commercial aircraft and passenger and recreational vessels sailing to Cuba. BIS also amended its licensing policy for such aircraft and vessels establishing a general policy of denial. On the same day, the Department of the Treasury eliminated its authorization for group people-to-people educational travel to Cuba.

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On November 15, 2018, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned 17 officials of the Government of Saudi Arabia for their purported role in the killing of journalist Jamal Khashoggi.  The individuals include Saud Al-Qahtani, the now former royal court adviser and consultant to crown prince Mohammed bin Salman, and General Mohammed Alotaibi, Saudi Arabia’s consul general in Istanbul.  This followed outreach on October 10, 2018 from leaders of both parties in the U.S. Senate to President Trump seeking a determination on the imposition of sanctions under the Global Magnitsky Act with respect to any foreign person responsible for a human rights violation in connection with the death of Mr. Khashoggi.

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On November 2, 2018, the Department of Treasury’s Office of Foreign Assets Control (“OFAC”) issued a final rule effective Monday, November 5, 2018 that amends the Iranian Transactions and Sanctions Regulations and reinstates sanctions on Iran that had been suspended during implementation of the Joint Comprehensive Plan of Action (“JCPOA”). On May 8 of this year, the Trump Administration had announced that the United States would withdraw from the JCPOA, but provided for 90-day and 180-day wind-down periods for specified activities involving Iran.

The 90-day wind down period ended effective August 6, 2018, and the U.S. government took steps to re-implement sanctions via Executive Order 13846.  This included the application of secondary sanctions to the purchase or acquisition of U.S. dollar banknotes by the Government of Iran, certain trade in gold or precious metals, certain trade in graphite, raw or semi-finished metals such as aluminum, steel, coal and software for integrating industrial processes, transactions relating to Iranian rials, transactions relating to issuance of Iranian sovereign debt, and sanctions relating to Iran’s automotive sector. (See our previous post here).

The latest announcement addresses the end of the 180-day wind down period and implements certain additional aspects of Executive Order 13846.

  1. The amendments include deleting the “EO 13599 List” of individuals and entities who were removed from the SDN List pursuant to the JCPOA, but still were considered “Government of Iran” parties or Iranian financial institutions subject to blocking by U.S. persons pursuant to EO 13599.  The Federal Register notice states that OFAC will relist “as appropriate” certain individuals and entities who were on the EO 13599 List.  It is therefore unclear at this time whether all persons who were on the EO 13599 List will be re-added to the SDN List.

 

  1. The Iranian Transactions and Sanctions Regulations will authorize sanctions against a person upon a determination that:
  • On or after August 7, 2018, the person has materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services in support of, the purchase or acquisition of U.S. bank notes or precious metals by the Government of Iran; or
  • On or after November 5, 2018, the person has materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services in support of, the National Iranian Oil Company (NIOC), Naftiran Intertrade Company (NICO), or the Central Bank of Iran.
  1. OFAC amended a pre-existing general license allowing U.S. persons to sell real property in Iran provided it was acquired before the individual became a US person or was inherited from persons in Iran.  The general license has been expanded to include personal property subject to the same conditions.

During a telecom briefing on Friday, Secretary of State Michael Pompeo mentioned that the administration decided to grant “temporary allotments” to eight jurisdictions to continue purchasing Iranian oil.  Some reports indicate that South Korea, Japan, India, and Turkey are among the countries receiving such waiver.  Although Mr. Pompeo did not say how long the waivers will be in place, he mentioned that the purpose of the waivers is to give countries a few “weeks longer to wind down.”

We expect that the actual re-designations of persons and entities to the SDN List will be published on Monday along with guidance and FAQs.  We will follow up next week with further details.

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On August 6, 2018, the Treasury Department’s Office of Foreign Assets Control (OFAC) released a new Executive Order to implement the previously announced re-imposition of U.S. sanctions for Iran. There were no major surprises, with the Executive Order paralleling the guidance released on May 8, 2018 when the President announced his decision to cease the United States’ participation in the Joint Comprehensive Plan of Action (JCPOA) and to begin re-imposing the U.S. nuclear-related sanctions that had been lifted, following a wind-down period.

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On December 20, 2017, President Trump issued Executive Order 13818 (the “E.O.”) implementing provisions of the Global Magnitsky Human Rights Accountability Act (“Global Magnitsky Act”) (enacted into law in December 2016), which provided for sanctions relating to gross human rights violations or government officials linked to corruption. The E.O. authorizes the imposition of sanctions on non-U.S. persons determined to be responsible for, complicit in, or have engaged in (directly or indirectly) “serious human rights abuse,” corruption, or “the transfer or the facilitation of the transfer of the proceeds of corruption,” or to have attempted to engage in or materially support such acts.

The E.O. applied sanctions designations to 13 persons and, separately, the Department of Treasury’s Office of Foreign Assets Control (“OFAC”) imposed sanctions on 39 additional individuals and entities around the world. This includes individuals and entities from 13 countries and territories spanning the continents of Asia, Africa, Europe, and North America.

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Following President Trump’s trip to Asia, sanctions policies for North Korea continue to evolve. The U.S. government has strengthened sanctions through legislation and Presidential Executive Orders. Further, it is enforcing its secondary sanctions against companies doing business with the North Korean regime, thus far targeting banks, businesses and individuals. The UN Security Council has approved resolutions imposing sanctions on North Korea in reaction to its nuclear and missile tests. Aggressive enforcement by the United States and actions by China and other Asian countries in light of the UN resolutions should be expected. Indeed, President Trump recently tweeted that China would be “upping” sanctions against North Korea.

Below is a summary of key pronouncements from the U.S. government, UN, and other countries.

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On November 8, 2017, the Department of Treasury’s Office of Foreign Assets Control (“OFAC”) and the Department of Commerce’s Bureau of Industry and Security (“BIS”) announced amendments to the Cuban Assets Control Regulations (“CACR”) and Export Administration Regulations (“EAR”). In addition, the State Department published a list of entities and subentities deemed to be under the control or to act on behalf of the Cuban military, intelligence, or security services or personnel. These steps implement the changes to the Cuba sanctions program announced by the President in his June “National Security Presidential Memorandum on Strengthening the Policy of the United States Toward Cuba” (“NSPM”). The changes reflect adjustments to the broader Cuba reform initiated by former President Obama in January 2015. A majority of the general license and guidance issued since that time remain in effect.

The key changes to the Cuba sanctions program are as follows:

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This week, the U.S. government took several steps to implement sections of the Countering America’s Adversaries Through Sanctions Act of 2017 (CAATSA), with implications for Russia-related sanctions and their enforcement. On October 27, 2017, the Department of State (DoS) published guidance on sanctions with respect to Russia’s Defense and Intelligence Sectors under Section 231 of CAATSA. In addition, on October 31, 2017, DoS published guidance on how it would view secondary sanctions for investments in special Russian crude oil projects and energy export pipelines. Separately, the Department of Treasury’s Office of Foreign Assets Control (OFAC) amended Directive 4 of the Ukraine/Russia related sanctions and published updated FAQs relating to the amended Directive as well as new guidance on CAATSA sections 223(a), 226, 228, 233.

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Effective October 12, 2017, the Sudanese Sanctions Regulations (SSR) have been revoked in recognition of the Government of Sudan’s (GOS) sustained positive actions in stopping conflict and improving humanitarian access in Sudan.  This latest action makes permanent the general license issued in January 2017.  However, Sudan remains designated as a “State Sponsor of Terrorism” and accordingly, key restrictions remain.

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