On August 7, 2020, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced the imposition of sanctions on 11 prominent Hong Kong and People’s Republic of China (PRC) officials for taking actions that, in the view of the US government, undermined Hong Kong’s autonomy and restricted fundamental freedoms of people in Hong Kong. The officials include Hong Kong’s Chief Executive Carrie Lam, Hong Kong’s Secretary for Justice, the Secretary for Security, the Commissioner of the Hong Kong Police Force, and Chinese officials responsible for Hong Kong affairs, among others.

OFAC named the officials as Specially Designated Nationals (SDNs) pursuant to Executive Order (EO) 13936, entitled The President’s Executive Order on Hong Kong Normalization. Section 4 of the EO authorizes sanctions called for by Congress in the Hong Kong Human Rights and Democracy Act of 2019 and the Hong Kong Autonomy Act (HKAA).

As a result of the designations, all property and interest in property of the SDNs must be blocked (frozen) when in the United States or within the possession or control of a US person. US citizens and green card holders and US-domiciled companies are generally prohibited from transactions or dealings, directly or indirectly, with SDNs as well as entities owned 50% or more by one or more SDNs. This includes financial transactions processed through US banks. Note that the general prohibitions and blocking requirements under EO 13936 do not apply to foreign subsidiaries of US companies, but would apply to foreign branches of such companies.

(For a detailed summary of the sanctions provisions of EO 13936 please see our recent client advisory here.)

Continue Reading Financial Institutions Watch and Wait as OFAC Sanctions Top Hong Kong Officials

Skirting over financial crime due diligence when considering a quick transaction in an emerging market can cost you dearly down the line when regulators or shareholders discover issues with regulatory compliance after your transaction. The safer and ultimately more cost-effective course may be an independent assessment of the financial crimes compliance risks before completing cross-border

On July 15, 2020, the U.S. Department of State updated its public guidance on Section 232 of the Countering America’s Adversaries Through Sanctions Act (“CAATSA”), which authorizes (but does not require) the president to impose sanctions on “a person” that “knowingly” invests in Russian energy export pipelines, or that sells Russia goods, technology or services for such pipelines where certain monetary thresholds are met.

The Department of State announced that the purpose of the updated guidance is “to expand the focus of implementation of Section 232 to address certain growing threats to U.S. national security and foreign policy interests related to Russian energy export pipelines, particularly with respect to Nord Stream 2 and the second line of TurkStream.” This is a significant change, as the prior public guidance stated “The focus of implementation of Section 232 sanctions would be on . . . [Russian] energy export pipeline projects initiated on or after August 2, 2017 . . . For the purposes of Section 232, a project is considered to have been initiated when a contract for the project is signed. Investments and loan agreements made prior to August 2, 2017 would not be subject to Section 232 sanctions.”  This prior guidance had suggested that the focus of implementation of Section 232 would not be on Nord Stream 2 or Turkstream (either line), because these projects were “initiated” before August 2, 2017.

Continue Reading US Clarifies Secondary Sanctions on Nord Stream 2

On July 14, President Trump issued an Executive Order (EO) strengthening and expanding sanctions mandated by Congress under the Hong Kong Autonomy Act (HKAA), which the president also signed into law on July 14. In particular, the EO introduces blocking sanctions against foreign persons pursuant to the International Emergency Economic Powers Act in response to

On June 17, 2020, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the US Department of State announced the addition of 17 individuals and 22 entities to the List of Specially Designated Nationals and Blocked Persons (SDN List), pursuant to the Caesar Syria Civilian Protection Act of 2019 (Caesar Act) and Executive Order 13894 (EO 13894), for their support of the Bashar al-Assad government in Syria, and actions to undermine peace efforts in the country.  The State Department described the concurrent designations as part of a “whole-of-government campaign by the United States aimed at deterring the Assad regime from continuing its attacks against the Syrian people.”

Continue Reading Treasury, State Departments Sanction Syrian Government and Supporters

On June 18, 2020, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced the addition of three individuals and eight entities to its list of Specially Designated Nationals and Blocked Persons (SDN List), pursuant to Executive Order 13850, for “their activities in or associated with a network attempting to evade United States sanctions on Venezuela’s oil sector.”  OFAC also identified two vessels as blocked property belonging to the designated persons and issued a general license authorizing wind-down activities with certain of the designated persons, as well as an FAQ regarding the general license.  Finally, OFAC announced the delisting of two entities previously included on the SDN List for operating in the oil sector of the Venezuelan economy.

The actions are the latest in a string of recent designations targeting entities involved in the Venezuelan oil sector, which has been a particular focus for OFAC of late.  The latest actions offer a number of insights for companies doing business with Venezuela and operating in the oil and shipping industries more broadly.  We highlight three key takeaways below.

Continue Reading Three Key Takeaways from OFAC’s Latest Venezuela Sanctions Actions

On June 17, 2020, the President signed the Uyghur Human Rights Policy Act of 2020 (the “Act”). The stated purpose of the Act is to “direct United States resources” to address widely alleged human rights abuses and violations in the Xinjiang Uyghur Autonomous Region (“XUAR”) of the People’s Republic of China (“PRC”). The Act contains sanctions and reporting requirements targeting PRC government officials, and other individuals and companies, that the US government believes to be involved in the alleged human rights abuses and violations in XUAR.

Although the Act names two senior PRC officials, the current XUAR Party Secretary and the former XUAR Deputy Party Secretary, for crafting and implementing policies leading to human rights violations against Uyghurs and other minority groups in XUAR, the Act does not directly impose sanctions on those officials.
Continue Reading Trump Signs Uyghur Human Rights Policy Act Authorizing Sanctions Against “Foreign Persons” Engaging in Human Rights Abuses and Violations in Xinjiang Uyghur Autonomous Region

On June 11, 2020, the President issued a new Executive Order, “Blocking Property of Certain Persons Associated with the International Criminal Court” (the “ICC EO”).  The ICC EO authorizes economic sanctions and travel restrictions on persons who are engaged in efforts by the ICC to investigate and prosecute U.S. and allied personnel for alleged war crimes.

The President issued the ICC EO pursuant to the International Emergency Economic Powers Act (IEEPA) in response to the ICC’s “assertions of jurisdiction over personnel of the United States and certain of its allies, including the ICC Prosecutor’s investigation into actions allegedly committed by United States military, intelligence, and other personnel in or relating to Afghanistan.” In invoking IEEPA, the President declared that “any attempt by the ICC to investigate, arrest, detain, or prosecute any United States personnel without the consent of the United States, or of personnel of countries that are United States allies and who are not parties to the Rome Statute or have not otherwise consented to ICC jurisdiction, constitutes an unusual and extraordinary threat to the national security and foreign policy of the United States.”

Although the ICC EO does not immediately impose restrictions on any ICC personnel or supporter, the ICC EO authorizes the imposition of sanctions and travel prohibitions in several circumstances.

Continue Reading New Executive Order Authorizing Sanctions against International Criminal Court (“ICC”) Officials

In a Federal Register notice published on April 10, 2020, the US Department of the Treasury, Office of Foreign Assets Control (OFAC), amended its North Korea Sanctions Regulations (NKSR) to extend their application to non-US entities owned or controlled by US financial institutions. The change was mandated by Congress in Section 7121 of the National Defense Authorization Act for Fiscal Year 2020.

This jurisdictional expansion involving US sanctions on North Korea is noteworthy. With the exception of the Cuba and Iran sanctions programs, US sanctions prohibitions typically do not apply directly to non-US entities owned or controlled by US persons. Historically, the extension of US sanctions prohibitions to foreign subsidiaries of US companies has been one of the most controversial “extraterritorial” aspects of US sanctions programs. (So-called “secondary sanctions” do generally apply to non-US entities, but they do not impose “prohibitions” under US law.)

Continue Reading Under Congressional Mandate, OFAC Asserts Jurisdiction Under North Korea Sanctions Regulations Over Non-US Entities Owned or Controlled by US Financial Institutions

Following Steptoe’s Client Advisory of April 7, 2020, “US and EU Sanctions Policies on Humanitarian Exports and COVID-19 Relief,” the US Office of Foreign Assets Control (OFAC) issued a Fact Sheet on April 16, “Provision of Humanitarian Assistance and Trade to Combat COVID-19,” which provides additional information on OFAC policies covered