The U.S. Department of the Treasury, Office of Foreign Assets Control Ends Its ‘Burma Sanctions Program’

by Allen & Overy LLP

Allen & Overy LLP

​On 7 October 2016, the United States Department of the Treasury, Office of Foreign Assets Control (OFAC) ended all economic and financial sanctions with respect to Myanmar (referred to by OFAC as Burma).  The move had been anticipated following President Obama’s meeting with State Counsellor Aung San Suu Kyi several weeks ago and is an acknowledgement by the United States of the significant progress that Myanmar has made in implementing democratic reforms.  While OFAC’s Myanmar sanctions program has officially ended, persons doing business in Myanmar must continue to comply with a number of other regulations that are unaffected by this action. 

Termination of OFAC’s Myanmar sanctions program was the result of President Obama’s issuance of an Executive Order (EO) on Friday 7 October 2016.  The EO ended the United States’ national emergency with respect to Myanmar, revoked all EOs providing authority for the program, and waived all remaining statutory financial and blocking sanctions on Myanmar.  In issuing the EO, the President noted that the situation in Myanmar had been “significantly altered,” by, among other things, Myanmar’s:

  • November 2015 elections, which resulted in the National League for Democracy having a majority of the seats in the national parliament;

  • formation of a democratically-elected, civilian-led government;

  • release of many political prisoners; and

  • greater enjoyment of human rights and fundamental freedoms.

Simultaneously, OFAC announced that it will remove the Burmese Sanctions Regulations, 31 C.F.R. part 537, from its regulations.

All persons that had previously been included on OFAC’s Specially Designated Nationals and Blocked Persons List (the SDN List) pursuant to the Burmese Sanctions Regulations—in all approximately 204 entries of individuals and entities—have been removed from the SDN List, and their property and interests in property unblocked.  Transactions by U.S. persons or occurring from, through, or within the United States involving these persons, their property, or their interests in property will no longer be prohibited by U.S. sanctions laws, assuming that the transactions are otherwise compliant with U.S. law.  In this regard, we note that approximately 33 individuals and entities located in Myanmar continue to be listed on the SDN List pursuant to OFAC’s sanctions programs targeting narcotics trafficking and North Korea.  U.S. sanctions laws will continue to apply to transactions with these persons.
The termination of the Myanmar sanctions program has the following additional consequences, as summarized in OFAC’s publicly issued guidance:
  • The ban on importing rubies, jade, and jewelry containing jadeite and rubies into the United States is lifted;

  • Banking and financial services activities in Myanmar are no longer subject to U.S. sanctions. Although termination of the Myanmar sanctions program also resulted in termination of OFAC’s general licenses authorizing U.S. financial institutions to provide certain correspondent banking services to Burmese banks, FinCEN has issued an administrative exception to Myanmar’s designation as a “jurisdiction of primary money laundering concern” pursuant to Section 311 of the USA Patriot Act, which allows U.S. financial institutions to continue providing these services (subject to certain due diligence requirements); and
  • Compliance with the U.S. State Department’s Responsible Investment Reporting Requirements is no longer mandatory but companies may continue voluntarily reporting covered investments.

OFAC’s actions do not affect regulations administered by other U.S. government agencies, such as the U.S. Department of State and the U.S. Department of Commerce.  In addition, the European Union (EU) continues to impose sanctions relating to Burma. These establish trade restrictions concerning the sale, supply, transfer or export to Burma of certain equipment which might be used for internal repression and/or arms and associated military items, as well as various activities associated with the same (such as the provision of financing or technical assistance).  These restrictions are applicable to any person in respect of any business done in whole or in part within the EU, as well as any EU nationals and/or EU-incorporated entities in respect of any activities that they conduct anywhere in the world.

OFAC has also issued a FAQ indicating that it will continue to proceed with pending enforcement matters, as well as investigate any new matters that come to its attention, that involve apparent violations of the Burmese Sanctions Regulations, which occurred prior to termination of OFAC’s Myanmar sanctions program.

Doing business in Myanmar continues to present many complex business and legal issues.  However, the removal of U.S. sanctions against Myanmar has been widely anticipated and is expected to accelerate the further opening up of the country, especially to U.S. businesses for two significant reasons (among many others):

  • U.S.-based banks or those with strong U.S. connections will be able to review their compliance policies on fund flows involving Myanmar that currently make it very difficult for companies to transfer funds to Myanmar or receive payment from Myanmar companies. With the termination of OFAC’s Myanmar sanctions program, there is potential for U.S. and other banks to open up some of the channels for U.S. and other international investors looking to invest in or do business with the country and allow it to reconnect fully with the international financial system; and

  • the removal of over 200 individuals and entities from the SDN List means that U.S. companies can now deal with many potential partners and government agencies that were previously off limits. For example, some of the largest conglomerates have been removed as well as the company running the busiest port in Myanmar. This could open up trade and opportunities for partnerships or acquisitions in Myanmar but also for Myanmar companies to forge partnership and invest overseas.

In the same week as the historic end to OFAC’s Myanmar sanctions, the Myanmar parliament passed a new Investment Law designed to further reduce barriers to foreign investors and create a facilitative framework. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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