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OFAC publishes Burma Sanctions Regulations
On May 28, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued the Burma Sanctions Regulations to implement Executive Order (E.O.) 14014, “Blocking Property with Respect to the Situation in Burma.” As previously covered by InfoBytes, President Biden issued E.O. 14014 in February granting OFAC the authority to target any person determined to have operated in the defense sector of the Burmese economy, or any other sector of the economy as determined by the Secretary of the Treasury. Among other things, the Burma Sanctions Regulations provide guidance on (i) prohibited transactions; (ii) general definitions; (iii) interpretations; (iv) licenses and authorizations; (v); reports; (vi) penalties and findings of violations; and (vii) procedures and the delegation of certain authorities to the Treasury secretary. OFAC noted that while the regulations have been published in an abbreviated form to provide “immediate guidance to the public,” it intends to provide a more comprehensive set of regulations in the future that “may include additional interpretive and definitional guidance, general licenses, and other regulatory provisions.”
OFAC updates FAQs on sanctioned Chinese military companies
On May 27, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) removed FAQ 880 from its website and published a new FAQ 896 pursuant to Executive Order (E.O.) 13959, “Addressing the Threat From Securities Investments That Finance Communist Chinese Military Companies.” FAQ 880 previously stated that, following a court order preliminarily enjoining the implementation of E.O. 13959 against a previously sanctioned company, the prohibitions are no longer applicable pending further order of the court (covered by InfoBytes here). FAQ 896 clarifies that the prohibitions in E.O. 13959 do not apply with respect to the specific company identified in the FAQ.
PPP closes to new applications
On June 1, the Small Business Administration (SBA) issued an announcement on the closure of the Paycheck Protection Program (PPP) to new loan guaranty applications. The PPP has provided over $798 billion in economic relief to over 8.5 million small businesses and nonprofits across the nation, and was among the first Covid-19 economic disaster relief programs to provide small businesses affected by the pandemic with emergency funds. According to the announcement, the PPP supported the “smallest of small businesses with 32 percent of the loans going to Low-and-Moderate Income (LMI) communities.” Additionally, Community Financial Institutions played a role in PPP lending to underserved communities by providing 1.5 million loans, which totaled around $30 billion. SBA Administrator Isabella Casillas Guzman pointed out, “in 2021, 96 percent of PPP loans went to small businesses with fewer than 20 employees. Moving forward, [the SBA] will continue to prioritize equity in all SBA programs and services.”
Counter ISIS Finance Group seeks to isolate ISIS from the international financial system
On May 26, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced the release of a joint statement by the Counter ISIS Finance Group (CIFG) of the Global Coalition to Defeat ISIS, which coordinates efforts to isolate the Islamic State of Iraq and Syria (ISIS) from the international financial system and eliminate revenue sources. The CIFG held its fourteenth meeting on May 17 to discuss ongoing efforts to combat ISIS financing worldwide, which coincided with sanctions against three individuals and one entity connected to ISIS for allegedly helping ISIS access the financial system in the Middle East through a network of international donors (covered by InfoBytes here).
Among other things, the statement highlighted ISIS’s “reliance on regional money services businesses (MSBs) to transfer funds internationally,” its focus on funding “the release of its detained operatives and family members, and its extortion and looting of Syrian and Iraqi populations.” CIFG members and observers also noted the significance of “information-sharing, increased oversight over financial institutions, and coordinated disruptive actions to deter ISIS financial supporters from accessing the regional financial system.” CIFG members and observers were also briefed on ISIS supporters’ abuse of the charitable sector and madrassa networks in Asia, in addition to “discussions on how ISIS branches and networks in Africa utilize informal funds transfer mechanisms and participate in looting to support their extremist affairs.” Delegates also “presented case studies on security operations against Europe-based ISIS supporters who raise and transfer funds online, in some cases via virtual currencies.” The statement concludes: “The work of the CIFG is critical to the global fight to defeat ISIS in all corners of the world and we will continue to engage global partners to deprive ISIS of its sources of revenue and prevent it from accessing the international financial system. We will continue learning from each other’s successes and challenges, and empowering partners in the most vulnerable jurisdictions to strengthen their anti-money laundering and combating the financing of terrorism regimes.”
U.S.-UK financial regulators discuss bilateral issues
On May 24, the U.S. Treasury Department issued a joint statement covering the recently held fourth meeting of the U.S.-UK Financial Regulatory Working Group (Working Group). Participants included officials and senior staff from both countries’ treasury departments, as well as regulatory agencies including the Federal Reserve Board, CFTC, FDIC, OCC, SEC, the Bank of England, and the Financial Conduct Authority. The Working Group discussed, among other things, (i) financial sector implications of the UK’s withdrawal from the EU; (ii) “cooperative efforts to promote the free flow of cross-border financial services data crucial for effective financial sector regulation and supervision”; (iii) regulatory fragmentation and data localization risks; (iv) the Financial Stability Board’s work on non-bank financial intermediation, which involves active engagement from both U.S. and UK authorities; and (v) the management of climate-related financial risks and other sustainable finance issues. Working Group participants will continue to engage bilaterally on these issues and others ahead of the next meeting planned for this fall.
OFAC sanctions Houthi military official
On May 21, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13611 against a key senior military official connected to the Ansarallah, sometimes referred to as the Houthis, for allegedly arranging attacks impacting Yemeni civilians. According to OFAC, the sanctioned individual recently led the offense against Yemeni government-held territory in the Marib province, which “puts approximately one million already vulnerable internally displaced people (IDP) at risk, threatens to overwhelm an already stretched humanitarian response, and is triggering broader escalation.” 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 unless exempt or otherwise authorized by a general or specific license, and warned foreign financial institutions that if they knowingly facilitate significant transactions for any of the designated persons, they may be subject to U.S. correspondent account or payable-through account sanctions.
OFAC authorizes certain PEESA transactions and activities
On May 21, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued Protecting Europe’s Energy Security Act of 2019 (PEESA) General License (GL) 1, which authorizes certain activities otherwise prohibited involving the Federal State Budgetary Institution Marine Rescue Service (MRS). However, GL 1 does not authorize any transactions or activities involving any vessels identified on OFAC’s Non-SDN Menu-Based Sanctions List “as blocked property of MRS or of any entity in which MRS owns, directly or indirectly, a 50 percent or greater interest,” or any PEESA prohibited transactions or activities. OFAC also issued related FAQs 894 and 895 and added entities and vessels to its Non-SDN Menu-Based Sanctions List. Furthermore, OFAC added two vessels to the Specially Designated National List, and reiterated in FAQ 895 that “property and interests in property of persons on the SDN List are blocked and any entity owned 50 percent or more, individually or in the aggregate, directly or indirectly, by one or more blocked persons is itself blocked.”
Biden orders regulators to evaluate, mitigate climate-related financial risks
On May 20, President Biden ordered financial regulators to take steps to mitigate climate-related risk related to the financial system. The executive order, among other things, directs the Secretary of the Treasury to work with Financial Stability Oversight Council (FSOC) members to consider “assessing, in a detailed and comprehensive manner, the climate-related financial risk . . . to the financial stability of the federal government and the stability of the U.S. financial system,” and to facilitate climate-related risk information sharing between FSOC member agencies and other federal departments and agencies. Under the executive order, Treasury is also required to issue a report to the president within 180 days on current efforts taken by FSOC members to incorporate climate-related financial risk into their policies and programs. The executive order directs the report to include recommendations on (i) “actions to enhance climate-related disclosures by regulated entities to mitigate climate-related financial risk”; (ii) current approaches for incorporating climate-related financial risk considerations into regulatory and supervisory activities, as well as a discussion of any impediments faced when adopting these approaches; (iii) processes for identifying climate-related financial risks; and (iv) how “identified climate-related financial risks can be mitigated, including through new or revised regulatory standards as appropriate.” The executive order also states, among other things, that federal financial management and reporting should be modernized to incorporate climate-related financial risk, especially risk related to federal lending programs.
OFAC amends Terrorism List Governments Sanctions Regulations
On May 19, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued a final rule to amend the Terrorism List Governments Sanctions Regulations to implement changes resulting from the Secretary of State’s December 14, 2020 rescission of the designation of Sudan as a State Sponsor of Terrorism. The amendments relate to “removing one general license in full and amending another general license to remove references to the Government of Sudan and Sudanese nationals because financial transactions with the Government of Sudan are no longer prohibited by the Terrorism List Governments Sanctions Regulations.” The rule went into effect on May 20 immediately upon publication in the Federal Register.
OFAC amends security investment-related general license
On May 18, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued General License (GL) 1B, “Authorizing Transactions Involving Securities of Certain Communist Chinese Military Companies.” GL 1B authorizes through June 11 (9:30 a.m. eastern daylight time) certain transactions and activities that involve “publicly traded securities, or any securities that are derivative of, or are designed to provide investment exposure to such securities, of an entity whose name closely matches, but does not exactly match, the name of a Communist Chinese military company as defined by section 4(a) of E.O. 13959.” However, GL 1B does not authorize “[a]ny transactions or activities involving publicly traded securities, or any securities that are derivative of, or are designed to provide investment exposure to such securities of entities identified in the Office of Foreign Assets Control’s Non-SDN Communist Chinese Military Companies List (NS-CCMC List) pursuant to section 4(a)(iii) of E.O. 13959, as amended, as a subsidiary of a person determined to be a Communist Chinese military company, including entities added to the NS-CCMC List on January 8, 2021.” GL 1B immediately replaces and supersedes GL 1A, dated January 26.