On November 14, 2022, HM Treasury’s Office of Financial Sanctions Implementation (“OFSI”) published detailed guidance on the recently published ban on the provision of maritime transportation of Russian oil and oil products and related services (“OFSI Guidance”). The OFSI Guidance sets out additional details regarding how the oil price cap exception will operate as well as the attestation process and reporting obligations with which all parties involved in the maritime supply chain will need to comply. The OFSI Guidance also addresses OFSI’s proposed approach to enforcement of the new ban. For more information on the ban on the maritime transportation of Russian oil and oil products and related services, see our previous blog post (here).Continue Reading OFSI Publishes Guidance on the UK Maritime Services Prohibition and Oil Price Cap
On October 20, 2022, the US Department of the Treasury (Treasury) issued, for the first time, Enforcement and Penalty Guidelines (Guidelines) for the Committee on Foreign Investment in the United States (CFIUS or the Committee). The Guidelines describe three categories of conduct that may constitute a violation, the process CFIUS generally follows in imposing penalties, and some of the factors the Committee considers in determining whether a penalty is warranted and the scope of any such penalty. The Guidelines also encourage prompt and complete self-disclosure of any conduct that may constitute a violation.Continue Reading CFIUS Announces First Ever Enforcement and Penalty Guidelines
On November 3, 2022, a sixteenth amendment to the UK’s Russia sanctions regime was laid before parliament. The Russia (Sanctions) (EU Exit) (Amendment) (No. 16) Regulations 2022 (“Amendment 16”) introduces a ban on UK ships and services such as insurance, brokerage and shipping facilitating the maritime transport of Russian crude oil from December 5, 2022. A General Licence is expected to be published shortly that lays the basis for an oil price cap exception, which will allow continued access to services provided that Russian crude oil is purchased at or below the price cap. The level of the price cap will be set by the price cap coalition of the G7 and Australia in due course. Amendment 16 brings forward the implementation date for the import bans relating to Russian oil and oil products discussed in our previous blog post (here) from December 31, 2022 to December 5. Amendment 16 also introduces a comparable ban on refined oil products, which will come into effect on February 5, 2023.Continue Reading New UK Russia Sanctions Legislation Bans the Maritime Transport of Russian Oil
On October 24, the White House announced that President Biden signed Executive Order (EO) 14088 (amending EO 13851) which substantially expands the Nicaragua sanctions program with sectoral sanctions authorities, exposing individuals and entities operating in identified sectors to blocking sanctions. Specifically, the amended EO identifies the gold sector, which affects about $900 million of exports, most of it to the United States. Entities and individuals that operate or have operated in that sector are now at risk of US blocking sanctions. The EO also allows for the future identification of additional sectors that could become subject to sanctions, if warranted.
On October 28, 2022, further amendments to the UK’s Russia sanctions regime were laid before parliament. The new measures introduced under the Russia (Sanctions) (EU Exit) (Amendment) (No. 15) Regulations 2022 (“Amendment 15”) include an expansion of the ban on loan and credit arrangements and the items covered by existing trade restrictions on oil refining, revenue generating, G7 dependency and further goods and technology. Amendment 15 also introduces an import ban on liquefied natural gas (“LNG”) and the creation of new trade prohibitions on gold jewellery, certain processed gold and the export of so-called “Russia’s vulnerable goods.” All of the new measures will enter into force on October 29, 2022, with the exception of the provisions relating to the import of LNG, which will enter into force on January 1, 2023.
Continue Reading New UK Russia Sanctions Legislation Amends Loan and Credit Restrictions; Expands the Range of Items Targeted by Existing Trade Prohibitions; and Introduces New Trade Prohibitions on Liquefied Natural Gas, Items Critical to the Functioning of Russia’s Economy and Certain Gold Items
On October 11, 2022, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) and Financial Crimes Enforcement Network (FinCEN) announced enforcement actions against Bittrex, Inc. (Bittrex), a privately-owned digital asset trading platform based in Bellevue, Washington, for apparent violations of anti-money laundering (AML) laws and of multiple sanctions programs. A settlement of over $24 million was announced by OFAC and a $29 million fine was announced by FinCEN. FinCEN will credit payment of the OFAC settlement amount toward Bittrex’s potential liability with FinCEN, meaning Bittrex will pay just over $29 million in total. Joint enforcement action between OFAC and FinCEN is uncommon—the settlements mark the first instance of parallel enforcement actions by OFAC and FinCEN in the digital asset sector.
On October 7, 2022, in a move that was hailed by senior U.S. government officials as a paradigm shift in U.S. export controls policy toward China, the Department of Commerce’s Bureau of Industry and Security (BIS) issued an interim final rule that amends the Export Administration Regulations (EAR) to impose new and expanded controls on advanced computing integrated circuits (ICs), computer commodities that contain such ICs, and certain semiconductor manufacturing items. Transactions for supercomputer end-uses and transactions involving certain entities on the Entity List are now subject to additional export controls, as are certain semiconductor manufacturing items and transactions for certain IC end uses. U.S. person activities as they relate to certain semiconductor activities in China are also now restricted.
Certain aspects of the rule, specified below, including the availability of license exceptions, became effective immediately on October 7, 2022. The new restrictions on U.S. person activities under § 744.6 became effective on October 12, 2022. The remainder of the provisions with a delayed effective date are specified below and will become effective on October 21, 2022. BIS is also accepting public comments on the interim final rule through December 12, 2022.
Separately, also on October 7, 2022, BIS issued a final rule, which revised the Unverified List (UVL) and clarified the activities and criteria that may lead to the addition of an entity to the Entity List. BIS stated that a sustained lack of cooperation by the host government in a country where an end-use check is to be conducted, such as China, that effectively prevents BIS from determining compliance with the EAR, will be grounds for adding an entity to the Entity List.
The U.S. policy goals behind the new rules are ambitious and seek to degrade China’s advanced computing capabilities in an unprecedented manner. As summarized recently by National Security Advisor Jake Sullivan: “On export controls, we have to revisit the longstanding premise of maintaining ‘relative’ advantages over competitors in certain key technologies. We previously maintained a ‘sliding scale’ approach that said we need to stay only a couple of generations ahead. That is not the strategic environment we are in today. Given the foundational nature of certain technologies, such as advanced logic and memory chips, we must maintain as large of a lead as possible.”
The broad implications of these new rules, along with their efficacy from a policy standpoint, may take some time to come fully in to focus. For now, it is clear that any U.S. or non-U.S. individuals or entities that play any role in the global semiconductor supply chain—whether as manufacturers, producers, consumers, or otherwise—need to carefully review the new rules to determine what is required to comply and, if necessary, seek guidance or a license from BIS.
On September 27, 2022, HM Treasury’s Office of Financial Sanctions Implementation (“OFSI”) announced that a monetary penalty of £30,000 was imposed on April 26, 2022 against Hong Kong International Wine and Spirits Competition Ltd. (“HKIWSC”) for breaches of the Ukraine (European Union Financial Sanctions) (No. 2) Regulations 2014 (the “UK Regulations”) and Council Regulation (EU) No. 269/2014 (Ukraine Misappropriation and Human Rights) (the “EU Regulations”). HKIWSC is a UK registered company.
According to OFSI’s penalty report, HKIWSC received three payments and 78 wine bottles from State Unitary Enterprise of the ‘Republic of Crimea’ Production-Agrarian Union (“Massandra”), a designated entity since July 25, 2014, for entry into competitions between September 2017 and August 2020. The total cumulative value of the payments and wine bottles received by HKIWSC was estimated at £3,919.62. Additionally, HKIWSC made publicity – considered an intangible economic resource – available to a UK designated person.
The HKIWSC case represents the eighth use of OFSI’s civil monetary penalty powers since they were introduced under Part 8 of the Policing and Crime Act 2017 (“PACA”). Several useful hints as to OFSI’s enforcement priorities and interpretation of the scope of asset freeze sanctions can be discerned from the HKIWSC case.
On September 30, 2022, the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) published a final rule to implement the beneficial ownership information (BOI) reporting provisions of the Corporate Transparency Act (CTA), which was enacted as part of the Anti-Money Laundering Act of 2020 within the National Defense Authorization Act for Fiscal Year 2021. The final rule responds to comments on the proposed rule published by FinCEN in December 2021, which was the subject of a prior blog post.
The final rule is intended to protect US national security and the US financial system by preventing and combatting fraud, corruption, money laundering, and terrorist financing, among other illicit activities, by parties seeking to hide money and other assets in the United States via shell companies and other opaque legal structures. The rule aims to provide essential information to national security, intelligence, and law enforcement agencies by requiring certain business organizations and entities to report information to FinCEN about the beneficial owners and controllers of such organizations and the individuals who have filed an application with specified government authorities to form the entity or register it to do business. The rule describes who must file a beneficial ownership information report, what information must be reported, and when a report is due.
On September 30, 2022, the UK Foreign Secretary, James Cleverly, announced new services and goods export bans targeting vulnerable sectors of the Russian economy in response to President Putin’s announcement of the annexation of the Ukrainian regions of Donetsk, Luhansk, Kherson and Zaporizhzhia following sham referendums. The imposition of an asset freeze also was announced on the Governor of the Central Bank of the Russian Federation (CBR), alongside measures to suspend the process by which actions taken to manage the orderly failure of Russian banks are recognized under the laws of the United Kingdom. The announcements were made in tandem with the UK’s international partners.