Sanctions Top-5 for the week ending 31 July 2020
Here are five things that happened this week in the world of economic sanctions that I think you should know about.
- The US Office of Foreign Assets Control (OFAC) named two Chinese individuals and the Xinjiang Production and Construction Corps (XPCC) as Specially Designated Nationals (SDNs) under the Global Magnitsky Sanctions program for their involvement in human rights abuses in the Xinjiang Uyghur Autonomous Province (XUAR). The XPCC is linked to Chen Quanguo, a PRC government official sanctioned by OFAC in July 2020 for overseeing activities in the XUAR. OFAC also issued General License 2, authorizing US persons to wind down certain XPCC-related activities through 30 September 2020.
- The European Union added six individuals and three entities in China, North Korea, and Russia to the EU Sanctions List for their involvement in cyber-related attacks. These are the first designations under the EU’s cyber-related sanctions since the program’s adoption in May 2019. The targets include one Chinese national previously indicted by the US Department of Justice in December 2018 and individuals and entities sanctioned by OFAC in December 2016, September 2018, and December 2018, respectively, including a division of Russia’s Main Intelligence Directorate (GRU).
- OFAC announced a US$ 824,314 settlement with a US-based manufacturer for violations of the Iranian Transactions and Sanctions Regulations (ITSR) caused by the company’s subsidiaries in Italy and Turkey. According to the OFAC settlement notice, between 2012 and 2015, the subsidiaries sold products to Iran via distributors in violation of the ITSR at 31 CFR 560.215.
- OFAC named a Syrian businessman and nine of his companies as SDNs under the Caesar Syria Civilian Protection Act of 2019 and Executive Order 13582 in connection with luxury shopping and hotel development projects in and around Damascus. The US State Department simultaneously sanctioned three individuals and the First Division of the Syrian Arab Army under Executive Order 13894 in response to atrocities committed by the Syrian military.
- The US State Department released a list of 22 materials determined to be used in connection with Iran’s nuclear, military, or ballistic missile programs (who knew there were so many types of aluminum?). The State Department press statement reminds that persons who knowingly transfer such materials to Iran could be targeted with secondary sanctions under Section 1245 of the Iranian Freedom and Counter-Proliferation Act.
There’s always so much to learn from OFAC settlements. In the latest case, we are reminded (again) that non-US entities that are owned or controlled by US persons must comply with the ITSR. Unfortunately, an employee of the manufacturer (who, OFAC tells us, was not a sanctions expert) decided it was A-OK for the foreign subsidiaries to continue their Iranian sales as long as they worked through distributors. (Not so.) Several years and 74 violations later, the company’s management realized the mistake when OFAC issued now-defunct General License H, which permitted US companies’ foreign subsidiaries to do certain Iranian business. The good news: thanks to their cooperation with OFAC and compliance remediation, the company’s monetary penalty was reduced from a maximum of almost USD 20 million to a mere USD 824,314.
For the legal scholars out there: you might be interested in this analysis on the HKU Legal Scholarship Blog of the unsettled question of the application (or non-application) of Article 29(4) of the Hong Kong National Security Law to financial institutions and companies that are required to comply with foreign sanctions of their home jurisdictions. The authors are Professor Albert H.Y. Chen, a member of the Hong Kong Basic Law Committee of the National People’s Congress Standing Committee, and Professor Simon N.M. Young, both of the University of Hong Kong Faculty of Law.
Need an update on Hong Kong sanctions? Join Gem Conn, Vice President of Risk & Compliance Research at Dow Jones, and me for a webinar on “The Sanctions Implications of Recent Hong Kong Legislation” hosted by Dow Jones Risk & Compliance, today, 4 August, at 3:00 p.m. Hong Kong time. Registration is here.
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(The views expressed are my own and do not constitute legal advice. Photo from Vladislav Reshetnyak.)