On Thursday, March 25, the Biden administration imposed blocking sanctions against Myanma Economic Holdings Public Company Limited (MEHL) and Myanmar Economic Corporation Limited (MEC), pursuant to Executive Order 14014 (the Burma EO), in response to the military’s refusal to disavow the February 1, 2021 military coup.[1]  As a result of the sanctions, all transactions and dealings within U.S. jurisdiction, including U.S. dollar interbank transfers, in which MEHL and MEC have a direct or indirect interest are prohibited, and all property within the United States or in the possession or control of U.S. persons in which either has a direct or indirect is blocked.  These sanctions also extend to any entity directly or indirectly 50% or more owned by one or more sanctioned persons or entities, directly or indirectly.[2]  The move was made in coordination with the United Kingdom, which also imposed blocking sanctions against MEHL.[3]  You can read our previous blog post on the Burma EO here.[4]

The designation of MEHL and MEC, two large military-affiliated holding companies, is likely to have a significant impact on international trade involving Myanmar.  MEHL and MEC have broad business interests in the Myanmar economy, holding between them more than 100 businesses covering a range of sectors including agriculture, alcohol, tobacco, oil, gas and natural resources, as well as operations in the banking, telecommunications, tourism, and transport industries.  Notably, MEHL and MEC also own Myawaddy Bank and Innwa Bank, two of Myanmar’s largest banks, and have joint ventures with foreign firms and extensive real estate investments.

Concurrent with the new designations, OFAC issued four general licenses, of which the most commercially significant is General License 4, “Authorizing the Wind Down of Transactions Involving Myanmar Economic Corporation and Myanma Economic Holdings Limited.”[5]  The license authorizes transactions and activities that are ordinarily incident and necessary to the wind down of existing transactions involving MEC or MEHL and their direct or indirect subsidiaries through June 22, 2021.[6]

The Burma EO, the legal authority for the designations of MEHL and MEC as SDNs, provides authority for further expansion of sanctions against Burma, and additional action by the Biden administration is possible.

[1] Although the United Nations recognizes the official name of the country as “Myanmar,” the United States Government still uses the name “Burma.”  To avoid confusion, we use “Burma” when discussing the Executive Order and the SDN designations.  U.S. Dep’t of the Treasury, “Treasury Sanctions Military Holding Companies in Burma” (Mar. 25, 2021), available at https://home.treasury.gov/news/press-releases/jy0078; U.S. Dep’t of State, “Sanctions on Two Burmese Entities in Connection with the Military Regime” (Mar. 25, 2021), available at https://www.state.gov/sanctions-on-two-burmese-entities-in-connection-with-the-military-regime/.

[2] If an entity is 50% or more owned by one or more sanctioned persons, it is treated as a sanctioned person in analyzing entities the sanctioned subsidiary in turn owns.  If it is less than 50% or more owned by sanctioned persons, any indirect beneficial ownership interest is disregarded.  In other words, OFAC uses a “light switch” rule in which a subsidiary is either treated as fully sanctioned or fully not sanctioned, rather than calculating the ultimate indirect beneficial ownership of the original designated party.  See OFAC, “Revised Guidance on Entities Owned by Persons whose Property and Interests in Property Are Blocked” (Aug. 13, 2014),  available at https://home.treasury.gov/system/files/126/licensing_guidance.pdf; OFAC, FAQ #401 (Aug. 13, 2014), available at https://home.treasury.gov/policy-issues/financial-sanctions/faqs/401.

[3]  UK Foreign, Commonwealth & Development Office, “UK sanctions major military business interests in further measures against Myanmar military regime” (Mar. 25, 2021), available at https://www.gov.uk/government/news/uk-sanctions-major-military-business-interests-in-further-measures-against-myanmar-military-regime.

[4] Cleary International Trade and Sanctions Watch, “United States Imposes Sanctions in Response to Military Coup in Myanmar” (Feb. 16, 2021), available at https://www.clearytradewatch.com/2021/02/united-states-imposes-sanctions-in-response-to-military-coup-in-myanmar/.

[5] U.S. Department of the Treasury, General License No. 4, available at https://home.treasury.gov/system/files/126/burma_gl_4.pdf.

[6] U.S. Dep’t of the Treasury, FAQ #883,  available at https://home.treasury.gov/policy-issues/financial-sanctions/faqs/883.