OFAC Authorizes Exports of Financial Services to and New Investment in Burma
On July 11, 2012, the United States Government lifted some of the sanctions on Burma by removing restrictions prohibiting U.S. persons from exporting financial services to or investing in Burma. It is anticipated that the Special Measures prohibiting U.S. financial institutions from opening, operating or maintaining correspondent or payable-through relationships with banks in Burma also will be removed.1 Nonetheless, significant compliance obligations remain. U.S. companies and non-U.S. companies with a nexus to the United States should enter the Burmese market only after conducting a risk assessment and implementing compliance measures to mitigate against potential exposure to sanctioned parties, corrupt practices, and/or money laundering, among other risks, and to comply with reporting requirements for authorized investments.
I. OFAC Authorizes New Investment in, and Exports of Financial Services to, Burma; Reporting Requirements Instituted
On July 11, 2012, the Office of Foreign Assets Control ("OFAC") issued two general licenses authorizing exports of financial services to and new investment in, Burma. Neither license authorizes transactions involving: (1) the Burmese Ministry of Defense, including the Office of Procurement; (2) any state or non-state armed group; or (3) any entity in which any of the foregoing own a 50 percent or greater interest.
A) General License No. 16 -- Financial Services
While most direct and indirect exports and reexports of financial services to Burma are now permitted, exports and re-exports of financial services to blocked persons remain prohibited unless: (1) the financial service is a transfer of funds to or from an account of a blocked financial institution; and (2) the account is not on the books of a financial institution that is a U.S. person.
For purposes of the Burmese Sanctions Regulations and General License No. 16, exportation or reexportation of financial services to Burma means the:
- transfer of funds, directly or indirectly, from the United States or by a U.S. person, wherever located, to Burma; or
- provision, directly or indirectly, to persons in Burma of insurance services, investment or brokerage services (including but not limited to brokering or trading services regarding securities, debt, commodities, options or foreign exchange), banking services, money remittance services; loans, guarantees, letters of credit or other extensions of credit; or the service of selling or redeeming traveler's checks, money orders and stored value.2
B) General License No. 17 – Investment
1. Investment Defined
New Investment for purposes of the Burmese Sanctions Regulations and this General License includes:
- The entry into a contract that includes the economic development of resources located in Burma, as defined at 31 C.F.R. §537.302;
- The entry into a contract providing for the general supervision and guarantee of another person's performance of a contract that includes the economic development of resources located in Burma;
- The purchase of a share of ownership, including an equity interest, in the economic development of resources located in Burma; or
- The entry into a contract providing for the participation in royalties, earnings, or profits in the economic development of resources located in Burma, without regard to the form of the participation.
The term new investment
does not include the entry into, performance of, or financing of a contract to sell or purchase goods, services, or technology unless such contract includes any of the activities described above.3
2. No Transactions with SDNs
General License No. 17 also does not authorize transactions with, directly or indirectly, any person whose property and interests in property are blocked pursuant to the Burmese Sanctions Regulations, 31 C.F.R. Part 537; Executive Order 13448 of October 18, 2007; Executive Order 13464 of April 30, 2008; or the Executive Order issued on July 11, 2012.
3. General License No. 17 Reporting Requirements
(a) Agreements with the Myanma Oil and Gas Enterprise (MOGE)
U.S. persons engaging in new investment in Burma pursuant to an agreement, or pursuant to the exercise of rights under such an agreement, that is entered into with the Myanma Oil and Gas Enterprise (MOGE) must notify the Department of State in writing within 60 days of such new investment.
(b) Investments Exceeding $500,000
Any U.S. person whose aggregate investment in Burma exceeds $500,000 must file an annual public and U.S. Government report by April 1 of each year. The format for these reports is available at www.HumanRights.gov/BurmaResponsibleInvestment, and they must contain:
- Name of submitter;
- Signed acknowledgement that the report will be made public;4
- Point of contact;
- Overview of operations in Burma;
- A summary or copies of the submitter’s policies and procedures as they relate to the submitter’s operations and supply chain in Burma;
- Information relating to the submitter’s arrangements with security service providers;
- Information relating to any purchase or lease of land or other real property in which the submitter either (a) spent more than $500,000 to purchase or lease the land/real property or to purchase or lease any rights related to the land/real property; or (b) purchased or leased more than 30 acres of land/real property;
- A report of total payments during the reporting year to each Government of Burma entity and/or any sub-national or administrative entity that possesses or claims to possess authority over the submitter’s new investment activities in Burma.
The Government Report also must contain the following:
- Point of contact information for individuals responsible for preparing this report;
- A report of any meetings or other communications with the armed forces of Burma and/or other armed groups that were material to the submitter’s investments in Burma;
- A report of any due diligence conducted with respect to human rights, work rights, and/or environmental issues.
II. New Executive Order Blocking Property of Persons Threatening the Peace, Security, or Stability of Burma
The President issued a new Executive Order Blocking Property of Persons Threatening the Peace, Security or Stability of Burma. This Executive Order provides for the authority to block any property or property interests of any person who:
- has engaged in acts that directly or indirectly threaten the peace, security or stability of Burma where such action undermines or obstructs the political reform process or peace process with ethnic minorities in Burma;
- is responsible for ordering, controlling or otherwise directing, or participating in the commission of human rights abuses in Burma;
- have directly or indirectly imported, exported, reexported, sold or supplied arms or related materiel from North Korea or the Government of North Korea to Burma or the Government of Burma;
- is a senior official of an entity that has engaged in the acts described above;
- has materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, the acts described above; or
- are owned or controlled by, or have acted or purported to act for or on behalf of, directly or indirectly, any person whose property and interests in property are blocked pursuant to this order.
III. FinCEN 311 Special Measures
It is also anticipated that the Financial Crimes Enforcement Network’s (“FinCEN”) 311 Special Measures on Burma prohibiting U.S. financial institutions from opening, maintaining or operating correspondent or payable-through accounts will be removed. As of this writing they remain in effect.
1 See http://www.fincen.gov/statutes_regs/patriot/section311.html.
2 31 C.F.R. §537.305.
3 31 C.F.R. §537.311.
4 This requirement is necessary only for the public report.
For more information, please contact the professional(s) listed below, or your regular Crowell & Moring contact.