November 11, 2016
By: Anna Sayre, Legal Content Writer, SanctionsAlert.com
On October 7, 2016, President Obama issued an executive order terminating the Myanmar (also known as Burma) sanctions program and revoking the executive orders imposing sanctions against the Southeast Asian country. This formally concluded US economic sanctions against Myanmar nearly 20 years after their inception.
This historic decision to lift sanctions against Myanmar is the culmination of easing of sanctions in support of the county’s marked recent transition from military rule to democratic governance.
Although US sanctions against the country have ended, there are still restrictions and risks that a compliance officer needs to be aware of before expanding operations or correspondent relationships with Myanmar customers.
A history of US sanctions against Myanmar
The political relationship between the US and Myanmar (then called Burma)became strained after the Burmese military coup in 1988, which led to violent suppression of pro-democratic demonstrations. During the next decade, tensions increased between the two countries leading to a number of US companies exiting the country’s market due to a worsening of the business climate and mounting criticism from global human rights groups.
TIMELINE OF US-MYANMAR RELATIONS
- 1988: Burmese military coup; Burma is renamed Myanmar.
- 1997: US prohibits new investment in the Myanmar market.
- 2003: US passes the BFDA banning imports, financial exports, freezing assets, and extending visa restrictions against Myanmar.
- 2007: OFAC cracks down further on Myanmar, adding 25 individuals to its SDN List.
- 2010: Myanmar elects a quasi-democratic government.
- 2011: US and Myanmar negotiate an exchange of ambassadors.
- 2012: Initial easing of US sanctions against Myanmar.
- 2015: Further elections restore democratic rule, leading to further easing of US sanctions.
- 2016: Full lift of US embargo against Myanmar.
In May 1997, the US Government officially prohibited new investment by US persons or entities in the Myanmar market. Further, in 2003, Congress passed the Burma Freedom and Democracy Act (BFDA), which included a ban on all imports from Myanmar, a ban on the export of financial services, a freeze on the assets of certain financial institutions, and extended visa restrictions on Myanmar officials.
Continued repression by the Burmese government, including the crackdown on peaceful protestors in September 2007, forced the US government to further strengthen its sanctions against Myanmar.On September 27, 2007, the US Department of Treasury’s Office of Foreign Assets Control (OFAC), the main agency that enforces and administers US sanctions,designated 25 senior Myanmar government officials as subject to an asset block under Executive Order (EO) 13310,which blocks property and property interests of designated officials as well as certain transactions between US persons and Myanmar. On October 19, 2007, President George W. Bush issued a new EO 13448, which expanded the authority to block assets to individuals who are responsible for human rights abuses and public corruption, as well as those who provide material and financial support to the Burmese regime.
It was not until November 2010, following the election of a quasi-civilian government headed by former President Thein Sein, that the US government began the process of improving its links with Myanmar. In late 2011, the then US Secretary of State Hillary Clinton and various Myanmar government official sengaged in talks and negotiations that resulted in an exchange of ambassadors between the countries. By 2012, the US began formal easing of its sanctions against Myanmar.
In historic elections in November 2015, Myanmar’s National League for Democracy (NLD) party won a majority of the total seats in the national parliament, leading to the NLD party’s HtinKyaw being inaugurated as president on March 30, 2016.
Which US Sanctions were lifted?
As a result of President Obama’s EO on October 7, 2016, the following changes took effect immediately:
- All individuals and entities on OFAC’s Specially Designated Nationals and Blocked Persons List (SDN List) who had been listed under the ‘Burma Sanctions Program’ were delisted, and all property or interests in property blocked under the program were unblocked. The SDN list is a number of individuals and companies, periodically designated by OFAC, whose assets are blocked and with which dealings are prohibited by ‘US persons’.
- The ban on the importation into the United States of Myanmar-origin jadeite and rubies, and any jewelry containing them, was revoked.
- OFAC announced it would remove the Burmese Sanctions Regulations, 31 C.F.R., part 537, prohibiting property and certain other transactions related to the country.
- OFAC-administered restrictions regarding financial and banking transactions involving Myanmar have been lifted.
- The US Department of State’s reporting requirements regarding certain new investments in Myanmar by U.S. persons have been made voluntary.
It should be noted that, the US still continues to use “Burma” when referring to Myanmar in all legislations and publications, therefore any US laws and regulations (such as the ones above) amending sanctions against Myanmar will carry that name.
Since 2003, OFAC has authorized certain general licenses that provide a narrow exception to the ‘special measures’ imposed by the Financial Crimes Enforcement Network, a part of the Treasury Department known as FinCEN, against Burma under Section 311 of the USA Patriot Act relating to correspondent accounts for Burmese financial institutions, provided that particular Burmese financial institution is not a blocked entity.
A correspondent bank is a third party bank that facilitates international fund transfers and other transactions, such as wire transfers, on behalf of another, often smaller, financial institution. This is usually necessary when a financial institution does not have the means or international presence needed to conduct such transactions.
Following the 2016 termination of OFAC’s Burma sanctions, these OFAC general licenses were no longer in effect.
In October, in order to respond to this anomaly, FinCEN provided so-called ‘exceptive relief to allow US financial institutions to provide correspondent services to Myanmar banks. The exception is only granted when such accounts are subject to the due diligence obligations set forth under Section 312 of the USA PATRIOT Act, namely that financial institutions implement appropriate policies and procedures that are reasonably designed to detect known or suspected money laundering activities.
33 Burmese entities and individuals remain ‘designated’ by OFAC
Although sanctions against the country have ended, there are still risks and restrictions a sanctions compliance officers needs to be aware of.
Currently, there are still 33 persons with a Myanmar passport or a Myanmar address, on OFAC’s‘do not touch’ lists consisting of 23 individuals – including the North Korean Ambassador to Myanmar- and 10 companies.
|THET, Naing Win||Burma||Burma||Individual||SDNTK||SDN|
|KHINE, Oo Oo||Burma||Burma||Individual||SDNTK||SDN|
|AKIRAPHOKIN, Thit||China, Thailand, Burma||Thailand||Individual||SDNTK||SDN|
|CHANG, Chin Sung||Burma, Thailand||Thailand||Individual||SDNTK||SDN|
|SHIH, Kuo Neng||Burma||N/A||Individual||SDNTK||SDN|
|CHA, Ta Fa||Burma||Thailand||Individual||SDNTK||SDN|
|KYA, La Bo||Burma||N/A||Individual||SDNTK||SDN|
|LI, Cheng Yu||Burma, Thailand||Thailand||Individual||SDNTK||SDN|
|TUAN, Shao Kuei||Burma||Thailand||Individual||SDNTK||SDN|
|LI, Kai Shou||Burma||N/A||Individual||SDNTK||SDN|
|PAO, Hua Chiang||Burma||N/A||Individual||SDNTK||SDN|
|PAO, Yu Liang||Burma||N/A||Individual||SDNTK||SDN|
|PAO, Yu Yi||Burma||N/A||Individual||SDNTK||SDN|
|PAO, Yu Hsiang||Burma||N/A||Individual||SDNTK||SDN|
|WEI, Hsueh Yuan||Burma||Thailand||Individual||SDNTK||SDN|
|WEI, Hsueh Lung||China, Thailand, Burma||Thailand||Individual||SDNTK||SDN|
|HO, Chun Ting||Burma, Singapore||Burma, Singapore||Individual||SDNTK||SDN|
|TET KHAM GEMS CO., LTD.||Burma||N/A||Entity||SDNTK||SDN|
|HONG PANG GEMS & JEWELLERY COMPANY LIMITED||Burma||N/A||Entity||SDNTK||SDN|
|HONG PANG GEMS & JEWELLERY (HK) CO. LIMITED||Hong Kong, Burma, China||N/A||Entity||SDNTK||SDN|
|HONG PANG TEXTILE COMPANY LIMITED||Burma||N/A||Entity||SDNTK||SDN|
|HONG PANG MINING COMPANY LIMITED||Burma||N/A||Entity||SDNTK||SDN|
|HONG PANG LIVESTOCK DEVELOPMENT COMPANY LIMITED||Burma||N/A||Entity||SDNTK||SDN|
|HONG PANG GENERAL TRADING COMPANY, LIMITED||Burma||N/A||Entity||SDNTK||SDN|
|HONG PANG ELECTRONIC INDUSTRY CO., LTD.||Burma||N/A||Entity||SDNTK||SDN|
|TET KHAM CONSTRUCTION COMPANY LIMITED||Burma||N/A||Entity||SDNTK||SDN|
|YANGON AIRWAYS COMPANY LIMITED||Burma||N/A||Entity||SDNTK||SDN|
|KIM, Sok Chol||Burma||North Korean||Individual||DPRK2||SDN|
|KIM, Kwang Hyok||Burma||North Korean||Individual||DPRK2||SDN|
Any assets of these persons in the possession or control of US persons must remain blocked, and transactions involving US persons or subject to US jurisdiction involving these persons or companies generally remain prohibited. These sanctions also apply to any entity that is 50 percent or more owned, whether individually or in the aggregate, directly or indirectly, by one or more persons on the SDN List, even if the entity is not itself listed.
Be aware of historical violations of Burma sanctions program
Additionally, the US government will continue to enforce historical violations of Myanmar sanctions that occurred during the time in which the sanctions against Myanmar continued to be in effect. As such, it should be noted that the lifting of sanctions does not relieve potential liability for prior violations of sanctions against Myanmar.
Since 2003, there have been a total of 18 OFAC enforcement actions against companies or individuals for Burma sanctions violations, with penalties or settlements ranging from $450 to $963M. In 11 of the 18 cases, in addition to the Burma program violations, there were violations of other programs, including Cuba, Sudan and others. In 7 cases, the only sanctions program that was violated was the Burma program.
|Entity/Individual Subject to Enforcement Action||Year||Country||Industry||Amount Paid||Sanctions Program Violated|
|BNP Paribas SA Settlement||2014||France||Bank||$963,619,900||Sudan, Iran, Cuba, Burma|
|ING Bank N.V. Settlement||2012||Netherlands||Bank||$619,000,000||Cuba, Burma, Sudan|
|Credit Suisse AG Settlement||2009||Switzerland||Bank||536,000,000||Burma, Sudan, Cuba, Libya, Charles Taylor|
|HSBC Holdings plc Settlement||2012||UK||Bank||$375,000,000||Cuba, Burma, Sudan|
|Crédit Agricole Corporate and Investment Bank Settlement||2015||France||Bank||$329,593,585||Sudan, Cuba, Burma, Iran|
|Commerzbank AG Settlement||2015||Germany||Bank||$258,660,796||Burma, Cuba, Iran, Sudan, WMD|
|Standard Chartered Bank Settlement||2012||UK||Bank||$132,000,000||Burma, Iran, Libya|
|The Royal Bank of Scotland plc Settlement||2013||UK||Bank||$33,122,307||Cuba, Burma|
|Bank of Tokyo-Mitsubishi UFJ, Ltd. Settlement||2012||Japan||Bank||$8,571,634||Burma, Iran|
|National Australia Bank Ltd. Settlement||2007||Australia||Bank||$100,000||Burma, Sudan, Cuba|
|Yokozuna Pearls & Gems, Inc. Assessment||2010||USA||Wholesale||$25,000||Burma|
|Premier Agency Inc Assessment||2008||USA||Business Services||$7,500||Burma|
|1 Individual Assessment||2008||N/A||Individual||$7,500||Burma|
|1 Individual Settlement||2009||N/A||Individual||$4,206||Burma|
|Pala International Inc. Settlement||2008||USA||Other/Unknown||$846||Burma, Kingpin/SDNT|
|Ritz Camera Centers, Inc. Settlement||2008||USA||Manufacturing||$500||Burma|
|Hanmi Bank on behalf of Pacific Union Bank Settlement||2004||USA||Finance and Insurance Sector/Bank||$450||Burma|
EU sanctions and US Commerce Department’s trade controls remain in force
Though the US has now lifted its sanctions, the embargoadministered by the US Department of Commerce in relation to arms continues to stand. Namely, this continues to prohibit the provision of arms and related materiel to any party in, or for use in, Myanmar, the provision of finance or financial assistance for the sale, supply, transfer or export of arms and related materiel to any party, or for use in, Myanmar; and also prohibits export/import of any equipment which may be used for internal oppression in Burma/Myanmar.
Compliance officers also need to be aware that the European Union (EU) also continues to enforce an embargo against Myanmar. Specifically, under EU sanctions law, through what are called ‘restrictive measures’, the EU prohibits:
- providing technical assistance related to military activities and to the provision, manufacture, maintenance and use of arms and related materiel of all types, including weapons and ammunition, military vehicles and equipment, paramilitary equipment, and spare parts for the aforementioned, directly or indirectly to any natural or legal person, entity or body in, or for use in Myanmar.
- providing finance or financial assistance related to military activities, including, in particular, grants, loans and export credit insurance for any sale, supply, transfer or export of arms and related materiel, directly or indirectly to any natural or legal person, entity or body in, or for use in Myanmar.
EU sanctions against Myanmar have been in place since 1990, and were recently extended until for another 12 months until 30 April 2017.
Eye on Canada
Finally, sanctions compliance officers need to keep an eye on developments in Canada.
On April 24, 2012, Canada eased the sanctions regime taken against Myanmar under the Special Economic Measures Act following positive steps being shown towards reform in the Southeast Asian country.
Canada removed a number of prohibitions currently found in the Special Economic Measures (Burma) Regulations includingthe prohibitions on import, export, investment, the docking and landing of ships and aircraft and the provision or acquisition of financial services.
The Canadian arms embargo, covering the export of arms and related material, the provision of associated technical and financial assistance, as well as an assets freeze and prohibition on dealing with designated persons, remain in force.