Effective February 27, 2020, the Office of Foreign Assets Control (OFAC) of the US Department of the Treasury issued General License (GL) Number 8 to authorize certain humanitarian transactions involving the Central Bank of Iran (CBI).  As discussed further below, GL No. 8 and other measures taken by the US Government should now facilitate transfers, transactions, and certain activities related to the exportation and reexportation of agricultural commodities, medicines, and medical devices to Iran. Before issuance of GL No. 8, humanitarian trade from the United States and involving U.S. persons had been significantly and negatively affected based on the US Government’s “maximum pressure” campaign against the Government of Iran.

First, as previously advised, on September 20, 2019, OFAC designated the CBI as a Specially Designated National and Blocked Person (SDN) under the Global Terrorist Sanctions Regulations (GTSR).  Although the CBI had previously been named a SDN as the GOI under the Iranian Transactions Sanctions Regulations (ITSR) and off-limits to most US person transfers and dealings, the GTSR designation called into question exiting GLs applicable to humanitarian trade by US persons and also raised the possibility of secondary sanctions being imposed against non-US, foreign persons for engaging in significant transactions with GTSR SDNs related to Iran.

Second, effective November 14, 2019, the Financial Crimes Enforcement Network (FinCEN) of the US Department of the Treasury published a final rule designating the Islamic Republic of Iran as a jurisdiction of primary money laundering concern and imposing special measure five under section 311 of the USA PATRIOT Act of 2001, as amended, against all of Iran’s financial institutions.  Although this action followed a proposed rule issued in 2011, in the final rule, FinCEN prohibited any US financial institution from opening or maintaining in the US a correspondent account for, or on behalf of, any Iranian financial institution (unless authorized or exempt). As a result FinCEN’s rule required that US financial institutions take reasonable steps not to process a transaction for the correspondent account of a foreign bank in the United States if such a transaction involves an Iranian financial institution.

Third, on January 30, 2020, Brian H. Hook, Special Representative for Iran and Senior Policy Advisor to the Secretary of State, discussed coordination with the Department of Treasury about completing a sale and delivery of cancer drugs and transplant drugs to Iran as part of working with the Swiss government on a new financial channel for humanitarian goods. As part of that briefing, Mr. Hook stated: “We want companies to take advantage of the exemptions in our sanctions regime for food, medicine, medical devices, and agricultural products.”

Now, subsection (a) of GL No. 8 authorizes the following:

Transactions and activities described in general licenses or authorized under specific licenses set forth in the following sections of 31 CFR Part 560:

  • 560.530(a) or (b) – Commercial sales, exportation, and reexportation of agricultural commodities, medicines, and medical devices, and certain related software and services;
  • 560.532 – Payment for and financing of exports and reexports of agricultural commodities, medicines, and medical devices, and certain related software and services; and
  • 560.533 – Brokering sales of agricultural commodities, medicine, and medical devices.

Transactions and activities ordinarily incident and necessary to transactions with regard to the CBI sanctioned under OFAC’s GTSR and ITSR programs:

  • 560.516 – Transfers of funds involving Iran; and
  • 560.405 – Transactions ordinarily incident to a licensed transaction authorized.

Be aware that Note 1 to subsection (a) of GL No. 8 does not authorize the export or reexport of goods to the CBI.  Also, Note 2 provides that even though §560.530(d)(5) of the ITSR excludes from the scope of §560.530 any transaction or dealing with a person that is blocked under the GTSR, GL No. 8 authorizes certain transactions involving the CBI that would otherwise be prohibited.  Finally, subsection (b) of GL No. 8 makes clear that the authorization does not authorize humanitarian-related transactions involving Iranian financial institutions designated under the GTSR (Executive Order 13224) other than the CBI. Any transactions otherwise prohibited by the ITSR must be separately licensed pursuant to the ITSR.

Effective February 27, 2020, OFAC also published new Frequently Asked Question (FAQ) No. 821 reiterating the discussion above, and also including the following notable statement:  For example, if a U.S. person could have relied on general or specific licenses pursuant to sections 560.530(a) or (b), 560.532, or 560.533 of the ITSR to engage in certain activities prior to the CBI’s designation under E.O. 13224, GL 8 provides the additional authorization needed to engage in such activities.

In addition, even though neither GL No. 8 nor FAQ No. 821 explicitly references any payment channel, the Secretary of the Treasury issued a press release about the United States and Switzerland finalizing the so-called Swiss Humanitarian Trade Arrangement (SHTA).  The statement provides that SHTA presents a voluntary option for facilitating payment for exports of agricultural commodities, food, medicine, and medical devices to Iran “in a manner that ensures the upmost transparency.”  Consequently, SHTA participating financial institutions must undertake enhanced due diligence to ensure that humanitarian goods reach the people of Iran and are not misused by the GOI.  The release directs that companies within Swiss jurisdiction that have questions should contact Switzerland’s State Secretariat for Economic Affairs (SECO), including entities that are owned or controlled by U.S. and third-country persons and domiciled in Switzerland. Finally, the statement seems to open a door for other foreign governments and foreign financial institutions interested in establishing a humanitarian mechanism to contact OFAC.

As a result, GL No. 8 and the SHTA should authorize transfers, activities, and incidental transactions involving the United States and the CBI related to humanitarian trade.  This development should hopefully relieve restrictions targeting Iran that may be viewed as inconsistent with the Trade Sanctions Reform and Export Act of 2000, which required the President to terminate any unilateral agricultural sanction or unilateral medical sanction against a foreign country, absent the application of specific exceptions, and that any future imposition of such sanctions would require a report to and joint resolution by Congress for approval.

If you have any questions or concerns about General License 8 or related issues, please contact a member of Steptoe’s economic sanctions team.

Click here to read the full Client Advisory by Steptoe.

On February 24, 2020, the US Commerce Department’s Bureau of Industry and Security (BIS) issued a rule that significantly expands the scope of US export controls on Russia and Yemen. The new trade restrictions on Russia have been imposed due to “proliferations concerns” regarding Russia on the part of the US government. The rule also broadens export controls on Yemen to account for heightened US national security concerns emanating from Yemen as it continues to suffer from a years-long internal and regional war.

These new US export controls will impact US companies, but also many non-US companies whose products have US content or other US links. The changes are significant for the nuclear and aerospace sectors, but also have relevance in other sectors. Products and technologies that may now require a license for Russia include many industrial goods, such as certain valves, machine tools and robots, along with certain composites, electronics production technologies and others.

For more information on how these rules may impact your business, click here to read the Client Advisory.

On February 20, 2020, the US Office of Foreign Assets Control (OFAC) issued two new FAQs on the Reporting Procedures and Penalties Regulations (RPPR), 31 CFR part 501. The FAQs follow OFAC’s June 2019 amendments to the RPPR, which significantly expanded the requirement for US persons (and in some circumstances non-US persons subject to OFAC’s regulatory jurisdiction) to report blocked property, unblocked property, or rejected transactions to OFAC.

Continue Reading New OFAC FAQs Clarify Rules for Reporting of Rejected Transactions

On February 18, 2020, OFAC designated Switzerland-based oil broker Rosneft Trading SA (“Rosneft Trading”), a subsidiary of Rosneft Oil Company, as a Specially Designated National (“SDN”) for “operating in the oil sector of the Venezuelan economy,” under Executive Order 13850.  The US government had been weighing possible sanctions against Rosneft entities due to their activity in Venezuela for months.  A US official stated during a briefing that Rosneft Trading handled more than half of Venezuela’s oil exports and took steps to conceal those shipments, and that this sanctions designation was “a reaction to the growing and increasingly central role of Rosneft in the affairs of Venezuela, particularly in the course of the last year.”  Illustrating the policy deliberations that appear to have preceded this designation, a US Department of Energy official stated that this action was viewed as not likely to destabilize global oil markets, which have seen recent price declines.

OFAC also sanctioned Didier Casimiro, Rosneft Trading’s Chairman and President, who a State Department press release notes “also serves as Rosneft’s Vice President for Refining, Petrochemical, Commerce and Logistics.”  It is noteworthy that the US government intentionally targeted an officer and director of the Rosneft parent entity.  Mr. Casimiro’s profile on Rosneft’s website confirms that he holds that VP position, along with membership on the board of Rosneft and a small number of shares of Rosneft.  The Rosneft web page listing other positions held by board members states that Mr. Casimiro “is Chairman of the Board of Directors at PJSC Saratov Oil Refinery, PJSC NC Rosneft – МP Nefteproduct, CJSC Rosneft-Armenia, LLC RNY, Rosneft Trading S.A., LLC «RNCommerce», LLC «RN-Refining», Chairman of the Supervisory Board at PRJSC LINIK, member of the Board of Directors at SLAVNEFT, Slavneft-YANOS PJSC, Rosneft Global Trade S.A., JSC SPIMEX, Rosneft Techno S.A., PJSOC Bashneft, LLC «RNForeign Projects», Nayara Energy Limited.”  The designation of Mr. Casimiro, if he continues to hold these senior positions within Rosneft and other organizations, could potentially add compliance complications in doing business with Rosneft or those other organizations, along with the direct and more significant impact of these sanctions actions on Rosneft Trading and Mr. Casimiro himself.

Continue Reading US Sanctions Rosneft Subsidiary and a Rosneft Director and Vice President for Venezuela Oil Trade

Click here to read the full Client Advisory by Steptoe.

On February 13, 2020, the final rules implementing changes to the Committee on Foreign Investment in the United States’ (CFIUS) jurisdiction and review process, as required under the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), take effect.

CFIUS, the inter-agency body responsible for reviewing foreign investment into the United States for national security risks, has traditionally been limited to reviewing transactions in which a foreign person acquires “control” of a US business. CFIUS’s regulations at Part 800 now cover both “controlling” and certain “non-controlling” investments in US businesses.

The final rules track fairly closely with the proposed rules released in September 2019, although CFIUS made a number of changes in response to comments from industry. The Client Advisory summarizes the final regulations in their entirety and also highlights where the final regulations differ from the proposed rules.

For more information about the new CFIUS rules and their impact, click here to read Steptoe’s Client Advisory.

Click here to read the full Client Advisory by Steptoe.

On January 23, 2020, Transparency International published its 2019 Corruption Perceptions Index (CPI),  which measures perceptions of public sector corruption in 180 countries. Viewed together with the 2019 TRACE Bribery Risk Matrix,  which also includes private sector corruption, the Asia Pacific (APAC) region overall remains generally high risk for bribery and corruption relative to other parts of the globe, with some notable exceptions.

APAC countries that have historically ranked highly (e.g., New Zealand, Singapore, Australia, Hong Kong, and Japan) continued to do so, with some demonstrating slight improvements in their CPI scores. Historically underperforming countries (e.g., Cambodia, North Korea, and Afghanistan) also remained in place, with no significant improvements. Gains in South Korea, Malaysia, Indonesia, and China were offset by declines in India, Mongolia, and the Philippines.

The CPI and TRACE Bribery Risk Matrix provide a largely consistent and useful point of reference for companies performing “risk-based” transactional and customer due diligence in APAC. However, there are some differences between the two which require a deeper dive into the analysis underlying the rankings.

For more information on how the 2019 rankings can help with risk-based due diligence, read the full Client Advisory.

 

On 5 February 2020, the UK Court of Appeal dismissed a challenge to the UK’s first Unexplained Wealth Order (UWO). Mrs. Zamira Hajiyeva, wife of the former chair of the International Bank of Azerbaijan who was sentenced to 15 years in jail in 2016 for defrauding the bank out of £2.2 billion, launched a challenge against the UK National Crime Agency’s (NCA) first ever UWO, attempting to overturn the UWO against a property in Knightsbridge, London, purchased for £11.5 million. Her arguments that the NCA mischaracterized her husband’s status as a politically exposed person (PEP) and that her husband’s conviction was the result of a “grossly unfair trial” were rejected by the Court of Appeal. This decision will likely energise and provide a boost to the NCA and other law enforcement agencies in seeking UWOs to seize ill-gotten gains in the future.

Continue Reading UK Court of Appeal Rejects Unexplained Wealth Order Challenge

Click here to read the full Client Advisory by Steptoe.

Of the record-breaking USD 2.9 billion in fines imposed by US authorities in 2019 for violations of the Foreign Corrupt Practices Act (FCPA), almost 95% involved Asia Pacific, primarily China and India, but also Indonesia, Vietnam, Thailand, and South Korea.

This year, the US Department of Justice and the Securities & Exchange Commission had cases against well-known multinational corporations operating in the region, and continued their emphasis on individual accountability, announcing prosecutive actions against 35 individuals in 2019, including several former Alstom executives for bribery in Indonesia; former Goldman Sachs executives in connection with Malaysian sovereign wealth fund (1MDB); and the former president, CEO, and Chief Legal officer of Cognizant accused of paying bribes in India.

Read more about these important FCPA cases and others from the Asia Pacific region in our Client Advisory.

On January 31, 2020, the US Treasury Department’s Office of Foreign Assets Control (OFAC) lifted sanctions on China-based COSCO Shipping Tanker (Dalian) Co., Ltd. (COSCO Dalian), five affiliates, and one individual who were named as Specially Designated Nationals (SDNs) in September 2019 for knowingly engaging in a significant transaction for the transport of oil from Iran. Despite last week’s reprieve, another COSCO subsidiary, COSCO Shipping Tanker (Dalian) Seaman and Ship Management Co., Ltd., as well as several affiliates and their executives, remain on the SDN List.

The September 2019 designations disrupted parts of the global shipping market, leading to a significant increase in some rates. OFAC’s announcement came several days before the scheduled expiration on February 4, 2020 of a general license authorizing US persons to engage in transactions for the maintenance or winding down of certain transactions with COSCO Dalian.

Continue Reading OFAC Removes Secondary Sanctions on COSCO Division Targeted for Iran Oil Imports

Click here to read the full Client Advisory by Steptoe.

On December 6, 2019, US Citizenship and Immigration Services (USCIS) confirmed that it would implement a system-wide process overhaul aimed at addressing issues and inefficiencies with the “H-1B cap season.” At the foundation of these changes, effective as of this writing, is a newly-created, yet-to-be-fully-revealed electronic registration process. While many questions remain, the H-1B cap process has clearly changed—including the deadline.

As explained in the Client Advisory, lottery registration is a deceptively simple process—on the surface, it involves a few pieces of fairly standard data. Below the surface, however, there are attestations under penalty of perjury and penalties for abusing the new system. Employers must understand their commitments and the related implications before hitting “submit” on H-1B registrations.

Continue Reading Client Advisory: H-1B Visa Electronic Registration: Changes to Process, Deadline and Best Practices