Sanctions Top-5 for the week ending 7 August 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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(Note: this week’s briefing is a day early in light of the Hong Kong developments.)

  1. The US Office of Foreign Assets Control (OFAC) named 11 government officials in Hong Kong and China as Specially Designated Nationals (SDNs) pursuant to Executive Order 13936. The targets include Hong Kong’s Chief Executive (think mayor), Police Commissioner, Justice Secretary, and other notables. (More on this below.)
  2. The next day, the Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC) released statements (here and here) acknowledging the existence of the US sanctions and urging Hong Kong firms to treat customers fairly. In its statement, the HKMA reiterated its longstanding position that “no obligation is created . . . under Hong Kong law” (emphasis mine) by foreign sanctions adopted outside the United Nations framework.
  3. Had enough yet? On the eve of Hong Kong sanctions, the White House released two Executive Orders (here and here) that could limit US transactions with Tencent (in relation to WeChat) and ByteDance. As I told the Financial Times, the orders could eventually restrict US persons from downloading the apps or prohibit transfers of technologies to the companies. We’ll known more within 45 days, when the Commerce Department issues regulations. (Read more about it in our post on the Steptoe International Compliance blog.)
  4. The UN Security Council committee concerning the Central African Republic (CAR) adding Bi Sidi Souleman, leader of the militia Retour, Réclamation, Réhabilitation (3R) to the UN Sanctions List pursuant to UN Security Council Resolution 2127(2013). According to the UN news release, 3R has engaged in a raft of nefarious activities and disrupted the country’s Political Agreement for Peace and Reconciliation.
  5. OFAC named a Zimbabwean businessman, Kudakwashe Regimond Tagwirei, as an SDN under the “material assistance” provision of Executive Order 13469 for providing gifts and other support to sanctioned government officials in exchange for contracts and favors. OFAC also named a company, Sakunda Holdings, as an SDN for being owned or controlled by Tagwirei.

Comments

As a result of the SDN designations, property and interests in property of the 11 sanctioned government officials (and entities owned 50 percent or more by them) are blocked (frozen) in the United States or within the possession or control of a US person. US persons (including US banks and companies) are prohibited from transacting or dealing, directly or indirectly, with them. As I told Reuters, non-US persons and companies could face OFAC risk by engaging in transactions involving the SDNs that also involve US persons or the US financial system (e.g. wire transfers through US correspondent accounts).

Financial institutions, in particular, will be watching to see how the reporting process under Section 5 of the Hong Kong Autonomy Act plays out. Will the 11 officials be reported to Congress under Section 5(a) and when? Could other foreign persons be added to the list? What sanctions will apply to foreign financial institutions under Section 7? What on earth is a “significant transaction”? It’s a cliffhanger.

Speaking of, what does “material assistance” under Section 1(a)(iv) of Executive Order 13936 mean in the context of Hong Kong? That will be up to the US State and Treasury Departments to decide. For an example of what could be included, see last week’s Zimbabwe designation under Section 1(a)(vii) of Executive Order 13469, which also relates to SDN officials.

In case you missed it: Brian Hook, the US State Department’s Special Representative for Iran, will step down from his post. Elliott Abrams, the current Special Representative for Venezuela, will take over, according to a State Department announcement.

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