Sanctions Top-5 for the week ending 31 May 2019

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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1. The American Conference Institute (ACI) hosted its 2nd Summit on Economic Sanctions Compliance & Enforcement in Hong Kong last week. Thanks to those of you who stayed for the post-conference workshop on the intersections of sanctions and AML compliance, with Standard Chartered’s Maggie Qiu and yours truly. This year’s summit featured officials from the US State Department’s Office of Threat Finance and Sanctions and the Compliance & Evaluation Division of the US Office of Foreign Assets Control (OFAC). More on this below.
2. The PRC Ministry of Commerce (MOFCOM) announced that the PRC government is preparing to implement an “Unreliable Entities List” (UEL) of foreign entities engaged in activities that threaten Chinese national security, including participating in blockades or other discriminatory measures against Chinese companies. (Thanks to Qing Ren of Global Law Office for sharing a helpful English-language summary of the proposed UEL. Click here for a Chinese version.)
3. OFAC announced a finding of violation against State Street Bank & Trust for making 45 pension payments between 2012 and 2015 to a US citizen who was ordinarily resident in Iran. According to the OFAC web notice, the beneficiary’s address was listed as Tehran.
4. US Secretary of State Mike Pompeo pronounced INSTEX, the EU’s so-called Special Purpose Vehicle for EU-Iran trade, “unproblematic” if used for humanitarian goods during a press conference with German Foreign Minister Heiko Maas. (Pompeo made similar remarks in London earlier this month.) Meanwhile, Bloomberg reported that Sigal Mandelker, US Treasury Undersecretary for Terrorism and Financial Intelligence, sent a letter to INSTEX President Per Fischer warning of “severe consequences” for running afoul of US sanctions.
5. Speaking of double takes. The Wall Street Journal reported that Brian Hook, the US State Department’s Special Representative for Iran, said countries that were granted Significant Reduction Exceptions could continue to import petroleum from Iran until they reached a previously negotiated cap without risking secondary sanctions. Later, Hook clarified that the petroleum had to be en route from Iran by 2 May 2019, “even if a country had not met its previously-negotiated purchase caps.”

Comments

Kudos to Co-Chairs Jessica Bartlett and Alix Grice, the ACI team, and all the speakers for putting on a great conference in Hong Kong last week. Deputy Assistant Secretary David Peyman gave a spirited affirmation of US secondary sanctions in his keynote address. The highlight for me, though, was Carlton Morris’ very helpful presentation about OFAC’s expectations for compliance and the recently published Framework for OFAC Compliance Commitments guidance. The good news: OFAC isn’t looking for “KYCCC,” as Morris put it, and everyone’s favorite FAQ 116 is alive and well. (Send me a message if you’d like a summary of my notes.)

Speculation is rife over the PRC’s new UEL. Meanwhile, FedEx is reportedly under investigation in China for diverting Huawei shipments to the United States en route to destinations in Asia. According to The Wall Street Journal, the diversion followed the implementation of new export control procedures.

Bonus item: Hong Kong is in the middle of a tug-of-war between the United States and China over a tanker called the Pacific Bravo which may or may not be heading to Hong Kong with a belly full of Iranian oil and which may or may not be owned by China’s Bank of Kunlun. Windward published an interesting case study on the Pacific Bravo, available here. (Thanks to Omer Eilat for the tip.)

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