On October 7, 2016, the United States Treasury Department’s Office of Foreign Assets Control (OFAC) announced the termination of all remaining financial and trade sanctions against Burma (a.k.a. Myanmar).
The removal of sanctions followed a visit to the U.S. by Burmese State Counselor Aung San Suu Kyi, and was the culmination of several rounds of sanctions relief provided over the past few years in recognition of the country’s progress toward political liberalization. Accordingly, as of October 7, 2016, the Burmese Sanctions Regulations (BSR) (31 C.F.R. Part 537) are no longer in effect and there are no country-specific sanctions on Burma.
This means, among other things, that the U.S. has unblocked 111 Burmese individuals and entities and removed them from OFAC’s list of Specially Designated Nationals (SDNs) and Blocked Persons and likewise all property and interests in property blocked pursuant to the BSR. The prohibition on the import into the United States of jadeite and rubies mined and extracted from Burma has been revoked. All OFAC-administered restrictions under the BSR program regarding banking or financial transactions with Burma are no longer in effect and compliance with the US State Department’s Responsible Investment Reporting Requirements is no longer required.
However, the lifting of the Burma country sanctions does not affect other U.S. sanctions programs, such as those targeting persons engaged in narcotics trafficking, or in the provision of support to the North Korean regime. Accordingly, conducting sanctions due diligence remains critical to reducing risk in any business involving Burma.
Overview of the historical Burma sanctions
The Burma sanctions program dates back to May 1997, when then-President Bill Clinton issued Executive Order 13047, declaring that Burma presented an “extraordinary threat” to US security and imposing certain restrictions on trade. Several other executive orders and legislation followed, including the Burmese Freedom Democracy Act of 2003 and the Tom Lantos Block Burmese JADE Act of 2008 (the JADE Act).
The resulting BSR prohibited U.S. persons from engaging in a wide range of conduct with respect to Burma, including:
1. Dealing with blocked persons, including Burmese government officials, individuals determined to have committed human rights abuses and facilitated public corruption, supporters of the Burmese government, and the spouses and dependents of blocked persons.
2. Exporting financial services to the Ministry of Defense (MOD), state or non-state armed groups, or entities owned 50 percent or more by any of the foregoing for the provision of security services.
3. New investment and facilitation of investment by foreign persons involving the parties mentioned above.
4. Importing into the U.S. of most products of Burma, including a prohibition on jadeites and rubies extracted and mined there.
The BSR also imposed U.S. visa restrictions on individuals associated with the Burmese military, including individuals providing substantial economic and political support to it. These visa restrictions can also reach the immediate family members of any such individual.
Gradual relaxation of the Burmese sanctions regulations
In response to the political reforms occurring in Burma, beginning with the country’s historic 2012 by-elections, the U.S. began to incrementally ease sanctions via the issuance of general licenses and regulatory amendments. The U.S. issued general licenses to authorize the import into the U.S. of most Burmese goods; allowed most trade-related financial transactions; permitted the exportation of U.S. financial services to, and new investment in, Burma, subject to certain limitations and reporting requirements; and authorized most transactions involving designated financial institutions.
While the easing of sanctions allowed for U.S. persons to re-engage in most trade and finance related transactions in Burma, significant restrictions remained on dealings with the MOD and blocked persons. This posed a significant commercial challenge, as many of the designated persons had or have extensive interests across the Burmese economy.
On September 14, 2016, President Obama announced the decision to lift all remaining sanctions against Burma. On October 7, the President issued a new executive order to give legal effect to the announcement. The new Executive Order revoked prior executive orders and waived the sanctions in 5(b) of the JADE Act, which contained blocking provisions for the property of individuals closely associated with the Burmese military and the now-dissolved Burmese military regime.
Termination of the Burmese sanctions regulations
Some of the key changes resulting from the termination of the Burmese sanctions include:
Removal of entities from the SDN list. Burmese individuals and entities whose property and interests in property were blocked pursuant to the BSR have been removed from the SDN list. The removals include military-owned and -linked entities, government officials, banking institutions and leading private businesses. U.S. persons are permitted to transact with individuals and entities who have been de-listed by the OFAC following the termination of the BSR.
Import of Burmese-origin jadeite and rubies. The ban on the import into the U.S. of jadeite and rubies mined and extracted in Burma, and any items of jewelry incorporating Burmese-origin jadeite and rubies, has been revoked. Burma’s jadeite industry is considered to be among its most lucrative and comprises a significant portion of the country’s GDP.
Banking institutions. OFAC previously issued General License 19, which allowed for most transactions involving designated financial institutions in Burma. However since the termination of the BSR, U.S. persons are generally free to transact with all non-designated and de-listed banks. This now includes Innwa Bank and Myawaddy Bank, both of which were removed from the SDN list on October 7.
Financial services and new investment. U.S. persons are no longer prohibited from engaging in the exportation or re-exportation to Burma of financial services in connection with the provision of security services to the MOD, state or non-state armed groups, or entities owned 50 percent or more by any of the foregoing, U.S. persons are also no longer prohibited from making, or facilitating new investments by a foreign person, involving those parties and entities.
Previously, U.S. persons investing more than $500,000 in the aggregate in Burma were required to file annual reports with the U.S. Department of State specifying information related to their operations, human rights and environmental policies, and contact with military or non-state armed groups. As of October 7, 2016, compliance with the reporting requirement is no longer mandatory and is now voluntary.
With the termination of the BSR, the US is actively promoting investment and economic ties with Burma. The recent political reforms in Burma that resulted in a democratically elected government has also led to increased economic liberalization and an environment more conducive to new investment and business opportunities.
However, U.S. Persons seeking to do business in Burma should continue to bear in mind that, even though the broad country sanctions have been lifted, certain U.S. sanctions programs targeting specific Burmese persons remain in place. Also, the lifting of economic sanctions and the movement toward economic liberalization does not necessarily reduce other regulatory risks, including with respect to anti-money laundering and corruption—two issues for which Burma continues to pose a heightened compliance concern.
The lifting of the Burmese sanctions also does not waive the possibility of enforcement actions based on conduct that violated the sanctions while they were in place. This means that any historical Burmese trade— within the past five years—that violated the sanctions while they were still on the books remains subject to an enforcement action.
Accordingly, companies considering entering into or expanding their involvement in Burma should continue to exercise heightened due diligence and consider how best to address the remaining risks. This is particularly true for any company that is U.S.-incorporated, has U.S. executives or managers, or otherwise has ties with the United States, as both the non-sanctions risks and legacy sanctions risks may be of interest to U.S. regulators, financial institutions, and business counterparties.
Mike Zolandz is a partner and co-practice leader of Dentons’ U.S. Public Policy and Regulation and Government groups. Jason Silverman is a partner at Dentons where he focuses on government investigations, export controls, white collar criminal defense, and litigation under the False Claims Act. Peter Feldman is a senior managing associate at Dentons based in London. Nimrah Najeeb is an associate in Dentons’ Public Policy and Regulation practice group.