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.

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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

OFAC Continues Belarus Sanctions Relief

On October 24, 2017, the US Department of Treasury’s Office of Foreign Assets Control (“OFAC”) issued a general license continuing the extension of certain sanctions relief toward Belarus. The general license, which is the fourth in a series of identical licenses, authorizes US persons to engage in certain transactions with nine Belarus-based entities that have previously been designated Specially Designated Nationals (“SDNs”), as well as entities in which the nine entities have a 50% or greater ownership interest. The general license authorizes such transactions for a renewable period of six months. The first general license in this series was issued on October 30, 2015, following President Lukashenko’s decision to welcome election monitors and free certain political prisoners (see our advisory here).

The nine entities include:

  • Belarusian Oil Trade House
  • Belneftekhim
  • Belneftekhim USA, Inc.
  • Belshina OAO
  • Grodno Azot OAO
  • Grodno Khimvolokno OAO
  • Lakokraska OAO
  • Naftan OAO
  • Polotsk Steklovolokno OAO

As with the earlier versions, the general license permits all transactions involving these entities otherwise prohibited by Executive Order (“EO”) 13405 (the authority under which the entities were designated), including (i) the provision of funds, goods, or services to the entities, (ii) the receipt of funds, goods or services from the entities, and (iii) dealings in securities that are registered in the name of, held for the benefit of, or issued by the entities. Transactions ordinarily incident to a licensed transaction are also authorized. Notably, the property of the above entities blocked pursuant to EO 13405 prior to October 30, 2015 remains blocked.

US persons engaging in a transaction or series of transactions in excess of $50,000 must file a report with the US Department of State’s Office of Eastern European Affairs. The report must include (1) an estimated or actual dollar value of the transaction, (2) the parties involved, (3) the type and scope of activities conducted, and (4) the dates or duration of the activities.

The general license will expire on April 30, 2018, unless extended or revoked. Therefore, all aspects of a transaction, including payment, must be concluded by that date.

President Trump Decertifies Iran Deal, Outlines New Approach

As a follow up to our recent blog post, Steptoe published a detailed advisory on President’s Trump’s October 13, 2017 announcement that his administration would take a new strategic approach with regard to Iran and that he “cannot and will not” continue to make at least one of the periodic certifications regarding the Joint Comprehensive Plan of Action (JCPOA, or Iranian nuclear deal) called for by US law.  The announcement, which was accompanied by a White House fact sheet, marked the culmination of a nine-month, comprehensive review designed to address several policy concerns regarding Iran, such as Iranian support for terror groups, human rights violations, and development of ballistic missiles, as well as the country’s nuclear program.  Although President Trump’s announcement and decision on JCPOA certification could have substantial ramifications in the future for the JCPOA (and US sanctions relief under the JCPOA), this action has little immediate effect on the existing US sanctions framework against Iran.

For more information, please see our advisory.

President Trump Outlines New Strategic Approach Regarding Iran

In a speech today, President Trump announced the result of his Administration’s strategic review of foreign policy towards Iran, including the Joint Comprehensive Plan of Action (“JCPOA”) implemented by the Obama administration in January 2016.  As set out in a White House fact sheet, the Trump Administration will seek to expand the focus of U.S. policy towards Iran to include a number of national security concerns, including Iran’s support of terrorist groups and the development of ballistic missiles.

President Trump took the immediate step of informing Congress that he was unable to certify that the suspension of sanctions pursuant to the JCPOA was appropriate and proportionate to the specific and verifiable measures taken by Iran to terminate its illicit nuclear program.  Section 2 of the Iran Nuclear Agreement Review Act of 2015 (INARA) requires that the President make such a certification, along with other certifications regarding Iran’s compliance with the deal, to Congress every 90 days.  By failing to make this certification , President Trump triggered a process under INARA that allows (but does not require) Congress to use expedited procedures to pass legislation re-imposing sanctions against Iran that are currently being waived by the United States.  See our previous post on this subject.

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Trump Administration Announces Permanent Rollback of Sudanese Sanctions Regulations

On October 6, the U.S. Government announced the termination of U.S. sanctions against Sudan, which had been in place since 1997.

While most of the recent developments regarding U.S. sanctions have involved increasing sanctions against countries such as North Korea and Venezuela, Sudan-related sanctions policy has been quietly moving in the opposite direction, with the Obama and Trump Administrations taking steps to significantly ease restrictions on Sudan. As we have previously written, this sanctions easing began in January 2017 when President Obama issued Executive Order (“EO”) 13761, which waived a number of statutory provisions mandating sanctions on Sudan and established a framework for the potential permanent revocation of key Sudan sanctions programs. Following the EO, the U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”) issued a broad general license essentially suspending, on a temporary basis, the United States’ longstanding comprehensive sanctions against Sudan. The U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) also amended the Export Administration Regulations to set out a favorable licensing policy for certain exports or reexports to Sudan of items intended to ensure the safety of civil aviation or the safe operation of fixed-wing, commercial passenger aircraft, along with certain items related to railroads.  (For additional details on the specific sanctions relief authorized under these actions see our previous advisory here). Continue Reading