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OFAC sanctions persons connected to human rights abuses
On June 21, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13405 against 16 individuals and five entities for allegedly facilitating and perpetrating “the Lukashenka regime’s continued assault against peaceful protesters, journalists, members of the opposition, and civil society.” One of the individuals is also being sanctioned for “having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services in support of,” the designated Lukashenka regime. As a result of the sanctions, all property and interests in property belonging to the sanctioned persons, and “any entities that are owned, directly or indirectly, 50 percent or more” by the blocked persons that are subject to U.S. jurisdiction are blocked. OFAC notes that its regulations generally prohibit U.S. persons from participating in transactions with the designated persons, which include “the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any blocked person or the receipt of any contribution or provision of funds, goods or services from any such person.”
The same day, OFAC also issued Belarus General License (GL) 3 and related FAQs 912 and 913. Specifically, GL 3 authorizes limited transactions and activities involving the State Security Committee of the Republic of Belarus that are necessary and ordinarily incident to “requesting, receiving, utilizing, paying for, or dealing in” certain licenses and authorizations for the importation, distribution, or use of certain information technology products in Belarus, and is intended to ensure that U.S. persons that engage in certain business activities that are not otherwise prohibited are not unduly impacted.
OFAC issues Covid-19 related general license and FAQs
On June 17, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued three general licenses, Iran GL N, Syria GL 21, and Venezuela GL 39, (referred to as the “COVID-19-related GLs”) to expand upon Treasury’s existing authorizations for Covid-19-related transactions and activities. As previously covered by InfoBytes, OFAC published a Fact Sheet providing guidance to ensure humanitarian-related trade and assistance reaches at-risk populations through legitimate and transparent channels during the global Covid-19 pandemic. The recently released COVID-19-related GLs build on longstanding humanitarian exemptions, exceptions, and authorizations to cover Covid-19-related transactions and activities, which include, among others, “transactions and activities involving the delivery of face masks, ventilators and oxygen tanks, vaccines and the production of vaccines, COVID-19 tests, air filtration systems, and COVID-19-related field hospitals.” These GLs are also part of the Biden Administration’s efforts designated in National Security Memorandum – 1, which directs certain government agencies to review existing U.S. and “multilateral financial and economic sanctions to evaluate whether they are unduly hindering responses to the COVID-19 pandemic worldwide.” According to OFAC, these new authorizations will continue to support the effort by governments, international organizations, non-governmental organizations, and private sector actors in providing Covid-19-related assistance to people in certain sanctioned jurisdictions. OFAC also published six FAQs related to the COVID-19-related GLs (see 906, 907, 908, 909, 910, and 911).
OFAC sanctions network connected to Iran, Houthis in Yemen
On June 10, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13224 against members of a smuggling organization that allegedly contributes to funding Iran’s Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF) and the Houthis in Yemen. According to OFAC, the group is led by an Iran-based Houthi financier and generates millions of dollars from selling commodities, such as Iranian petroleum, of which a significant amount is directed through an intricate network of intermediaries in several countries to the Houthis in Yemen. OFAC Director Andrea M. Gacki noted that financial support from the network “enables the Houthis’ deplorable attacks threatening civilian and critical infrastructure in Yemen and Saudi Arabia,” and that the attacks “undermine efforts to bring the conflict to an end and, most tragically, starve tens of millions of innocent civilians.” As a result of the sanctions, all property and interests in property belonging to the sanctioned individuals, and “any entities that are owned, directly or indirectly, 50 percent or more” by the individuals that are subject to U.S. jurisdiction are blocked and must be reported to OFAC. OFAC’s announcement further noted that OFAC regulations “generally prohibit” U.S. persons from participating in transactions with designated persons and foreign financial institutions that knowingly participate in significant transactions related to the designated individuals risk sanctions that could discontinue their access to the U.S. financial system or block their property or interests in property under U.S. jurisdiction.
In addition, OFAC announced the removal of sanctions on three former Government of Iran officials, and two companies who were previously connected to the handlings of Iranian petrochemical products. According to OFAC, “these delistings are a result of a verified change in behavior or status on the part of the sanctioned parties and demonstrate the U.S. government’s commitment to lifting sanctions in the event of a change in behavior or status for sanctioned persons.”
Agencies call for "robust" alternate reference rates
On June 11, the Treasury Department, OCC, SEC, and the FDIC released separate statements following the meeting of the Financial Stability Oversight Council concerning the LIBOR transition. Acting Comptroller of the Currency Michael Hsu said it is “imperative that banks continue careful planning” for the transition away from LIBOR to an alternate reference rate, such as the Secured Overnight Financing Rate (SOFR), the Alternate Reference Rates Committee’s (ARRC) preferred LIBOR alternative. As previously covered by InfoBytes, the ARRC released the SOFR “Starter Kit” in August 2020, which includes three factsheets that are the result of a series of educational panel discussions held by ARRC. The various panel discussions were designed to educate on “the history of LIBOR; the development and strengths of SOFR; progress made in the transition away from LIBOR to date; and how to ensure organizations are ready for the end of LIBOR.” SEC Chairman Gary Gensler also expressed support for SOFR, calling it a “preferable” alternate rate. In addition, Gensler shared his concerns regarding the Bloomberg Short-Term Bank Yield Index (BSBY), which some commercial banks are advocating as a replacement for LIBOR. Gensler said the BSBY is based upon unsecured, term, bank-to-bank lending, which is like LIBOR. Treasury Secretary Janet Yellen encouraged market participants to “act promptly to support the switch in derivatives from LIBOR to SOFR.” She noted that “[w]hile important progress is being made in some segments of the market, other segments, including business loans, are well behind where they should be at this stage in the transition.” FDIC Chairman Jelena McWilliams pointed out that the “FDIC continues to focus on the LIBOR transition and to assess institutions’ practices and plans to adopt a replacement rate and address legacy contracts before December 31 of this year.” However, she disclosed that “the FDIC does not endorse any particular alternative reference rate.”
OFAC sanctions individuals connected to Ortega regime
On June 9, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13851 against four individuals connected to the Ortega regime. According to the announcements, the Ortega regime has undermined democracy, abused civilians’ human rights, implemented corrupt laws with negative economic results, and attempted to censor the independent news media. OFAC Director Andrea M. Gacki, stated that the Ortega regime “intends to continue its suppression of the Nicaraguan people,” and “[t]he United States will continue to expose those officials who continue to ignore the will of its citizens.” As a result of the sanctions, all property and interests in property belonging to the sanctioned individual, and “any entities that are owned, directly or indirectly, 50 percent or more” by the individual that are subject to U.S. jurisdiction are blocked and must be reported to OFAC. OFAC’s announcement further noted that OFAC regulations “generally prohibit” U.S. persons from participating in transactions with designated persons.
President Biden issues executive order blocking U.S. entry by some persons connected to the Western Balkans
On June 8, President Biden issued an Executive Order (E.O.) on “Blocking Property And Suspending Entry Into The United States Of Certain Persons Contributing To The Destabilizing Situation In The Western Balkans.” According to the E.O., expanding the scope will address the national emergency declared in E.O. 13219, “including the undermining of post-war agreements and institutions following the breakup of the former Socialist Federal Republic of Yugoslavia, as well as widespread corruption within various governments and institutions in the Western Balkans, stymies progress toward effective and democratic governance and full integration into transatlantic institutions, and thereby constitutes an unusual and extraordinary threat to the national security and foreign policy of the United States.” The E.O blocks property and interests in property that are in the U.S. or in the possession or control of certain persons who meet one or more of the criteria set forth in the order, including those who are determined, among other things: (i) “to be responsible for or complicit in, or to have directly or indirectly engaged in, actions or policies that threaten the peace, security, stability, or territorial integrity of any area or state in the Western Balkans”; (ii) “to be responsible for or complicit in, or to have directly or indirectly engaged in, actions or policies that undermine democratic processes or institutions in the Western Balkans”; or (iii) “to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, any person whose property and interests in property are blocked pursuant to this order.” Additionally, the Treasury Secretary is authorized to take actions, including promulgating rules and regulations, to carry out the purposes of the E.O.
President Biden issues executive order prohibiting securities investments in Chinese military companies
On June 3, President Biden issued Executive Order (E.O.) 14032, “Addressing the Threat from Securities Investments that Finance Communist Chinese Military Companies.” The E.O. takes additional steps pursuant to the national emergency declared pursuant to E.O. 13959 (covered by Infobytes here), including the threat posed by the military-industrial complex of the People’s Republic of China (PRC) and “its involvement in military, intelligence, and security research and development programs, and weapons and related equipment production under the PRC’s Military-Civil Fusion strategy.” The E.O. generally prohibits U.S. persons from “the purchase or sale of any publicly traded securities, or any securities that are derivative of such securities, or are designed to provide investment exposure to such securities, of” any listed Chinese military company. The E.O. also establishes the deadlines for divestment of investments in companies currently listed as Chinese military companies as well as companies that later may be added to the list of Chinese military.
Among other things, the prohibitions apply “except to the extent provided by statutes, or in regulations, orders, directives, or licenses that may be issued pursuant to this order, and not withstanding any contract entered into or any license or permit granted before the date of the order.” The E.O. also prohibits any transactions by U.S. persons or within the U.S. that evade or avoid, have the purpose of evading or avoiding, cause a violation of, or attempt to violate the provisions set forth in the order, as well as any conspiracy to violate any of these prohibitions. Additionally, the Treasury Secretary—after consulting with heads of other executive departments as deemed appropriate—is authorized to take actions, including promulgating rules and regulations, to carry out the purposes of the E.O.
OFAC also published eight new FAQs and seven updated FAQs regarding the new E.O. In addition, several names and entities have been added to OFAC’s Non-SDN Chinese Military-Industrial Complex Companies List.
Fed winding down Secondary Market Corporate Credit Facility
On June 2, the Federal Reserve Board announced plans to wind down the portfolio of the Secondary Market Corporate Credit Facility (SMCCF), a temporary emergency lending facility that was established and provided by the Treasury Department under the CARES Act, which closed in December 2020. The SMCCF (covered by InfoBytes here) played a role in restoring market functioning, supported the availability of credit for certain employers, and assisted employment numbers during the Covid-19 pandemic. According to the announcement, sales from the SMCCF portfolio will be “gradual and orderly,” aiming to decrease the likelihood of “any adverse impact on market functioning by taking into account daily liquidity and trading conditions for exchange traded funds and corporate bonds.” The announcement also indicates that the Federal Reserve Bank of New York, which manages the operations of the SMCCF, will release more details before sales begin.
OFAC sanctions Bulgarian individuals and their networks
On June 2, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13818 against three individuals for their extensive roles in corruption in Bulgaria and their networks, which encompasses 64 entities. According to the announcement, this is the single largest action targeting corruption to date. Andrea Gacki, Director of OFAC, noted that the U.S. joins Bulgarians in “promoting accountability for corrupt officials who undermine the economic functions and democratic institutions.” Additionally, “any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons are also blocked.” The sanctions also generally prohibit U.S. persons from engaging in any dealings involving the property or interests in property of designated or otherwise blocked persons.
OFAC amends Venezuela-related general license
On June 1, the U.S. Treasury Department’s Office of Foreign Assets Control issued Venezuela-related General License (GL) 8H, which authorizes transactions involving Petróleos de Venezuela, S.A. (PdVSA) necessary for the limited maintenance of essential operations in Venezuela or the wind down of operations in Venezuela for certain entities that would otherwise be prohibited by Executive Order 13850, as incorporated into the Venezuela Sanctions Regulations. (Covered by InfoBytes here.) Effective June 1, GL 8H replaces GL 8G, which was issued November 2020.