UN and EU North Korea Sanctions: Impacts on European and Cross-Border Trade

As tensions continue to escalate between the United States and North Korea, and President Donald Trump and Kim Jong-Un trade increasingly tense lobs, the United Nations, the EU, the United States, and other countries continue to impose further stringent sanctions against North Korea to a breaking point (for details on UN Security Council Resolution 2375 and the US’s new sanctions, see our previous advisory). In our most recent advisory, we provide an overview of the EU sanctions measures imposed against North Korea, review their impact, and offer some reflections on actions that may take place in the future.

For more information, please see our advisory.

A ‘Modest Proposal’ for Cuba: OFAC, BIS and State Department Implement President’s New Cuba Policy

Effective November 9, 2017, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the Department of Commerce’s Bureau of Industry and Security (BIS) amended the Cuban Assets Control Regulations (CACR) and Export Administration Regulations (EAR), respectively, to implement US Cuba sanctions policy changes President Trump announced in a presidential memorandum issued June 16, 2017.  Concurrently, as required by the presidential memorandum, the Department of State published a list of 180 entities and subentities associated with Cuban military, intelligence, and security services (Cuba Restricted List).  As such, US government policy establishes that direct financial transactions conducted by persons subject to US jurisdiction with persons identified on the Cuba Restricted List would disproportionately benefit them at the expense of the Cuban people or private enterprise in Cuba.

Even though President Trump announced in June that he was “cancelling the last administration’s completely one-sided deal with Cuba,” the memorandum he issued in June, and the regulatory changes implemented by the State, Treasury, and Commerce Departments last week, reflect relatively moderate changes to US Cuba sanctions policy, as we previously explained in our June advisory on the matter.  While these changes limit certain US business activity with, and travel to, Cuba, they do not reflect a roll-back of all (or even most) of the Obama Administration’s significant Cuba sanctions reforms.

For more information, please see our advisory.

Russian Sanctions Update: OFAC Amends Directive 4 and Updates FAQ Guidance

On October 31, 2017, the Office of Foreign Assets Control (OFAC) took a number of actions to implement the Countering Russian Influence in Europe and Eurasia Act (CRIEEA) (also known as the Countering America’s Adversaries Through Sanctions Act (CAATSA), a larger sanctions statute of which CRIEEA was a part).  As part of this, OFAC amended Directive 4 under Executive Order 13662—related to prohibitions on supplying Russian oil projects—and issued updated Frequently Asked Question (FAQ) guidance on restrictions related to foreign financial institutions, facilitating transactions with sanctioned persons, sanctions evasion, and investments in Russian state-owned assets.  OFAC also provided guidance regarding CRIEEA’s authorization of sanctions targeting the railway and metal and mining sectors.

Expansion of Prohibitions on Supplying Russian Oil Projects

Directive 4 as amended prohibits U.S. persons from directly or indirectly providing, exporting, or re-exporting goods, services (except for financial services), or technology in support of exploration or production for deepwater, Arctic offshore, or shale projects that meet all three of the following criteria: (1) the project was initiated on or after January 29, 2018; (2) the project has the potential to produce oil in any location; and (3) Russian individuals or entities designated under Directive 4—individually or in the aggregate—either have a 33 percent or greater ownership interest in the project or own a majority of the voting interests in the project.  Directive 4 does not apply to gas-only projects.    Continue Reading

Economic Sanctions Webinar

On Wednesday, November 15 at 12:00 PM EST, Anthony Rapa will be presenting “Recent Developments in Economic Sanctions: Russia, Iran, Venezuela, North Korea, and Cuba,” a webinar hosted by Federal Publications.  As described on the Federal Publications website:

From “decertifying” the Iran deal to disputes with “Rocket Man,” the economic sanctions world has seen dizzying changes over the last several months. This webinar will explore the most recent developments under U.S. sanctions, and will touch upon the related EU sanctions context, with a focus on sanctions against Russia, Iran, Venezuela, North Korea, and Cuba.

You can sign up for the webinar here.

EU Adopts Initial Set of Sanctions Against Venezuela

In light of the continuing deterioration of the democracy and human rights in Venezuela, the Foreign Affairs Council of Ministers agreed on November 13 to adopt a first set of sanctions measures against Venezuela. These measures are reflected in two EU legal instruments, Council Regulation (EU) 2017/2063 of 13 November 2017 concerning restrictive measures in view of the situation in Venezuela and Council Decision (CFSP) 2017/2074 of 13 November 2017 concerning restrictive measures in view of the situation in Venezuela.

At this stage, the measures are not intended to cut off commerce with specific sectors of the economy in  Venezuela. Measures include:

  • A prohibition to sell, supply, transfer or export, directly or indirectly, goods and technology listed in the EU Common Military List, as well as equipment which may be used for internal repression as listed in Annex I of Council Regulation (EU) 2017/2063.  Related financial and technical assistance is also prohibited.
  • A prohibition to sell, supply, transfer or export, directly or indirectly, equipment, technology or software, as listed in Annex II of  Council Regulation (EU) 2017/2063. Related financial and technical assistance is also prohibited.

Continue Reading

Congress Scrutinizes Foreign Investment, Fires Warning Shots at China and Silicon Valley

During a November 8 press conference announcing the introduction of the Foreign Investment Risk Review Modernization Act (“FIRRMA”) while President Trump met with President Xi Jinping in China, co-sponsor and Senate Majority Whip John Cornyn (R-TX) summed up the impetus for the bipartisan, bicameral bill in five words:

“China is eating our lunch.”

In the decade since Congress last passed reforms governing the Committee on Foreign Investment in the United States (“CFIUS”) and its procedures for conducting national security reviews of inbound foreign investments, Chinese investment in the United States – especially in the technology sector – has exploded.  Although FIRMMA doesn’t mention China by name, many of its provisions appear designed to address aspects of China-related deals that cause heartburn for national security hawks. Continue Reading

State Department Allows Certain Civilian Trade to Continue with Russia’s Defense Sector

On October 27, 2017, the US Department of State, pursuant to Section 231 of the Countering America’s Adversaries Through Sanctions Act (CAATSA), published the list of entities that are part of, or operate for or on behalf of, the Russian defense or intelligence sectors, as well as Guidance that sets out indicators of how the Trump Administration intends to implement Section 231.  President Trump reluctantly signed the CAATSA on August 2, 2017, and Section 231 of CAATSA requires the imposition of sanctions on any person (US or otherwise) that, on or after that date, “knowingly…engages in a significant transaction with a person that is part of, or operates for or on behalf of, the [Russian] defense or intelligence sectors.”  See our previous advisory on CAATSA.  When Section 231 sanctions are triggered, the State Department (to which the authority to implement Section 231 was delegated) must impose five or more measures from a menu of sanctions.  These measures range in severity from a restriction on financing by the US Export-Import Bank for exports to the sanctioned person, to more severe measures such as prohibiting US persons from conducting any transactions or dealings with the person that engages in sanctionable conduct.  Beginning on January 29, 2018, these measures are to be applied to any person that engages in a significant transaction with a listed entity on or after August 2, 2017.

For more information, please see our advisory.

Who’s Your Correspondent? FinCEN Penalizes Texas-Based Bank for Bank Secrecy Act Violations

On November, 1, 2017, the US Department of the Treasury, Financial Crimes Enforcement Network (FinCEN), announced that Lone Star National Bank (Lone Star), operating in Texas, entered into a civil money penalty consent for alleged willful violations of the Bank Secrecy Act (BSA) and 31 C.F.R. Chapter X regulations involving inadequate anti-money laundering (AML) compliance program systems.  This action primarily related to requirements for high-risk foreign correspondent account banking services.  Lone Star, a privately held depository institution, agreed to pay a $2 million civil money penalty to resolve the matter.  FinCEN’s action follows a Consent Order for a Civil Money Penalty in 2015 for $1 million imposed by the Office of the Comptroller of the Currency against Lone Star for alleged programmatic AML deficiencies.

FinCEN asserted that, from 2010-2014, Lone Star failed (i.e., with reckless disregard or willful blindness) to: (1) establish and implement an adequate AML compliance program; (2) conduct required due diligence on a foreign correspondent account; and (3) report suspicious activity.  As a result of these failures, Lone Star’s conduct permitted a foreign financial institution (apparently located in Mexico) to transfer hundreds of millions of U.S. dollars in suspicious bulk cash shipments through the U.S. financial system.  Most notably, Lone Star allegedly had insufficient internal controls and staff inexperienced with the BSA’s obligations.  Consequently, Lone Star did not undertake appropriate due diligence, transaction monitoring, and reporting of suspicious activity, when engaging in high-risk foreign correspondent banking services.  Continue Reading

Steptoe Cyberlaw Podcast: Update on Possible CFIUS Reform Legislation

On October 30, 2017, Brian Egan and Alexis Early were featured on Steptoe’s Cyberlaw Podcast to discuss the possible introduction of CFIUS reform legislation.  They discuss the rumored provisions in Sen. John Cornyn’s (R-TX) Foreign Investment Risk Review Modernization Act and what it means for US sellers and foreign buyers.

Congress Continues Bipartisan Focus on Sanctions Legislation

The House of Representatives was the scene of a flurry of sanctions-related activity this week, as the lower chamber passed new sanctions measures related to North Korea, Iran, and Hizballah. The bipartisan consensus on sanctions policy in the House continued, with three of the bills passing by unanimous voice vote and the other two bills being opposed by only two lawmakers apiece. The Senate has been keeping pace, with hearings on the situation in Myanmar (Burma) on October 25 and a draft bill in the works regarding Iranian compliance with the nuclear deal. Continue Reading

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