Sanctions Updates: Cuba, North Korea, Russia, Sudan, Venezuela
Sanctions compliance is challenging because of the changing nature of sanctions regulations and individuals identified as Specially Designated Nationals. With each new administration, foreign policy priorities are usually played out in a variety of sanctions regimes and policies.
This year, however, saw Congress enter the regulatory fray, when it imposed detailed regulatory requirements and procedures designed to constrain the current administration from making major changes to the Russia/Ukraine Sanctions Program. The current administration was slow to implement the required changes, ignoring a deadline set by Congress in the new law and blaming the delay on the State Department.
In order to assist compliance officers, here is a summary of changes occurring in 2017 so that you can keep your scorecards up to date. This is not an exhaustive list, so please make sure you check the OFAC website (here)
Cuba Sanctions – The current administration modified the Cuba sanctions program to restrict certain activities that were previously permitted under the Obama administration. Additionally, the new regulations apply broader restrictions against entities related to Cuban military, intelligence or security services.
US persons are now prohibited from engaging in financial transactions with certain entities and sub-entities identified by the State Department. OFAC also restricted educational travel and non-academic educational travel to Cuba.
North Korea Sanctions – Recently, the current administration announced the designation of North Korea as a state sponsor of terrorism, a designation that will have little practical impact since North Korea already is subject to stringent sanctions.
A long list of individuals, entities and vessels were recently added to the prohibited list. (here)
As the current administration continues to ramp up sanctions enforcement against North Korean entities or affiliated entities, it is important to adhere strictly to OFAC’s 50 percent rule, which extends the sanctions prohibition to any entity owned 50 percent or more by one or more prohibited SDN. In a set of complex financial and commercial transactions involving potential North Korean entities, companies have to carefully scrutinize transactions and related entities, particularly any involving China, given the close association between North Korean an Chinese entities.
In September 2017, OFAC designated eight North Korean banks and 26 individuals linked to North Korean financial networks, including nationals who operate in China, Russia, Libya and the UAE.
Russia/Ukraine Sanctions – In October 2017, OFAC issued a revised version of Directive 4 to implement the Countering America’s Adversaries Through Sanctions Act. As amended, the revised Directive 4 creates two prohibitions on the export, reexport of goods, services or technology for certain activities in the energy sector of Russia.
First, Directive 4 prohibits designated individuals and entities from export, re-export of goods, services or technology in support of exploration or production for deepwater (defined as activities occurring deeper than 500 feet), Arctic offshore or shale projects that have the potential to produce oil in Russia, or in maritime area claimed by Russia.
Second, Directive 4 further prohibits the export or reexport of goods, services, or technology in support of exploration or production for deepwater (defined as activities occurring deeper than 500 feet), Arctic offshore, or shale projects that meet all three of the following criteria: (1) the project was initiated on or after January 29, 2018; (2) the project has the potential to produce oil in any location; and (3) any person determined to be subject to Directive 4 either has a 33 percent or greater ownership interest in the project or owns a majority of the voting interests in the project.
The Directive 4 prohibitions have a broad application to drilling services, geophysical services, logistical services, management services, modeling capabilities and mapping technologies. The prohibitions do not apply to related financial services (e.g. clearing transactions or providing insurance).
Sudan Sanctions – A long list of entities with ties to Sudan were removed from the Specially Designated Nationals List. (here).
Venezuela Sanctions – In August 2017, Executive Order 13808 implemented sectoral sanctions (similar to the Russia/Ukraine sanctions) that prohibited new debt with maturity of longer than 90 days involving PDVSA; longer than 30 days involving the Government of Venezuela; engaging in transactions involving Venezuela bonds; and payment of dividends or other distribution of profits to the Government of Venezuela. OFAC issued four general licenses relating to the sanctions, including one to permit transactions involving Citgo.