Treasury Sanctions 17 Saudi Officials, though not the Crown Prince, in the Killing of Jamal Khashoggi

On November 15, OFAC imposed economic sanctions against 17 Saudi officials for their participation in the killing of Jamal Khashoggi. Khashoggi, a journalist and “royal insider-turned-critic of Saudi policy”, was murdered at the Saudi Arabian consulate in Istanbul, Turkey on October 2, 2018. Among the men designated in yesterday’s action are Saud Al-Qahtani—a top aide to Saudi Crown Prince Mohammed bin Salman—and Saudi Consul General Mohammed Alotaibi. These individuals were designated pursuant to Executive Order 13818, which builds upon and implements the Global Magnitsky Human Rights Accountability Act targeting perpetrators of serious human rights abuse and corruption.

Yesterday’s designations were announced hours after Saudi Arabia’s public prosecutor said the death penalty was being sought for five out of eleven suspects charged in Khashoggi’s murder in Saudi Arabia. The economic sanctions do not target the Riyadh government or the Crown Prince, who the Saudi foreign minister said had “absolutely nothing to do” with the murder. Nonetheless, U.S. officials have continued to press the Saudi government for a full investigation. Continue Reading

New “Troika of Tyranny” Cuba Sanctions – More Bark Than Bite

Effective tomorrow the State Department is updating its Cuba Restricted List (press release here) to add 26 new subentities (along with amending the entries for 5 previously-listed subentities).  National Security Advisor John Bolton had previewed this action in a speech in Miami in which he labeled Cuba, Venezuela and Nicaragua the “Troika of Tyranny” and said the U.S. government would be designating “over two dozen additional entities owned or controlled by the Cuban military and intelligence services to the restricted list of entities with which financial transactions by U.S. persons are prohibited.”  Bolton had ominously warned that this “Troika” had “finally met its match” and that all three countries “will feel the full weight of America’s robust sanctions” under this new policy.  Bolton suggested that the Administration would implement a tough new sanctions policy against Cuba, quipping, in contrast to the Obama Administration, that “Our concern is with sanctions, not selfies.”

So what has been the follow up to this strident policy pronouncement?  So far, it has been to add several hotels and other seemingly minor entities to a sanctions list that itself has little practical impact in many cases.  What this list does under the U.S. sanctions regulations, as we’ve previously advised, is limit the ability of U.S. persons to use certain carve-outs from the Cuba embargo but only when engaging in “direct financial transactions” with one of the listed entities, including “by acting as the originator on a transfer of funds whose ultimate beneficiary is” on the list “or as the ultimate beneficiary on a transfer of funds whose originator is” on the list.  Because the Cuban embargo already prohibits U.S. persons from engaging in most types of activity with Cuba, in many instances being on this list does not give rise to additional sanctions restrictions.  There is also an impact under U.S. export controls, and these listed entities will generally not be eligible to receive goods, software or technology subject to U.S. jurisdiction.      Continue Reading

Export Control Hiring Practices Continue to Challenge Employers

Two recent settlements between employers and the U.S. Department of Justice (DOJ) emphasize the complex interplay between U.S. immigration and export control laws in the hiring process.  The settlements serve as a reminder to employers of the potential employment discrimination pitfalls for companies attempting to comply with export control laws. 

In late August 2018, the DOJ’s Immigration and Employee Rights Section (IER) reached a settlement agreement with international law firm Clifford Chance US LLP, which the DOJ accused of violating the Immigration and Nationality Act (INA) by refusing to consider employment-authorized non-US citizens and dual citizens for a document review project.  Just two months earlier, the DOJ found that engineering company Setpoint Systems, Inc. violated the INA by limiting certain positions to U.S. citizens only.  In both cases, the unlawful employment practices stemmed from a mistaken understanding of the requirements of the International Traffic in Arms Regulations (ITAR).

For more information, please see the full post on Steptoe’s Labor & Employment Blog.

U.S. Reimposes Sanctions and Then Some, as Iran Warns of “War Situation”

On November 5, 2018, the U.S. government reimposed the remaining sanctions on Iran that were previously lifted under the Joint Comprehensive Plan of Action (JCPOA) in 2016.  Treasury’s Office of Foreign Assets Control (OFAC) added over 700 Iranian entities, individuals, vessels, and aircrafts to the list of Specially Designated Nationals and Blocked Persons (“SDN List”), including scores of previously unlisted targets.  According to a statement from Treasury, these sanctions are “designed to disrupt the Iranian regime’s ability to fund its broad range of malign activities, and places unprecedented financial pressure on the Iranian regime to negotiate a comprehensive deal that will permanently prevent Iran from acquiring a nuclear weapon, cease Iran’s development of ballistic missiles, and end Iran’s broad range of malign activities.”

The new or reimposed SDN designations include nearly 250 persons and associated blocked property that had appeared on the so-called “EO 13599 list,” 50 additional Iranian banks and their subsidiaries, and over 400 additional affiliated targets in a range of sectors, including Iran’s shipping, energy, and aviation sectors, among others. OFAC has published a complete list of designated entities here.  Under the existing sanctions framework, foreign financial institutions and persons that facilitate or engage in transactions with designated entities are themselves potentially subject to U.S. sanctions restrictions. Continue Reading

US Sanctions Venezuelan Gold Sector

Today the President issued a new Executive Order targeting Venezuela, which is noteworthy in three respects:

1) It shows the US government wants to continue to increase the pressure on the Maduro regime through sanctions, but is continuing to act incrementally rather than imposing more sweeping restrictions that had been rumored in the past to be under consideration, such as broader oil sector sanctions.

2) It may have a significant impact on any companies dealing in the Venezuelan gold sector or dealing in gold sourced from Venezuela.  Press reports indicate that a significant portion of Venezuelan gold is exported to refiners in Turkey.  OFAC issued Frequently Asked Questions to provide additional guidance to those operating in these areas.

3) It authorizes the Treasury and State Departments to designate additional sectors of the Venezuelan economy for future sanctions, an authority similar to that which exists under the current Russia sanctions program. 

No sanctions designations of individuals or entities were announced concurrent with the publication of this Executive Order, so for the time being this remains simply a framework for potential future sanctions.

Treasury Creates CFIUS Pilot Program and Releases Interim Regulations as Initial Step Toward Implementing FIRRMA Reforms

As a first step to implementing the wide-ranging Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) that was enacted in August 2018, the U.S. Department of the Treasury on October 10, 2018 issued an interim rule to launch a “pilot program” to expand the jurisdiction of the Committee on Foreign Investment in the United States (CFIUS) to review certain “critical technology” transactions.  Treasury also issued temporary regulations that make limited changes to the existing CFIUS regulations, mostly to implement changes that became effective immediately upon passage of FIRRMA.

Pilot Program Interim Rule

A number of the provisions of FIRRMA that expand CFIUS’s jurisdiction do not become effective until Treasury passes implementing regulations or February 2020, whichever comes first.  Treasury is not expected to finalize the relevant implementing regulations for several months.  However, FIRRMA also authorized Treasury to create temporary “pilot programs” to allow for faster implementation of parts of the legislation that did not become effective immediately upon enactment. Continue Reading

EU Promotes Export Controls and Sanctions Compliance Programs

The European Commission (the Commission) recently issued draft guidelines on the core elements that European industry should take into account when implementing internal export controls and sanctions compliance programs.  The guidance – which is legally non-binding – will be finalized upon the results of a public consultation providing the opportunity for EU exporters to comment on its core elements.  Companies can participate by responding to a survey until November 15.  It is the intention of the Commission to share the results of this survey with a Technical Expert Group before finalizing its guidance.

Internal compliance programs (ICPs) have long been part of a culture of compliance in the US, but much less so within the European Union.  However, ICPs are increasingly viewed in the EU as a key element for an effective export control system.  While not expressly alluding to ICPs, the EU Dual Use Regulation has encouraged Member States to take into consideration whether a company employs adequate means and procedures for compliance when assessing applications for global export authorizations.  In addition, ICP guidelines have been introduced by some Member States as a tool to better monitor compliance with EU and national export controls.  The EU Dual Use Regulation Recast Proposal formally introduces standardized operational ICPs as part of the assessment in the granting and control of global export authorizations and certain general export authorizations.  In implementing these ICP guidelines, the EU is acting pursuant to the multilateral provisions of the Wassenaar Arrangement that have expressed support for ICPs and for this type of regulatory guidance. Continue Reading

US Withdraws from Treaty of Amity with Iran after International Court of Justice Imposes Limited Provisional Measures Against US Iran Sanctions

On October 3, 2018, the International Court of Justice (“ICJ” or the “Court”), the principal judicial organ of the United Nations, issued an Order ruling partly in favor of Iran on Iran’s request for provisional measures against the US for its May 8, 2018 withdrawal from the Joint Comprehensive Plan of Action (“JCPOA”) and re-imposition of sanctions on August 6, 2018.

On July 16, 2018, Iran instituted proceedings against the US with regard to alleged violations of the 1955 Treaty of Amity, Economic Relations and Consular Rights between the US and Iran (“Treaty of Amity”). On the same day, Iran submitted a request for certain provisional measures, including a request that the US “immediately take all measures at its disposal to ensure the suspension of the implementation and enforcement of all of the 8 May sanctions, including the extraterritorial sanctions, and refrain from imposing or threatening announced further sanctions and measures which might aggravate or extend the dispute submitted to the Court.” Iran’s filing essentially asked the ICJ to order the US to provisionally lift its sanctions in advance of more detailed arguments on the merits of the case. Continue Reading

OFAC Adds Additional Names to SDN List under Venezuela Program

On September 25, 2018, OFAC added six individuals, three entities, and an aircraft to the SDN list (link to press release here).  These designations appear to be motivated by a continued effort to pressure the Maduro government to change its policies.  The press release notes that, “By the end of 2018, hyperinflation in Venezuela is projected to reach over one million percent.  Three million Venezuelans will have departed Venezuela for neighboring nations to escape widespread poverty and its attendant hardships.  The Maduro regime, meanwhile, continues to pursue failed policies and financing schemes to mask the regime’s corruption and gross mismanagement. The United States has imposed sanctions on many who have profited during Venezuela’s decline[.]”  These new designations do not specifically target PDVSA or the oil and gas sector. Continue Reading

Trump Administration Sanctions Key Chinese Military Entity under Russia Authorities

On September 20, 2018, the State Department announced sanctions on China’s Equipment Development Department (EDD) (formerly known as the General Armaments Department (GAD)) and its director, Li Shangfu, for engaging in significant transactions with Russia’s Rosoboronexport for the delivery to China of Su-35 combat aircraft in 2017 and equipment for S-400 surface-to-air missile systems in 2018. The EDD is part of the Chinese State Council’s Central Military Commission and plays a key role in the Chinese government’s international military cooperation efforts.

This marks the first time the US government has imposed sanctions under Section 231 of the Countering America’s Adversaries Through Sanctions Act (CAATSA). It is also the most significant sanctions action taken by the US government to date under the CAATSA Russia sanctions authorities.  Notably, the Trump Administration chose the most severe measure available under the “menu” of sanctions available under Section 231 of CAATSA – the addition of the targeted persons to the Specially Designated Nationals (“SDN”) list – along with some other restrictions.  Continue Reading

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