On May 8, 2019, President Trump issued a new Executive Order expanding secondary sanctions against the iron, steel, aluminum, and copper sectors of Iran. The Executive Order provides authority to impose sanctions on foreign persons who operate in the covered metals sectors or who facilitate significant transactions in connection with those sectors. Unlike direct sanctions (which have long prohibited unlicensed dealings with Iran with a connection to U.S. jurisdiction), secondary sanctions threaten the imposition of sanctions against non-U.S. persons acting entirely outside U.S. jurisdiction. Although the order is immediately effective, firms are permitted 90 days to wind down existing transactions pursuant to an accompanying OFAC FAQ. Continue Reading Sanctions Tighten on Iranian Metals Sectors
On May 2, 2019, the U.S. Department of the Treasury’s Office of Foreign Assets Control released “A Framework for OFAC Compliance Commitments”, providing general guidance on the elements OFAC considers to compose an effective sanctions compliance program.
Broadly, the framework endorses a risk-based approach to compliance (recognizing that no two compliance programs will be identical) and the need for a formal SCP that includes five essential components: management commitment, risk assessment, internal controls, testing and auditing, and training. The Framework is not a regulatory requirement, nor does it prescribe specific controls; rather, it indicates the elements that OFAC will look for in evaluating a company’s compliance efforts in the context of any enforcement action.
The Framework also sets out prescriptive compliance commitments OFAC will seek in future enforcement actions, largely codifying commitments seen in recent settlements.
This memorandum summarizes the Framework and recent OFAC enforcement actions imposing compliance commitments.
This Trade Summary provides an overview of WTO dispute settlement decisions and panel activities, and EU decisions and measures on commercial policy, customs policy and external relations, for the first quarter of 2019.
As we have discussed in prior posts, the Trump Administration has threatened since January 2019 to permit claims under Title III of the Helms-Burton Act for “trafficking” in property claimed by Americans and expropriated by Cuba to proceed. Title III has been suspended since the Helms-Burton Act was enacted in 1996.
On April 17, 2019, the Trump Administration announced that it will no longer maintain the suspension of Title III. This means that as of May 2, 2019, it will be possible for former owners of properties expropriated by the Cuban government to bring claims before the U.S. courts against foreign companies alleged to have “trafficked” with those properties.
We have updated our memorandum on the potential impact of these changes in U.S. law, including measures that foreign companies involved in business related to Cuba may wish to consider.
On April 17, 2019, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced that the Central Bank of Venezuela has been designated as a specially designated national (SDN) under Executive Order 13850, banning all transactions within U.S. jurisdiction in which it has an interest. As a result, any party who materially assists, sponsors, or provides financial, material, or technological support for, or goods or services to or in support of, the Central Bank of Venezuela now risks designation, whether or not the transaction takes place within U.S. jurisdiction. Continue Reading Venezuela Sanctions Tighten: OFAC Sanctions the Venezuelan Central Bank and Senators Propose Sanctions Legislation
On March 27, 2019, journalists affiliated with Reuters reported that the Kunlun Group (“Kunlun”), a China-based tech firm, was preparing to sell its wholly owned subsidiary, Grindr, after the Committee on Foreign Investment in the United States (“CFIUS”) informed the group that Kunlun’s continued ownership of Grindr constituted a national security risk. This forced divestiture of Grindr is a pointed reminder that CFIUS remains focused on protecting the sensitive personal data of U.S. citizens, has the power to upend closed deals that have not been cleared by the committee, and is dedicating increased resources to the review of transactions that are not notified to CFIUS. Continue Reading CFIUS Forces Kunlun to Unwind 2016 Acquisition of Grindr Over Concerns About the Protection of Sensitive Personal Data
On January 31, 2019, France, Germany and the UK (the “E3”) announced the creation of the Instrument in Support of Trade Exchanges (“INSTEX”), a special purpose vehicle intended to facilitate legitimate trade between European companies and Iran, registered in France. This initiative is supported by the European Union. The vehicle was created in the wake of the U.S.’ withdrawal in 2018 from the Iran nuclear deal (the Joint Comprehensive Plan of Action (“JCPOA”)), in addition to the EU Blocking Regulation, and as part of the EU’s response to the re-imposition of U.S. secondary sanctions on Iran through the U.S. Executive Order 13846 (the “Executive Order”). The Executive Order re-imposed the secondary sanctions regime against Iran that it have been suspended while it was a party to the JCPOA. Continue Reading France, Germany, UK Launch INSTEX to Facilitate Trade With Iran
On March 8, 2019, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) further amended the general licenses governing secondary trading of pre-sanctions Government of Venezuela (GoV) debt and Petróleos de Venezuela, S.A. (PdVSA) debt and equity by issuing new General Licenses (GL) 3D and 9C. In both, OFAC extended the authorization for all transactions and activities ordinarily incident and necessary to winding down financial contracts or other agreements entered into before January 28, 2019 (for transactions involving PdVSA debt and equity) or February 1, 2019 (for transactions involving certain GoV debt listed in GL 3D) to May 10, 2019.
OFAC has stated that these authorizations permit settling trades entered into prior to the relevant restrictions even where the related sale or transfer is to a U.S. person. OFAC also revised previously issued FAQ guidance to reflect the extended expiration dates.
On February 13, 2019, a bipartisan group of senators introduced a draft bill that, if adopted, would significantly strengthen sanctions relating to the Russian Federation. Introduced as the “Defending American Security from Kremlin Aggression Act of 2019” (“DASKA”), the wide-ranging bill covers a number of subjects, in particular a range of new cybersecurity provisions. This note focuses on the sanctions provisions, which would: Continue Reading Russia Sanctions Bill Reintroduced by Bipartisan Group of Senators
The Office of Foreign Assets Control of the U.S. Treasury Department recently issued a series of instructive press releases regarding enforcement actions taken against several companies. The decision to publicize these enforcement actions could signal a more activist and expansionist approach to sanctions enforcement matters and may evidence a broadening of OFAC’s enforcement priorities as the long run of enforcement against financial institutions begins to wind down. The actions demonstrate a focus on acquisition due diligence and conduct by overseas entities, and in particular on aggressive action against U.S. companies who fail to terminate sanctioned business by their newly acquired overseas subsidiaries; indeed, in a number of these cases OFAC took enforcement action despite the fact that the U.S. acquiror explicitly directed the termination of the sanctioned business, was deceived by officials of the acquired entity, and voluntarily self-reported the violation after discovering it. OFAC has also begun to spell out, in enforcement actions, the elements of sanctions compliance programs it imposes on violators (and, presumably, would consider a benchmark for other companies). Continue Reading OFAC Takes Aggressive Enforcement Action in Connection With M&A Transactions and Spells Out Compliance Expectations