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Financial Services Law Insights and Observations

OFAC sanctions Burmese military holding companies

Financial Crimes OFAC Department of Treasury Sanctions OFAC Designations Burma Of Interest to Non-US Persons

Financial Crimes

On March 25, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order (E.O.) 14014 against two military holding companies in Burma. According to OFAC, these sanctions specifically target “the Burmese military’s control of significant segments of the Burmese economy.” As a result of the sanctions, all property and interests in property belonging to the sanctioned entities subject to U.S. jurisdiction, which enjoy a privileged position in the Burmese economy, are blocked and must be reported to OFAC. Additionally, “any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons are also blocked.” U.S. persons are generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons.

Concurrent with the sanctions, OFAC issued four general licenses (GL) and related FAQs: (i) GL 1, “Official Business of the United States Government”; (ii) GL 2, “Official Activities of Certain International Organizations and Other International Entities”; (iii) GL 3, “Certain Transactions in Support of Nongovernmental Organizations’ Activities”; and (iv) GL 4, “Authorizing the Wind Down of Transactions Involving Myanmar Economic Corporation and Myanma Economic Holdings Limited.” GLs 1, 2, and 3 authorize certain transactions prohibited by E.O. 14014 that are associated with, respectively, the official business of the U.S. government, the official business of certain international organizations and other international entities, and certain nongovernmental organizations’ activities. GL 4 authorizes, through June 22, transactions and activities ordinarily incident to the wind down of transactions involving the two sanctioned companies as well as any entity owned by 50 percent or more of the sanctioned companies. Additionally, FAQ 882 clarifies which organizations within the United Nations’ programs are covered by GL 2, whereas FAQ 883 stipulates that “wind down transactions may be processed through the U.S. financial system or involve U.S. persons, as long as the transactions comply with the terms and conditions in GL 4.”

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