Sanctions Top-5 for the week ending 16 October 2020

Here are five things that happened this week in the world of economic sanctions that I think you should know about.

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(This week’s briefing covers the weeks ending 9 and 16 October 2020)

  1. The US State Department issued a much-anticipated report under Section 5(a) of the Hong Kong Autonomy Act (HKAA) identifying a list of 10 individuals determined by the US government to be materially responsible for the “erosion of Hong Kong’s autonomy.” (All 10 were previously sanctioned by the US Office of Foreign Assets Control (OFAC) on 7 August 2020.) Meanwhile, OFAC published a set of four FAQs on potential secondary sanctions for foreign financial institutions (FFIs) under the HKAA. (More on this below.)
  2. The European Council agreed “to take further restrictive measuresagainst high-ranking Belarusian officials including President Aleksandr Lukashenko. (As reported earlier, the European Union adopted asset freezes and travel bans against 40 individuals following the country’s disputed presidential election in August 2020 and repression of opposition protests.) Meanwhile, Canada announced sanctions against 31 Belarusian officials, in addition to the eight who were targeted in conjunction with the United Kingdom earlier this month.
  3. The European Union imposed chemical weapon sanctions on six Russian nationals and one entity in response to a suspected nerve agent attack on Russian opposition figure Alexei Navalny in August 2020. The UK government announced it would also sanction the individuals and entity.
  4. The US State Department and OFAC announced the designation of 18 Iranian financial institutions pursuant to Executive Order 13902 (one of which was also designated pursuant to Executive Order 13382). Following a 45-day wind-down period, transactions with the 18 banks for non-humanitarian goods or certain licensed activities could expose non-US persons to secondary sanctions risks, a Treasury Department news release warned.
  5. OFAC named a Nicaraguan financial institution and Nicaragua’s attorney general and the country’s secretary of the presidency as Specially Designated Nationals (SDNs) under Executive Order 13851. The targeted bank is the “main tool for funneling proceeds from Nicaragua’s concessionary oil schemes with Venezuela” to reward supporters of Nicaraguan President Daniel Ortega, according to a State Department news release.

Comments

Under Section 5(b) of the HKAA, the US Treasury Department has 30 to 60 days to issue a report of FFIs (if any) that knowingly conduct a “significant transaction” with one of the 10 individuals on last week’s State Department report. FAQ 850 gives a list of seven factors OFAC could consider in determining if a transaction is significant. (The factors are more or less the same as those used under the Iran and Russia programs.) FAQ 849 summarizes the criteria in Section 5(d) of the HKAA for excluding or removing an FFI from a Treasury Department report — in other words, a bank could conceivably still take steps to avoid secondary sanctions.

Interestingly, OFAC’s FAQ 848 says the agency “will reach out to an FFI to inquire about its conduct before identifying it” in a report under Section 5(b). It’s not clear what that reach-out will look like or whether banks will be asked to disclose information about their transactions with the 10 individuals. The good news is that most banks would have scoped out their relationships with the individuals when they were first sanctioned under Executive Order 13936 back in August 2020. (For more information, see my team’s blog post on the Steptoe International Compliance Blog.)

Get ready to update those country lists: Donald Trump announced a little while ago that the US will soon drop Sudan from the list of “state sponsors of terrorism.” OFAC already lifted comprehensive sanctions against Sudan in October 2017.

Did I miss something? Send me a message or comment on LinkedIn.

(The views expressed are my own and do not constitute legal advice. Photo from Vladislav Reshetnyak.)

US attorney in Hong Kong specializing in economic sanctions, financial crimes. Sign up for emails: http://eepurl.com/cVhTXf LinkedIn at: http://goo.gl/KX1jER

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Nicholas Turner

Nicholas Turner

US attorney in Hong Kong specializing in economic sanctions, financial crimes. Sign up for emails: http://eepurl.com/cVhTXf LinkedIn at: http://goo.gl/KX1jER

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