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.)

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.)

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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