On January 26, 2022, the U.S. Department of the Treasury, in conjunction with the Departments of State, Commerce, Labor, Homeland Security, and the Executive Office of the President, issued an inter-agency advisory for businesses and individuals doing business in Burma. The advisory alerts U.S. businesses and individuals doing business in Burma to the particular risk of doing business with the Tatmadaw military regime responsible for the February 2021 coup, and has since been involved in human rights abuses, corruption, and illegal arms trafficking. The advisory does not have force of law and does not impose any new controls or sanctions on Burma. Instead, it provides a holistic overview of the risks of doing business in Burma and provides recommendations to the business community regarding sanctions and money-laundering risks of doing business in Burma. The advisory notes the following entities and sectors are of the greatest concern: state-owned enterprises; gems and precious metals; real-estate and construction projects; and arms, military equipment, and related activity.

State-Owned Enterprises

The advisory notes numerous sectors of the Burma economy in which junta-controlled state-owned enterprises (SOEs) play a dominant role, including the oil and gas, mining, postal, energy, and transportation and logistics sectors. The largest SOEs are in the natural resources sector, and include Myanma Oil and Gas Enterprise (MOGE); Myanmar Mining Enterprises 1, 2, and 3; Myanma Gems Enterprise (MGE); and Myanma Timber Enterprise (MTE). MGE and MTE are designated as Specially Designated Nationals (SDNs) by the Office of Foreign Assets Control (OFAC) and virtually all activities involving a U.S. nexus are therefore prohibited with these entities. The advisory cautions that SOEs could be involved in corruption, forced labor and child labor, restricting internet freedom, and other serious human rights abuses against minority groups. As such, the advisory recommends that businesses and individuals involved in dealings with SOEs conduct appropriate due diligence to ensure they are not supporting these abuses.

Gems and Precious Metals

The advisory warns businesses involved in Burma’s gems and precious metals industry of the potential for money laundering, corruption, and human rights abuses, including forced labor, due to lack of oversight and transparency. Moreover, two military holding companies, Myanma Economic Holdings Limited (MEHL) and Myanmar Economic Corporation (MEC), both of which are designated as SDNs by OFAC, control a large portion of the gems and precious metals sector. As such, the advisory recommends that importers of gems, pearls, and precious metals undertake enhanced due diligence to monitor and understand their supply chains. Specifically, the advisory cautions businesses that goods from Burma have previously been smuggled into Thailand and China and marked as “made in Thailand” or “made in Hong Kong.” Thus, even if Burma is not listed in a business’ supply chain on paper, a business should nonetheless ensure there are no links in which the Burmese military is the ultimate beneficiary.

Real Estate and Construction Projects

The advisory alerts businesses that the risk for real estate agents and developers to engage in cross-border money laundering, knowingly or otherwise, has increased with the return of the military regime. The military has significant interests in the real estate sector, and has historically seized land, forced evictions, and displaced people in pursuit of these interests. A 2019 UN Fact Finding Mission found, specifically, that the Pyinmabin Industrial Zone, the Golden City residential development in Rangoon, and the Sule Shangri-La Hotel and Sule Square Commercial Project are owned or controlled by the military. The advisory provides warning signs of real estate-based money laundering, which include:

• Significant and unexplained geographic distance between agent, customer, and property;
• Customers with unclear true beneficial ownership or controlling interest;
• High-value cash payments;
• Counterparties, government or otherwise, that are not subject to monitoring or supervision;
• The speed of the transaction;
• Successive transactions;
• Introduction of unknown or substitute parties at the late stage of a transaction;
• Third party vehicles (e.g., newly established corporations) used to obscure the ownership of the buyer; and
• Extremely over- or under-valued transactions.

The advisory encourages businesses to conduct further due diligence if any of the above warning signs are detected and to file suspicious transaction reports to FinCEN and other relevant authorities as required.

Arms, Military Equipment, and Related Activity

Lastly, the advisory states that actors engaged in business activities or transactions in or involving Burma should consider conducting heightened due diligence and ensure compliance with all applicable U.S. laws and regulations. After the military coup in February 2021, BIS took a series of actions to impose stricter export controls on Burma:

• On February 18, 2021, BIS announced it would review license applications for items destined for Burma’s Ministry of Defense, Ministry of Home Affairs, armed forces, and security forces under a presumption of denial, and suspended the availability of four license exceptions for items destined for Burma.
• On March 8, 2021, BIS placed Burma in Country Group D:1 and subjected it to military end use and end user controls. BIS also added four new entities to the Entity List.
• On April 9, 2021, BIS added Burma to the list of destinations subject to military intelligence end-use and end-user restrictions and identified the Office of Chief of Military Security Affairs (OCMSA) and the Directorate of Signal on an illustrative list of military-intelligence end-users.
• On July 6, 2021, BIS added four additional entities in Burma to the Entity List.

Accordingly, businesses should screen all potential exports to Burma, as well as any items subject to the EAR that could be re-exported to Burma, and acquire any relevant licenses.

Potential Future Developments

In November 2020, a similar business advisory was issued with respect to the deteriorating human rights situation and increased Chinese military presence in Cambodia. Just a month later, the Department of State and BIS published Final Rules adding Cambodia to the International Trafficking in Arms Regulations (ITAR) § 126.1 country list, and applying stricter export controls to Cambodia. Businesses and individuals doing business in Burma should be aware of the possibility that BIS, the Department of State, or OFAC will similarly increase restrictions on Burma soon after the issuance of this business advisory.