2016 Year-End Sanctions Update

February 6, 2017

2016 was a pivotal year in global sanctions implementation, relaxation and enforcement.  Against a backdrop of rising nationalism, the international community rallied behind the Joint Comprehensive Plan of Action ("JCPOA"), a deal to ease sanctions on Iran in exchange for limitations on the country’s nuclear program.  The United States rolled back decades-old sanctions on Cuba and Burma while implementing measures against the individuals and entities involved in Russia’s annexation of Crimea as well as North Korea’s nuclear and ballistic missile proliferation.  The U.S. Department of Treasury’s Office of Foreign Assets Control ("OFAC") sought to explain the shifting regulatory landscape through an unprecedented amount of non-binding guidance, typically in the form of frequently asked questions ("FAQs").  And in a year that defied predictions, global sanctions enforcement marched on:  the United Nations provided an international forum for coordinating responses to Iran and North Korea, while the European Union adopted measures to amend the duration of existing sanctions or expand the list of targeted persons, entities and groups.

In many ways, the international business community is still recalibrating in response to the United Kingdom’s vote on "Brexit" and the election of Donald J. Trump in the United States.  Global companies that had set a course for 2017 based on the policies of previous administrations now hang in a precarious balance, anxious for any indication as to whether and how the new U.S. regime will enforce, interpret, or revoke existing sanctions law and regulation.  In our view, given the frantic pace of President Donald Trump’s first weeks in office as well as his extensive criticism of former President Barack Obama, many sanctions programs could be altered.  It is possible that executive measures–especially those issued early in this administration–could be promulgated without OFAC’s typical input; and that the U.S. Congress could respond by codifying existing regulations or seeking to oppose the dictates of the administration. 

We believe that the best way to prepare for the future is to understand the precise contours of the present sanctions; and in the face of growing uncertainty we seek to explain and clarify the law and the mechanisms by which it might change.  The various U.S. and international sanctions programs are described below, and as changes unfold we will seek to issue additional guidance and clarification. 

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TABLE OF CONTENTS

The United States

I.      Major Program Developments

         A.      Iran

         B.      Cuba

         C.      Burma

         D.      Russia

         E.       North Korea

         F.       Kingpin Sanctions

         G.      Libya        

         H.      Côte d’Ivoire

II.   Other Significant OFAC Regulations

         A.      Federal Civil Penalties Inflation Adjustment Act

         B.      Guidance and FAQs

         C.      Significant Designations

III.  Enforcement

         A.      Selected OFAC Actions

         B.      New York State Actions

International

I.      The United Nations

II.    The United Kingdom

         A.      Policing and Crime Act 2017

         B.      OFSI

         C.      Enforcement

III.  The European Union

         A.      Belarus

         B.      Bosnia and Herzegovina

         C.      Burundi

         D.      Central African Republic

         E.       Cote d’Ivoire

         F.       Democratic Republic of Congo

         G.      Egypt

         H.      North Korea

         I.        Iraq

         J.        Liberia

         K.      Myanmar

         L.       Russian Federation

         M.     Ukraine

         N.      Iran

         O.      Syria

         P.       Tunisia

         Q.      Zimbabwe

IV.  European Union Case Law

Looking Forward

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THE UNITED STATES

I.      Major Program Developments

            A.      Iran

The Iran sanctions regime changed significantly during 2016, most notably through the implementation of the JCPOA–the Iran nuclear deal that was agreed to in 2015.  Although the JCPOA was the dominant story for most of the year, 2016 also brought a significant extension of the Iran Sanctions Act of 1996 and changes to the Iranian Transactions and Sanctions Regulations ("ITSR").     

      1.      Joint Comprehensive Plan of Action

On January 16, 2016, the key milestone of "Implementation Day" was reached, triggering substantial relief from the comprehensive international sanctions regime against Iran.  The milestone followed a determination by the International Atomic Energy Agency ("IAEA") that Iran had successfully complied with its initial JCPOA obligations with respect to its nuclear program.  These obligations included reducing its stockpile of enriched uranium to 300 kilograms or less, dismantling about two-thirds of its centrifuges, and removing the core of the Arak heavy water reactor (to prevent the reactor from being used to produce weapons-grade plutonium)–measures that, together with transparency requirements permitting comprehensive IAEA monitoring, reportedly increase the time it would take Iran to build a nuclear bomb from two or three months to a year or more.[1]  Iran satisfied these obligations earlier than most experts had predicted. 

As reported in our summary, Implementation Day Arrives: Substantial Easing of Iran Sanctions alongside Continued Limitations and Risks, Implementation Day triggered a substantial targeted easing of U.S. sanctions, together with more sweeping relief from United Nations and European Union sanctions.  In addition, waivers of certain provisions of the Iran Freedom and Counter-Proliferation Act of 2012 (22 U.S.C. § 8801 et. seq.) that had previously been put into place contingent on confirmation of Iran’s compliance with its obligations were triggered and took effect.[2]

Notably, and of critical importance in the early days of the Trump Administration, OFAC has issued guidance regarding the applicable policies and procedures that will be triggered if and when the lifted Iranian sanctions "snap back" into effect.  In the event of a snapback, OFAC will not retroactively impose sanctions for activities that occurred following Implementation Day.[3]  However, any activities following a snapback could be sanctioned, even if the contracts for the activities were signed before the snapback–that is, there is no "grandfather" exception in place to allow pre-snapback contracts to be completed after a snapback.[4]

To ease the transition should sanctions be reimposed on Iran, the United States would allow for a 180-day period to wind down pre-snapback contractual operations or operations undertaken pursuant to an OFAC license.[5]  Providing additional goods or services that are not necessary to the winding down of operations during this 180-day period could be sanctionable.[6]  However, non-U.S., non-Iranian persons will be permitted to collect payments for goods or services provided to Iran pre-snapback, provided that the payments do not involve U.S. persons or the U.S. financial system.[7]

On Implementation Day, the United States:

  • revoked Executive Orders 13574, 13590, 13622, and 13645, and portions of Executive Order 13628;
  • introduced General License H authorizing certain activities by non-U.S. subsidiaries of U.S. companies;
  • introduced a new rule permitting certain Iranian imports into the U.S.;
  • removed over 400 individuals and entities (including most major Iranian financial institutions and energy firms) from OFAC’s Specially Designated National ("SDN") List; and
  • issued various guidance documents, including a Statement of Licensing Policy relating to the sale of commercial passenger aircraft.

                  a.      Secondary Sanctions Relief

The majority of the Iran sanctions relief provided by the United States on Implementation Day concerned restrictions on non-U.S. persons ("secondary sanctions").  Pursuant to its obligations under the JCPOA, the United States lifted restrictions on:[8]

  • financial and banking transactions with Iranian banks and financial institutions, including the Central Bank of Iran and entities identified as Government of Iran by OFAC (including the opening and maintenance of correspondent and payable through-accounts at non-U.S. financial institutions, investments, foreign exchange transactions and letters of credit);
  • transactions in the Iranian Rial;
  • provision of U.S. banknotes to the Government of Iran;
  • bilateral trade limitations on Iranian revenues abroad, including limitations on their transfer;
  • financial messaging services to the Central Bank of Iran and Iranian financial institutions;
  • underwriting services, insurance, or reinsurance;
  • efforts to reduce Iran’s crude oil sales;
  • investment, including participation in joint ventures, goods, services, information, technology and technical expertise and support for Iran’s oil, gas and petrochemical sectors;
  • purchase, acquisition, sale, transportation or marketing of petroleum, petrochemical products and natural gas from Iran;
  • export, sale or provision of refined petroleum products and petrochemical products to Iran;
  • transactions with Iran’s energy sector;
  • trade in gold and other precious metals;
  • sale, supply or transfer of goods and services used in connection with Iran’s automotive sector; and
  • associated services for these categories.

Despite this relief, two aspects of the continuing sanctions regime place key limitations on the activities of non-U.S. persons with respect to Iran, even after Implementation Day.  First, non-U.S. persons must continue to take care to avoid transactions involving persons on the SDN List.  Second, non-U.S. persons may feel the effects of the stricter regulations that continue to apply to U.S. persons, as U.S. persons may only provide goods, service, or technology if a transaction meets the stricter standards described below.  The inability to secure the assistance of U.S. partners, such as financial institutions or suppliers, may make it difficult as a practical matter to pursue transactions under the loosened secondary sanctions regime.

Since Implementation Day, OFAC has also introduced a general license relating to civilian aviation by non-U.S. persons.  General License J (which was replaced in December 2016 with slight modifications by General License J-1) permits non-U.S. persons to send eligible aircraft to Iran on temporary sojourn, provided that certain requirements are met.[9]  The effect of General License J is to authorize flights by foreign carriers to and from Iran. 

For the purposes of this license, eligible aircraft include civilian, fixed-wing aircraft of U.S. origin or containing at least 10% U.S. content that are registered in a third-country.[10]  In order to comply with the terms of the general license, the aircraft may not remain in Iran for more than 72 hours, several conditions related to maintaining control over the aircraft must be met, and the aircraft must not be used to transfer technology or prohibited goods to Iran.[11]

As a practical matter, the effect of the general license is to clarify the legal status of a practice already in place:  many non-U.S. airlines had already been flying commercial flights to Iran using U.S.-made aircraft.[12]  The general license may thus have benefits for the U.S. aircraft leasing industry, as it removes any ambiguity as to whether U.S. companies may supply aircraft to third-country carriers that have flights to Iran.

                 b.      Primary Sanctions Relief

OFAC has also provided some relief from the primary sanctions applicable to U.S. persons, but the changes were less sweeping than those affecting secondary sanctions.  The changes to primary sanctions have fallen into three key areas, described in more detail below: (1) foreign subsidiaries of U.S. entities, (2) commercial passenger aviation, and (3) importation of certain foodstuffs and carpets.

                        i.      Foreign Subsidiaries

Also on Implementation Day, OFAC issued General License H, which authorized U.S.-owned or -controlled foreign entities to engage in transactions with the government and people of Iran, subject to certain limitations.[13]  General License H expressly preserves some restrictions on the activities of foreign subsidiaries, including (among others) prohibitions on the direct or indirect exportation of goods, technology, or services from the U.S. to Iran, on the transfer funds to, from or through a U.S. financial institution, and on transactions involving persons on the SDN List.[14] 

As U.S. persons remain prohibited from participating in or facilitating transactions by non-U.S. persons in violation of OFAC’s primary sanctions, companies wishing to take advantage of General License H must put in place adequate firewalls to ensure that U.S. persons are not involved in Iran transactions by the foreign subsidiary.  General License H does, however, provide two specific authorizations affecting U.S. persons:

  • U.S. persons may participate in "activities related to the establishment or alteration of operating policies and procedures" of the U.S. parent or the foreign subsidiary in order to permit the foreign subsidiary to engage in transactions authorized by General License H.
  • U.S. parent companies may engage in activities to make available to their foreign subsidiaries "any automated and globally integrated computer, accounting, email, telecommunications, or other business support system, platform, database, application, or server necessary to store, collect, transmit, generate, or otherwise process documents or information" related to transactions authorized by General License H.

Given the importance of this issue for multinational companies, OFAC issued a significant amount of non-binding guidance, typically in the form of FAQs, with regard to the scope and contours of General License H.  OFAC’s FAQs clarify that an entity is considered U.S.-owned or -controlled if, in the aggregate, U.S. persons hold a 50 percent or greater equity interest in the value or votes of the entity, or if a majority of the board is comprised of U.S. persons, or if U.S. persons "otherwise control[] the actions, policies, or personnel decisions of the entity."[15]  OFAC has clarified that whether U.S. persons "otherwise control" a foreign entity is a fact-specific, case-by-case inquiry into whether there is sufficient U.S. aggregate ownership and indicia of control.[16]

OFAC has also made clear that, although foreign entities may transact with Iran pursuant to General License H, they may not rely on General License H to export U.S.-origin goods to Iran,[17] reexport U.S.-origin goods from a third country if the foreign entity knows or has reason to know that the reexport is intended for Iran,[18] or transact with individuals on the SDN List.[19]  U.S. persons may be held liable for actions outside the scope of General License H undertaken by the foreign entities they own or control.[20]  OFAC’s guidance further explains that U.S. persons must be "walled off" from any transactions with Iran but may assist in the implementation of policies and procedures that allow the foreign entity to begin conducting its own business with Iran.

General License H authorizes U.S. persons to engage in "activities related to the establishment or alteration of operating policies and procedures of a United States entity or a U.S.-owned or -controlled foreign entity" to the extent necessary to allow the U.S.-owned or -controlled foreign entity to engage in transactions with Iran under General License H.[21]  OFAC, in an FAQ, clarified that this provision, which covers the employees, board members, senior management, and outside consultants of entities, allows U.S. persons to take part in the initial determination to engage with Iran under General License H.[22]  Further, U.S. persons can be involved in formulating and implementing the necessary policies and procedures to allow an entity to transact with Iran under General License H (and to allow for the recusal of U.S. persons from such transactions), and U.S. persons may then provide training on these new or revised policies or procedures.[23]  However, once the initial determination to engage with Iran has occurred, and the policies and procedures for transacting with Iran have been established, U.S. persons are generally prohibited from involvement in any ongoing Iran-related operations, such as "approving, financing, facilitating, or guaranteeing any Iran-related transaction by [a] foreign entity."[24]

Where a U.S. person is an employee or board member of an entity interacting with Iran under General License H, OFAC’s guidance makes clear that this person must be recused and "walled off" from the Iranian activity.[25]  U.S. persons and entities can remain involved in the non-Iran related day-to-day activities of a foreign entity that is U.S.-owned or -controlled, and can receive reports on the foreign entity’s Iran-related activities, provided that there is no "attempt to influence the Iran-related business decisions of such entities based on such reports."[26]

OFAC also provided some guidance on the provision permitting U.S. parent companies to make available certain "automated and globally integrated" computer systems to foreign subsidiaries that engage with Iran, but the exact scope of that exemption remains unclear.  OFAC has explained that "automated" refers to systems that "operate passively and without human intervention to facilitate the flow of data between and among the U.S. parent company and its owned or controlled foreign entities."[27]  Although a system that requires human intervention, such as data entry or processing, to complete a task would not be considered "automated," some limited human intervention, such as routine or emergency maintenance, is permitted as "ordinarily incident and necessary to give effect to" authorized transactions.[28]"Globally integrated" refers to systems that are "broadly available to, and in general use by, the U.S. parent company’s global organization and its owned or controlled foreign entities"; a system used by the U.S. parent but not made "broadly available" to its foreign entities does not qualify.[29]

This remains a difficult issue for multinational companies, and the scope of General License H remains largely untested.  As a result, many companies are continuing to struggle with implementing procedures consistent with General License H in line with broader corporate compliance policies.

                        ii.      Commercial Passenger Aviation

On Implementation Day, OFAC announced a new policy of granting specific licenses on a case-by-case basis allowing U.S. persons (and non-U.S. persons with a nexus to U.S. jurisdiction) to export, sell, lease or transfer commercial passenger aircraft (and spare parts for commercial passenger aircraft) to Iran, and to provide associated services, including warranty, maintenance, and repair services and safety-related inspections.[30]  Since Implementation Day, two aircraft manufacturers have obtained specific licenses under this policy, and the first aircraft authorized under the license (an Airbus A-321) has been delivered to Iran Air.[31]

Although sales or leases of aircraft require a specific license, OFAC has put into place a general license (General License I) permitting ancillary activities relating to the negotiation of and entry into contracts under the Statement of Licensing Policy, provided that the performance of any such contracts is conditioned on the grant of a specific license.  General License I does not authorize the sale of aircraft or any related services or parts to Iran, but, rather, authorizes those activities that are incident to negotiating and entering into a contract for such a sale.[32]  Parties relying on General License I to negotiate contracts for commercial aircraft must make the performance of those contracts contingent on the grant of a specific license.[33]  This is a significant departure for the United States, given that in all other OFAC sanctions programs, such executory contracts are prohibited absent a license. 

                        iii.      Importation of Foodstuffs and Carpets

On Implementation Day, OFAC also announced a new general license (which became effective January 21, 2016) that permits the importation of Iranian carpets and foodstuffs into the United States.[34]  U.S. financial institutions may play a role in such transactions but remain prohibited from any activity that results in a credit to or debit from an Iranian account.[35]  As a practical matter, these limitations on direct interactions between U.S. banks and Iranian parties likely mean that a third-country financial institution is needed to serve as intermediary in transactions under this license–similar to the long-standing system in place for licensed sales of agricultural goods and medical items from the U.S. to Iran.  Although less economically significant from a U.S. perspective than the other sanctions relief put in place by the JCPOA, this relief was seen as significant by the Iranian government and has the potential to benefit economically vulnerable Iranians.

      2.      Additional OFAC Guidance Regarding the JCPOA

Over the course of 2016, OFAC issued substantial guidance and FAQs relating to the implementation of the JCPOA.  The guidance and FAQs, which have been updated several times throughout 2016, provide additional clarity as to the parameters to these new policies.  Much of OFAC’s guidance concerned the intersection between the prohibition on U.S. persons dealing with Iran and the authorization for the foreign entities to do so.  In addition to the FAQs described above, OFAC offered express guidance regarding certain financial transactions, due diligence and compliance, licensing policies, and the "snapback" procedures that could be triggered if and when the United States decides to reimpose sanctions on Iran.  These issues are described in more detail below. 

                  a.      U-Turn Transactions and Correspondent Banking

The interaction between U.S. and non-U.S. financial institutions is the subject of several FAQs issued by OFAC in 2016.  Despite some speculation in the press that it would allow such transactions, OFAC made clear in January guidance that "U-turn" transactions involving Iran–whereby Iranian-related transactions involving two non-U.S. entities are processed through the U.S. financial system–remain prohibited.[36]  Non-U.S. entities may clear dollar transactions–meaning that they can process a transaction denominated in U.S. dollars–but in doing so, non-U.S. entities must not involve a U.S. financial institution or route any part of the transaction through the U.S. financial system.[37]  Non-U.S. financial institutions that transact with non-SDN Listed Iranian persons may, however, open correspondent accounts with U.S. financial institutions.[38]  However, those correspondent accounts at U.S. financial institutions cannot be used to process Iranian transactions, as that would involve the U.S. financial institution and the U.S. financial system in a prohibited transaction.[39]

                  b.      Due Diligence and Compliance

OFAC also issued guidance in 2016 regarding the amount of diligence a non-U.S. entity should undertake to ensure that it is not transacting with individuals or entities listed on the SDN List, but the guidance produced few bright lines.  Crucially, OFAC stated that merely checking the SDN List alone is not "necessarily sufficient" due diligence.[40]  As per its traditional practice, OFAC did not, however, provide definitive guidance as to what level of diligence would be sufficient but rather advised that the level of diligence should conform with "best practices" in the "particular industry at issue" and should comply with the due diligence guidance and expectations of the entity’s home country.[41]

Likewise, OFAC’s guidance that the appropriate level of due diligence for a non-U.S. financial institution "depend[s] on the financial institution’s role in a transaction" leaves open significant questions.[42]  For example, OFAC offered little guidance on whether a non-U.S. financial institution must conduct due diligence on its customers’ Iranian customers. OFAC stated that "[w]hile OFAC would consider it a best practice for a non-U.S. financial institution to perform due diligence on its own customers, OFAC does not expect a non-U.S. financial institutions to repeat the due diligence its customers have performed on an Iranian customer," so long as the non-U.S. institution does not have reason to believe that the customer’s due diligence was deficient.[43]  However, the non-U.S. financial institution should "consult with the local regulators regarding due diligence expectations in their domestic jurisdictions."[44]

OFAC has explained that it is not "necessarily sanctionable" for a non-U.S. person to engage in a transaction with an entity that is not on the SDN List, but is minority owned, or controlled in whole or part, by an Iranian on the SDN List.[45]  Nevertheless, OFAC advised that non-U.S. persons, in such a scenario, should exercise caution to ensure that the transaction "do[es] not involve Iranian or Iran-related persons on the SDN List."[46]  In addition, OFAC has clarified that foreign financial entities will not be exposed to sanctions merely on the basis of transactions with Iranian financial institutions that separately have banking relationships with Iranian persons on the SDN List.[47]

Notably, just days into 2017, OFAC issued a crucial piece of guidance regarding the provision of compliance services from U.S. attorneys and compliance counsel.[48]  OFAC clarified that U.S. persons are allowed to provide information or guidance regarding the requirements of U.S. sanctions laws administered by OFAC and opinions on the legality of specific transactions under U.S. sanctions laws regardless of whether it would be prohibited for a U.S. person to engage in those transactions.[49]

                  c.       Statement of Licensing Policy regarding Commercial Aircraft

On Implementation Day, OFAC’s Statement of Licensing Policy regarding the sale of commercial aircraft to Iran went into effect.  This policy statement established a favorable licensing policy, allowing U.S. and non-U.S. persons (with a nexus to U.S. jurisdiction) to request a specific license to sell (more precisely, to "export, reexport, sell, lease, or transfer") commercial aircraft to Iran and engage in "services that are ordinarily incident to a licensed transaction and necessary to give effect thereto."[50]  OFAC issued a series of FAQs to accompany the Statement of Licensing Policy, which provide clarity to the range of activities permitted under this new policy.

The FAQs state that among the services that are ordinarily incident to the sale of commercial aircraft to Iran include "transportation, legal, insurance, shipping, delivery, and financial payment services provided in connection with the licensed export transaction."[51]  As an example, providing insurance for the shipment of a licensed aircraft would be considered ordinarily incident to the sale of the aircraft.[52]  On the other hand, providing insurance to cover that aircraft for years after its export to Iran would not be considered ordinarily incident to the export of that aircraft.[53]  However, a U.S. person could potentially provide this latter service pursuant to a separate, specific license from OFAC for "associated services" relating to commercial aircraft exported to Iran.[54]

"Associated services," OFAC stated in an FAQ, could include, for example, "provision of warranty, maintenance, repair services, safety-related inspections, and training related to commercial passenger aircraft and spare parts and components for such aircraft exported to Iran pursuant to a specific license."[55]  U.S. persons must seek separate authorization to provide these associated services, as they are not considered "ordinarily incident" to the export of the commercial aircraft.[56]  In seeking this separate authorization, U.S. persons must relate the associated service to a specific export of a commercial aircraft (or related part or service).[57]  As an example, OFAC may authorize a U.S. person or entity to finance the sale of a particular commercial aircraft, but will not consider an application from a U.S. person seeking to provide "financing services in general."[58]  Notably, non-U.S. persons do not need authorization to provide these associated services, provided that the services (a) do not involve U.S. persons; (b) do not involve "the export or reexport to Iran of items that would require a license for export from the United States to Iran"; (c) "are conducted outside of U.S. jurisdiction"; (d) "do not involve the U.S. financial system"; and (e) do not involve persons or entities on the SDN List.[59]  OFAC may, however, authorize non-U.S. persons to provide associated services that would otherwise be prohibited under 31 C.F.R. § 560’s regulations, such as, for example, the export of items from the United States to Iran.[60]

The FAQs clarify that transactions authorized by OFAC under the Statement of Licensing Policy do not need separate authorization from the Department of Commerce, unless the transaction involves an item that is prohibited from export by, or requires a license for export under, the Export Administration Regulations ("EAR"), or involves a person on the Department of Commerce’s Denied Person List or Entity List.[61]  The FAQs also clarify that the easing of the policies on the sale of aircraft to Iran does not impact the prohibition on U.S. airlines operating flights to or from Iran.[62] 

            3.      Other Actions

                  a.      H.R. 6297 – Iran Sanctions Extension Act (enacted 12/15/2016)

Although the implementation of the JCPOA was the dominant Iran sanctions story, it was not the only development affecting the Iran sanctions regime in 2016.  On December 15, 2016, the Iran Sanctions Extension Act ("ISEA") went into law without presidential signature, extending the Iran Sanctions Act of 1996 by ten years (through December 31, 2026).[63] 

The Obama Administration considered the extension "unnecessary" but explained in a press release that it would not affect the JCPOA, as the administration would continue to use its authority to waive the sanctions affected by the JCPOA while continuing to enforce the sanctions outside its scope.[64]  The Iranians have viewed this legislation as a "blatant violation" of the deal.[65]

Although the JCPOA can continue to be implemented (as it has been to date) against the backdrop of the Iran Sanctions Act, the ISEA may have implications for the JCPOA.  In particular, the extension of the Iran Sanctions Act renders necessary the exercise of executive authority to waive the relevant sanctions, and it remains to be seen whether it will be the policy of the Trump administration to continue to do so.

                  b.      Amendments to the ITSR

Finally, on December 23, 2016, OFAC adopted a modification to the scope of the medical device and agricultural commodities exceptions to the ITSR.[66]  These exceptions were originally created to implement the Trade Sanctions Reform and Export Enhancement Act of 2000 ("TSRA") and have been modified several times.  With the new regulation, OFAC substantially broadened the exemption for medical devices to include any item meeting the definition of "medical device" unless specifically listed as a device requiring specific authorization.[67]  OFAC also made a small change to the agricultural commodities exemption to permit the exportation of shrimp and shrimp eggs.[68]

OFAC also substantially expanded the related products and services that can be provided under the medical devices exemption (and to a lesser extent, the agricultural commodities exemption).  OFAC regulations now permit the exportation of software or services related to the "operation, maintenance, and repair" of medical devices exported pursuant to an OFAC license.[69]  OFAC also expanded the authorizations relating to the provision of replacement parts to allow for ordinary maintenance (previously, the regulations had authorized the export of spare parts only on a one-for-one basis to replace defective parts).  In addition, OFAC added provisions permitting the provision of training "necessary and ordinarily incident to" the safe and effective use of the exported agricultural commodities or medical devices.[70]

            B.      Cuba

      1.      Regulatory Changes

The diplomatic and economic relationship between the United States and Cuba continued to thaw in 2016, resulting in a series of changes to the Cuba sanctions regime.  In January, several regulatory amendments removed restrictions on payment and financing terms for authorized exports and re-exports to Cuba of items other than agricultural items or commodities, and established a case-by-case licensing policy for exports and re-exports.  The January amendments further facilitated travel to Cuba for authorized purposes by allowing blocked space, code-sharing, and leasing arrangements with Cuban airlines; additional travel-related and other transactions directly incident to the temporary sojourn of aircraft and vessels; and additional transactions related to professional meetings and other events, disaster preparedness and response projects, and information and informational materials, including transactions incident to professional media or artistic productions in Cuba.  The revised Cuban Assets Control Regulations ("CACR") and EAR took effect on January 27, 2016.[71]

Less than two months later, on March 15, 2016, the U.S. Treasury and Commerce Departments announced additional revisions to the CACR and EAR that authorized travel to Cuba for individual people-to-people educational travel, removing the requirement that such travel be conducted under the auspices of a sponsoring organization.[72]  OFAC also removed the limitation on the receipt of compensation in excess of amounts covering living expenses and the acquisition of goods for personal consumption by a Cuban national present in the United States in a nonimmigrant status or pursuant to other non-immigrant travel authorizations issued by the U.S. government.[73]  The amendments also authorized certain dealings in Cuban-origin merchandise, allowing,for example, Americans traveling in Europe to purchase and consume Cuban-origin alcohol and tobacco products while abroad similar to the travel exemptions in other sanctions programs.[74]  The March amendments authorized certain banking and financial transactions, such as "U-turn" payments through the U.S. financial system, processing of U.S. dollar monetary instruments presented indirectly by Cuban financial institutions, and U.S. bank accounts for Cuban nationals,[75] and allowed persons subject to U.S. jurisdiction to establish and maintain a business and physical presence in Cuba.[76]

As described further in our November 2016 publication, Cuba Sanctions Update – OFAC and BIS Announce Further Amendments to Cuba Sanctions Regulations, the Obama Administration rounded out the year by authorizing certain transactions related to Cuban-origin pharmaceuticals, joint medical research, civil aviation safety-related services and expanding and clarifying authorizations relating to trade and commerce, grants, and humanitarian-related services.[77]  Notably, the amendments narrowed the definition of "Prohibited Officials" to mean certain officials in the Government of Cuba as well as the Cuban Communist Party.[78] 

The amendments also added a new general license authorizing the importation into the United States, and the marketing, sale, or other distribution in the United States, of Cuban-origin pharmaceuticals approved by the U.S. Food and Drug Administration.[79]  With respect to trade and commerce, the U.S. Commerce Department’s Bureau of Industry and Security ("BIS") significantly broadened its License Exception Support for the Cuban People to authorize exports or re-exports of eligible consumer goods directly to eligible individuals in Cuba for their personal use or their immediate family’s personal use.[80]  The amendments also authorized transactions incident to exports and re-exports,[81] allowed importation of previously exported/re-exported items to Cuba for service and repair,[82] and relaxed regulations regarding importation of Cuban merchandise,[83] among other things.

      2.      OFAC Guidance

Throughout 2016, OFAC issued an unprecedented amount of guidance, typically through frequently asked questions ("FAQs"), to clarify the scope of the amended regulations.  On April 21, 2016, OFAC issued eight new FAQs relating to the Cuba sanctions program addressing several topics, most notably "U-turn" transactions[84], and the issuance of insurance coverage to persons engaging in authorized transactions with Cuba.

                  a.      U-Turn Transactions

Unlike the Iran sanctions program, the CACR permits U.S. financial institutions to process U-turn transactions that originate and terminate at accounts maintained by the foreign branches and subsidiaries of U.S. financial institutions, so long as the other requirements of the CACR are met.[85]  U-turn transactions are permitted pursuant to the so-called "U-turn general license,"  31 C.F.R  § 515.584(d).[86]  Under this general license, a U.S. financial institution may serve as the intermediary bank for Cuba-related transactions between non-U.S. persons, such that the U.S. financial institution may process the transaction in U.S. dollars and through the U.S. financial system.[87]

OFAC has provided guidance on the due diligence that U.S. financial institutions must conduct when processing U-turn transactions.[88]  Where the remitter or beneficiary of the U-turn transaction is a direct customer of the U.S. financial institution processing the U-turn transaction, the U.S. financial institution is expected to determine the ownership structure, citizenship, and address of the customer, so as to confirm that the transaction is consistent with the U-turn general license authorization in the CACR.[89]  Where, however, the remitter or beneficiary of the transaction is not a direct customer of the financial institution, the financial institution may rely on the address provided by the remitter or beneficiary to determine whether the remitter or beneficiary is subject to U.S. jurisdiction, unless the financial institution knows, or has reason to know, that the remitter or beneficiary is a person subject to U.S. jurisdiction.[90]

                  b.      Insurance Industry

The FAQs published in April 2016 also address the insurance industry, clarifying that insurance and reinsurance services can be provided where those services are "directly incident" to underlying activities that are authorized by a general or specific license.[91]  For example, because travel to Cuba to engage in religious activities is an authorized activity under § 515.566 of the CACR, providing travel insurance for that activity would be permitted by § 515.566 as well.[92]  Likewise, insurance activities directly incident to the export or reexport of goods licensed or goods otherwise authorized for export to Cuba by the Department of Commerce are permitted under § 515.533 of the CACR.[93]  For example, the purchase of cargo insurance for the transport of an authorized export to Cuba would be permitted.[94]  Insurers do not need a specific license to pay claims on such insurance services that are directly incident to an authorized activity, even where payment of the claim is to a Cuban national.[95]

The corollary to this guidance is that insurers may not provide insurance services for underlying activities that are not authorized by a general or specific license.[96]  Thus, for example, insurers cannot provide insurance for foreign companies that are investing in Cuban state-owned businesses as, even if those foreign companies are operating lawfully, they are not acting pursuant to a general or specific OFAC license.[97]

                  c.       Use of U.S. Dollars in Certain Transactions

On July 8, 2016, OFAC issued two FAQs on the use of U.S. dollars for transactions involving Cuba.[98]  The first FAQ clarified that U.S. dollars may be used for activities that are authorized by, exempt from, or "not otherwise prohibited by" the CACR.[99]  For example, payment in U.S. Dollars for the importation or exportation of books, which falls under 31 C.F.R. § 515.206’s exemption for informational materials, is permitted.[100]  Likewise, as discussed above, U-turn transactions are permitted pursuant to the so-called "U-turn general license," 31 C.F.R. § 515.584(d).

The second FAQ addressed correspondent accounts–i.e., accounts opened by a domestic financial institution through which a foreign financial institution conducts financial transactions.[101]  The FAQ clarifies that U.S. financial institutions that maintain correspondent accounts at Cuban financial institutions (pursuant to a general license authorizing such correspondent accounts) may maintain those accounts in U.S. dollars.[102]  Further, they may use U.S. dollars for any transactions necessary to open and maintain that correspondent account, such as fees for processing funds transfers.[103]  The FAQ also explicitly notes that, although U.S. banks may open correspondent accounts at Cuban banks, the reverse is not permitted–Cuban financial institutions remain prohibited from opening correspondent accounts at U.S. banks.[104]

                  d.        Recordkeeping Requirements of Travel Providers

On July 25, OFAC issued one new FAQ and revised one FAQ, both relating to the recordkeeping requirements of those providing travel to Cuba.[105] The new FAQ, number 38 on the current list, clarifies that carriers, which are required to collect, from each traveler, information on which provision of the CACR authorizes the person’s travel to Cuba, may permissibly choose to collect only the customer’s specific license number, rather than a copy of the certificate granting the specific license itself.[106]  In the revised FAQ 39, OFAC stated that travel providers must maintain for five years the record of the certification providing the authorization for each customer’s travel to Cuba, such as, for example, the specific license number.[107] These records can be maintained in any form, including electronically.[108]

                  e.       Travel

On October 14, 2016 OFAC issued additional guidance on travel between the U.S. and Cuba.[109]  The guidance addresses which individuals are permitted to travel between the U.S. and Cuba, and what type of cargo can be transported between the two countries.  OFAC’s "Guidance Regarding Travel Between the United States and Cuba" addressed three topics: (1) the persons an authorized carrier may transport between the United States and Cuba; (2) the type of cargo an authorized carrier may transport from the United States to Cuba; and (3) the type of cargo an authorized carrier may transport from Cuba to the United States.[110]

The guidance states that there are four categories of persons an authorized carrier may transport between the United States and Cuba.[111]  The first category comprises persons who are traveling to or from Cuba pursuant to a general license under one of the 12 categories of travel listed in the CACR, or under a specific license.[112]  The second comprises Cuban nationals applying for admission to the United States or a third country with a valid visa or other travel authorization issued by the U.S. government.[113] The third comprises Cuban nationals present in the United States in a non-immigrant status; these persons may be transferred only from the United States to Cuba.[114] The fourth comprises any individual, including a foreign national, traveling on official business of the United States government, of a foreign government, or of an intergovernmental organization of which the United States is a member or holds observer status.[115]

With respect to the type of cargo that may be transported between the United States and Cuba, the guidance notes that all cargo ordinarily incident to the export of items that are authorized by BIS for export to Cuba can be carried to Cuba.[116] Departing from Cuba, the carrier can transport any cargo that has been approved for importation into the United States, as well as the Cuban-origin items purchased for the personal use of the travelers.[117]

OFAC’s October 16 updates to the FAQs highlight some of the significant changes that had been made to the CACR and the EAR.  The FAQs note that the spending limits for travelers in Cuba had been lifted, replaced with the limitation that items purchased in Cuba, such as Cuban cigars and rum, must be purchased for personal use.[118]  However, the FAQs note that OFAC considers the "personal use" of an imported item from Cuba to include the giving of such merchandise to another as a personal gift.[119] Cuban-origin items purchased in a third country can likewise be imported to the United States, subject to the limitation that the items must have been purchased for personal use only.[120] 

                  f.        Other

The FAQs address two significant new general licenses issued by OFAC.  As noted, the first permits the importation of Cuban-origin pharmaceuticals into the United States.[121]  The second permits persons subject to U.S. jurisdiction to provide services to Cuba or the Cuban government that support infrastructure maintenance and development in Cuba.[122]  "Infrastructure," the FAQ notes, means the systems and assets used to provide Cubans with public transportation, water and waste management, non-nuclear electricity generation and distribution, hospitals, public housing, and schools.[123]

The FAQs also state that items that were, under authorization, exported to Cuba, may be imported back into the United States for servicing and repair.[124]  Exporting the repaired item back to Cuba, however, requires a separate authorization pursuant to 31 C.F.R. § 515.533(a) or § 515.559.[125]  

            C.      Burma

Last year saw an historic and almost wholesale revocation of the U.S. sanctions against Burma.  After partial easing earlier in the year, the move towards easing culminated in October.  On October 7, 2016, President Obama issued Executive Order 13742, lifting almost all remaining sanctions on Burma.[126]  It also renewed the waiver of financial and blocking sanctions provided by the JADE Act of 2008.[127]  Other effects of Executive Order 13742 include the removal of all 111 individuals and entities blocked pursuant to the Burmese Sanctions Regulations ("BSR") from the SDN List, the unblocking of all property and interests previously blocked pursuant to the BSR, the revocation of a ban on the import into the U.S. of Burmese-origin jadeite and rubies, and the removal of OFAC restrictions on banking and financial transactions with Burma. 

While the vast majority of Burma-related sanctions are now lifted, some restrictions and risks still remain.  Although all individuals and entities previously on the SDN List pursuant to the BSR have been removed, some Burmese individuals and entities remain listed under other sanctions programs, such as the North Korean and counter-narcotics sanctions programs.  Notably, in an FAQ published on October 7, 2016, OFAC clarified that it would continue to investigate and pursue enforcement activities for any violations of the Burmese Sanctions Regulations that occurred prior to the termination of those sanctions.[128]  OFAC’s "longstanding practice," according to the FAQ, is that "apparent sanctions violations are analyzed in light of the laws and regulations that were in place at the time of the underlying activities."[129]

In addition, Burma continues to be classified by the Treasury Department’s Financial Crimes Enforcement Network ("FinCEN") as a "jurisdiction of primary money laundering concern" under Section 311 of the USA PATRIOT Act.[130]  While the classification remains, FinCEN has issued a new administrative exception suspending certain restrictions so U.S. financial institutions can provide correspondent services to Burmese banks subject to the enhanced due diligence requirements of Section 312 of the USA PATRIOT Act.[131]

            D.      Russia

      1.      Regulatory Changes

Tensions between the United States and Russia rose to a fever pitch in 2016 amidst Russia’s ongoing actions in Crimea and eastern Ukraine, the increasingly violent conflict in Syria, and allegations that the Russian government planned and authorized interference in the U.S. presidential election.  

In response to Russia’s continued integration of Crimea, OFAC designated 37 individuals and entities related to Russia and Ukraine in September 2016.  Designated entities included FAU Glavgosekspertiza Rossii, a Russian federal institution authorized to conduct official examinations of project documentation, for its role in Crimea after Russia’s occupation and attempted annexation of the Crimean peninsula.[132]  As described below, OFAC subsequently walked back the impact of sanctions on several entities, including FAU Glavgosekspertiza Rossii, due to the company’s central role in authorizing energy projects throughout Russia.

Although the impact of Russia’s alleged interference in the United States election will remain a question for the history books, the former administration worked quickly to issue sanctions in response.  On December 29, 2016, President Obama issued Executive Order 13757, "Taking Additional Steps to Address the National Emergency With Respect to Significant Malicious Cyber-Enabled Activities" in response to Russia’s alleged efforts to influence the 2016 U.S. Presidential election through cyber operations.[133]  The new E.O. amended the previously unused E.O. 13694, "Blocking the Property of Certain Persons Engaging in Significant Malicious Cyber-Enabled Activities,"[134] which was promulgated on April 1, 2015, following the North Korea hacks against the Sony Corporation.  Sanctions were never issued under the 2015 E.O. due to concerns both about the ability to publicize the case against any accused attackers (given the sensitivity of the information) and worries about retaliation. 

The authority under E.O. 13694 was amended by E.O. 13757 to allow for the imposition of sanctions on individuals or entities determined to be responsible for tampering, altering, or causing the misappropriation of information with the purpose or effect of interfering with or undermining election processes or institutions.  Before this amendment, it was unclear whether E.O. 13694 would encompass interference with elections.  E.O. 13757 also imposed sanctions on Russia’s two leading intelligence services–the GRU and the FSB–as well as four top officers of the GRU and three companies that provided material support to the GRU’s cyber operations.  These individuals and entities have been added to the SDN List along with two additional affiliated individuals not directly identified in the E.O.[135]  In line with almost all other OFAC sanctions, these new sanctions block the assets of these organizations and individuals that are in the United States and prohibit U.S. persons (including banks) from transacting with them.  The goal appears to be to chill private companies’ appetites to work with the GRU and FSB in further cyber activities.  For a detailed summary of this development and its implications, please see our recent client alert, President Obama Announces New Russian Sanctions in Response to Election-Related Hacking.  As described below, on February 2, 2017, OFAC published a general license pursuant to E.O. 13694 to authorize certain otherwise prohibited transactions with the FSB. 

In conjunction with these new sanctions, President Obama announced that the State Department would be shutting down two Russian compounds in the United States and declaring 35 Russian intelligence operatives as "persona non grata."[136] 

Notably, as we discuss below, a senior and bipartisan group of U.S. Senators introduced the Countering Russian Hostilities Act of 2017 (S. 94), on January 11, 2017–just days before the inauguration.  The proposed legislation would codify most of the sanctions on Russia imposed by Executive Order under the Obama Administration.

      2.      General Licenses

On February 2, 2017 OFAC issued a general license to allow U.S. companies to enter into limited transactions with the FSB, fixing a technical–and unintended–issue with the prior sanctions.  Because the FSB acts as a licensing agency for encryption technology, which includes most electronic devices, the general license was required to remove obstacles for U.S. companies selling devices like cellphones and tablets to Russia.[137]

OFAC issued several general licenses authorizing certain transactions otherwise prohibited by the sanctions enacted by the United States in response to Russia’s attempted annexation of Crimea.  On August 31, 2016, General License No. 10 authorized certain transactions otherwise prohibited by E.O. 13685, "Blocking Property of Certain Persons and Prohibiting Certain Transactions With Respect to the Crimea Region of Ukraine,"[138] for a limited period of time necessary to transfer holdings in certain blocked entities.[139]  Specifically, General License No. 10 authorized all transactions and activities, otherwise prohibited by E.O. 13685, that were "ordinarily incident and necessary" to divest or transfer to a non-U.S. person holdings in PJSC Mostotrest.  The wind-down period for such transactions was specified to be until October 1, 2016.

On December 20, 2016, General License No. 11 authorized certain transactions with FAU Glavgosekspertiza Rossii that were otherwise prohibited by E.O. 13685.[140]  Specifically, General License No. 11 authorized all otherwise prohibited transactions and activities ordinarily incident and necessary to "requesting, contracting for, paying for, receiving, or utilizing a project design review or permit from FAU Glavgosekspertiza Rossii’s office(s) in the Russian Federation," provided that "the underlying project is wholly located within the Russian Federation, and none of the transactions otherwise violate E.O. 13685."[141] 

      3.      Designations

As described in the chart below, on February 1, 2016 and January 9, 2017, OFAC added several individuals to the SDN List under the authority of the Magnitsky Act, a bill passed in 2012 with bipartisan support intending to punish Russian officials responsible for the death of Russian lawyer Sergei Magnitsky in a Moscow prison.[142]  On December 20, 2016, OFAC updated the SDN List and the Sectoral Sanctions Identifications ("SSI") List with the names of individuals, entities, and vessels to target sanctions evasion and other activities related to the conflict in Ukraine.[143]  OFAC previously updated the SDN List on November 14, 2016 with the names of six individuals who represented Crimea and Sevastopol in the Russian State Duma, or Parliament.[144]  The United States does not recognize the elections to the Russian State Duma that took place in Crimea as legitimate and designated the individuals for "being responsible for or complicit in actions or policies that undermine democratic processes or institutions in Ukraine."[145] On September 1, 2016, OFAC updated the SDN List and the SSI List to target sanctions evasion and other activities related to the conflict in Ukraine, by designating certain individuals and entities.[146]  

            E.      North Korea

      1.      North Korea Sanctions and Policy Enhancement Act

In 2016, the United States and its allies continued to exert pressure on North Korea by instituting further sanctions in response to ongoing nuclear and ballistic weapons testing by the country.  On February 18, 2016, President Obama signed into law the North Korea Sanctions and Policy Enhancement Act of 2016 ("NKSPEA").[147]  Passed with overwhelming support in both houses of Congress,[148] the NKSPEA strengthened U.S. sanctions against North Korea while codifying related policy priorities.

The NKSPEA introduced mandatory sanctions against persons who knowingly engage (or attempt to engage) in a variety of activities relating to North Korea broadly relating to the provision of goods, services, or technology with military or intelligence applications, the importation or exportation of luxury goods (directly or indirectly) into North Korea, the facilitation of censorship or serious human rights abuses, or money-laundering, counterfeiting, or narcotics trafficking that supports the Government of North Korea or its senior officials.[149]  Although similar sanctions had been available under prior laws, the NKSPEA requires, rather than permits, that the president designate for blocking sanctions any persons found to have engaged in the enumerated activities.[150]  The president is also required to investigate any credible reports of these activities.[151]  The NKSPEA also permits (but does not require) blocking sanctions against persons who knowingly support persons designated pursuant to an applicable United Nations Security Council resolution, or who knowingly participate in the bribery of, or misappropriation of funds by, a North Korean official.[152] 

The NKSPEA imposed export control requirements applicable to state sponsors of terrorism on exports to North Korea by requiring a license for the export of goods or technology covered under Section 6(j) of the Exports Administration Act of 1979 (50 U.S.C. 4605(j)).[153]  North Korea was removed from the state sponsors of terrorism list in 2008 and remains off the list, despite an unsuccessful effort in the House of Representatives to require the administration to consider re-designating it.[154]

The NKSPEA required the Secretary of the Treasury, in consultation with the Secretary of State and the Attorney General, to determine (within 180 days after its enactment) whether reasonable grounds exist to conclude that North Korea is a "jurisdiction of primary money laundering concern" under Section 311 of the USA Patriot Act, 31 U.S.C. § 5318A.  On June 1, 2016, the Treasury Department announced a finding that North Korea is such a jurisdiction.  Although U.S. financial institutions were already prohibited from engaging in direct or indirect financial transactions with North Korean financial institutions, the designation of North Korea as a "jurisdiction of primary money laundering concern" paved the way for further regulations prohibiting the use of correspondent accounts on behalf of North Korean financial institutions and requiring that U.S. financial institutions implement additional due diligence.[155]

The NKSPEA also requires executive departments to analyze and report to Congress on a variety of topics, including cyberattacks against the United States on behalf of the Government of North Korea, human rights issues, and access to cellular and internet communications.[156]  Throughout the act, the NKSPEA emphasizes international cooperation, including the importance of United Nations Security Council initiatives.

The Obama Administration initially implemented the changes embodied in both the NKSPEA and parallel United Nations actions (discussed below) through Executive Order 13722, which imposed "additional steps" with respect to the national emergency declared in Executive Order 13466 of June 26, 2008.[157]  Specifically, it blocked all property and interests of the Government of North Korea or the Workers’ Party of Korea, as well as the property of certain designated persons determined by the Secretaries of the U.S. Treasury and State Departments to: operate in certain industries in the North Korean economy; have sold or purchased metal, graphite, coal, or software where any revenue or profit benefits the Government of North Korea or the Workers’ Party of Korea; have engaged in abuse or violation of human rights; have engaged in exportation of workers; have engaged in significant activities undermining cybersecurity; have engaged in censorship; or have materially assisted or acted on behalf of blocked persons.  The E.O. also prohibited exportation or reexportation of any goods, services, or technology; new investment; and any approval, financing, facilitation, or guarantee by a U.S. person.  Additional restrictions included the prohibition of donations to or from blocked persons, a travel ban on blocked persons, and the prohibition of transactions or conspiracies intended to violate the E.O.

At the same time, OFAC also issued nine general licenses to allow U.S. persons to engage in certain classes of otherwise prohibited conduct without needing to apply for a specific license.  The general licenses permitted: (1) transactions related to the North Korean Mission to the United Nations; (2) provision of certain legal services; (3) normal service charges owed by blocked accounts; (4) noncommercial, personal remittances; (5) certain services in support of NGO activities; (6) third-country diplomatic and consular funds, (7) telecommunications and mail transactions; (8) certain patent, trademark, and copyright transactions; and (9) emergency medical services.[158]

Throughout 2016, OFAC continued to add additional North Korean entities and individuals across areas including government, financial services, and shipping industries to the SDN List.  Notably, in July OFAC added senior North Korean government officials, including Kim Jong Un.[159]  On December 2, OFAC added 7 individuals, 16 entities, and 16 aircraft belonging to North Korea’s national airline, Air Koryo.[160]

      2.      OFAC Guidance

On March 16, OFAC issued ten FAQs to provide guidance on the implementation of Executive Order 13722 as well as the general licenses.  The FAQs clarify that, even though the Executive Order prohibits the exportation or reexportation of goods, services, and technology to North Korea, the Department of Commerce, through BIS, retains the authority to license exports and reexports of goods and technology.[161] OFAC’s FAQs also clarify that Executive Order 13722 does not prohibit travel to North Korea.[162]  That clarification, however, comes with a major caveat: although travel to North Korea is not prohibited, travelers must comply with all applicable sanctions while doing so, including the prohibition on transacting with the Government of North Korea and the Workers’ Party of Korea, the prohibition on the exportation of goods, services, and technology from the United States to North Korea, and the prohibition on new investment in North Korea.[163]  Moreover, OFAC recommends consulting the State Department’s Travel Warning on North Korea  before planning travel to North Korea.[164]

            F.      Kingpin Sanctions

OFAC announced the implementation of new sanctions on May 5, 2016, designating a number of Panama-based individuals and companies, including financial institutions, that have been linked to the "Panama Papers,"[165]  an April 2016 leak which revealed the Panamanian law firm Mossack Fonseca’s use of shell corporations to carry out unlawful activities on behalf of its clients, including significant evasion of international sanctions.  OFAC designated the Waked Money Laundering Organization ("Waked MLO") and its leaders, Nidal Ahmed Waked Hatum and Abdul Mohamed Waked Fares, as Specially Designated Narcotics Traffickers pursuant to the Foreign Narcotics Kingpin Designation Act (the "Kingpin Act").[166]  Panamanian-Colombian-Spanish national Waked Hatum and Panamanian-Lebanese-Colombian national Waked Fares are co-leaders of the Waked MLO, which uses trade-based money laundering schemes, such as false commercial invoicing; bulk cash smuggling; and other money- laundering methods, to launder drug proceeds on behalf of multiple international drug traffickers and their organizations.[167]

OFAC also designated six Waked MLO associates and 68 companies tied to the network, including the principal Panama-based companies allegedly used by the Waked MLO to launder drug and other illicit proceeds such as Grupo Wisa, S.A., Vida Panama (Zona Libre) S.A., and Balboa Bank & Trust.[168]  Two attorneys were among the designated individuals for their involvement with Waked MLO and for incorporating shell companies for the network’s activities.  All assets of the designated individuals and entities under U.S. jurisdiction or in the control of U.S. persons are frozen, and U.S. persons are generally prohibited from engaging in transactions with them.  

On June 1, 2016, OFAC issued a statement on the Felix Maduro Group, also known as Maduro Internacional, S.A., which OFAC also designated in its May announcement as an entity owned and controlled by the Waked MLO.[169]  In its statement, OFAC announced that non-U.S. persons will not be designated for engaging in transactions related to the removal of Waked MLO control of the Felix Maduro Group, but should any such transactions involve U.S. persons, the involved parties should apply for a specific license from OFAC. 

These designations, as with the October 2015 designation of three Honduran businessmen and seven businesses,[170] demonstrate OFAC’s willingness to cast a wide net under the Kingpin Act, then to mitigate the material economic impact of those designations through general licenses.  Concurrent with its May 2016 announcement of the new designations, OFAC issued three general licenses authorizing certain transactions and activities for limited periods of time with five entities owned by the Waked network: Soho Panama, S.A. (a.k.a. Soho Mall Panama), a luxury mall in downtown Panama City; Plaza Milenio, S.A. (Millennium Plaza) and Administracion Millenium Plaza, S.A., related to a hotel complex in Colon, Panama; and two Panamanian newspapers, La Estrella and El Siglo, which are owned by Grupo Wisa, S.A.[171]  The first two general licenses assist with "winding down transactions" for a limited time by authorizing specific activities that would otherwise be prohibited.  The third general license is intended to allow both Panamanian newspapers to continue printing and operating by authorizing specific activities that would otherwise be prohibited.  On May 13, 2016, OFAC published two additional general licenses allowing for non-designated customers to engage in activities necessary for a reorganization period related to transferring any funds or other assets held by Balboa Bank & Trust.

            G.      Libya

On April 19, 2016, President Obama signed Executive Order 13726, "Blocking Property and Suspending Entry Into the United States of Persons Contributing to the Situation in Libya,"[172] expanding the scope of the national emergency declared in Executive Order 13566 of February 25, 2011.  The E.O. cited the "the ongoing violence in Libya, including attacks by armed groups against Libyan state facilities, foreign missions in Libya, and critical infrastructure, as well as human rights abuses, violations of the arms embargo imposed by United Nations Security Council Resolution 1970 (2011), and misappropriation of Libya’s natural resources" as constituting an "unusual and extraordinary threat to the national security and foreign policy of the United States." 

The E.O. blocked the property of any person responsible for, or complicit in, directly or indirectly, any of the following with respect to Libya:  actions or policies that threaten peace, security, or stability; actions or policies that obstruct the adoption of or political transition to a Government of National Accord; actions that lead to misappropriation of state assets; threatening or coercing Libyan state financial institutions or the Libyan National Oil Company; planning, directing, or committing attacks against any state facility or installation, any air, land, or sea port, or any foreign mission; targeting of civilians; or illicit exploitation of crude oil or any other natural resources.  It also blocked the property of leaders of an entity that has engaged in any of the aforementioned activities, and persons who have materially assisted or acted on behalf of blocked persons.  Lastly, the E.O. prohibited donations to or from blocked persons, placed a travel ban on blocked persons, and prohibited transactions or conspiracies that attempt to violate the E.O.

            H.      Côte d’Ivoire

On September 14, 2016, President Obama signed Executive Order 13739, "Termination of the National Emergency with the Situation in or in Relation to Côte d’Ivoire."[173]  The E.O. found that "the situation that gave rise to the declaration of a national emergency in Executive Order 13396 of February 7, 2006"–namely the massacre of civilians, human rights abuses, political violence and unrest, and attacks against international peacekeeping forces–"has been significantly altered by the progress achieved in the stabilization of Côte d’Ivoire."  These advances include the successful conduct of the October 2015 presidential election, progress on the management of arms and related materiel, and the combating of illicit trafficking of natural resources.  In light of these improvements and the removal of multilateral sanctions by the United Nations Security Council in Resolution 2283, the E.O. therefore terminated the national emergency declared in Executive Order 13396 and revoked that order.

II.      Other Significant OFAC Regulations

            A.      Federal Civil Penalties Inflation Adjustment Act

On July 1, 2016, OFAC issued regulations to implement the Federal Civil Penalties Inflation Adjustment Act of 1990.[174]  The regulations, which became effective on August 1, 2016, adjust for inflation the maximum amount of the civil monetary penalties that may be assessed under the relevant OFAC regulations (as described in the chart below).[175] 

 

Authority

Former Maximum Civil Penalty
Per Violation

New Maximum Civil Penalty
Per Violation

International Emergency Economic Powers Act

 

Greater of $250,000 or twice the amount of the underlying transaction

Greater of $284,582 or twice the amount of the underlying transaction per violation

Trading With the Enemy Act

 

$65,000

$83,864

Antiterrorism and Effective Death Penalty Act

Greater of $50,000 or twice the amount of which a financial institution was required to retain possession or control

Greater of $75,122 or twice the amount of which a financial institution was required to retain possession or control per violation

Foreign Narcotics Kingpin Designation Act

 

$1,075,000

$1,414,020

Clean Diamond Trade Act

 

$10,000

$12,856

 

            B.      Guidance and FAQs

In 2016, OFAC relied heavily upon the issuance of FAQs and guidance to clarify the scope of several of the sanctions programs that it administers.  Although OFAC’s FAQs and other guidance publications do not carry the weight of law or otherwise supplement or modify the regulations and statutes OFAC administers, the FAQs and guidance publications provide important clarification as to how OFAC interprets those regulations and statutes.  OFAC provided substantive guidance via FAQ pertaining to the Iran, Cuba, Burma, and North Korea sanctions programs (many of which are discussed in the preceding sections).  In addition, OFAC published guidance on the general licenses and exemptions concerning publishing activities.  Also in 2016, DOJ published guidance concerning its expectations for entities facing prosecution for criminal sanctions violations that hope to receive voluntary self-disclosure, cooperation, and remediation credit.

      1.      Publishing Guidance

On October 28, 2016, OFAC published guidance interpreting the general licenses and certain other exemptions authorizing publishing activities under the Cuba, Iran, (now-largely lifted) Sudan and Syria sanctions programs.[176]  The guidance addresses three issues: (1) the circumstances under which a person would be considered to be publishing on behalf of a sanctioned government, such that the general license for publishing would not be available; (2) the circumstances under which entities are considered "academic and research institutions" such that the general licenses are available and whether government-affiliated institutions could be so considered; and (3) whether providing peer review, style- and copy-editing, or marketing services falls within the scope of the exemptions and general licenses.[177]

As to the first issue, OFAC clarified that the general licenses and other exemptions would generally apply to publishing activities involving an individual who, though employed by a sanctioned government, is publishing in his or her personal capacity–that is, not on behalf of the sanctioned government.[178]  This is a case-by-case determination that must be undertaken by the individual relying on the general license–it is OFAC’s policy not to provide specific authorizations under general licenses.[179]  The determination is dependent on several factors, including the identity of the contracting party, the identity of the party receiving the payments, the identity of the party listed in the credit line, and other factors.[180]

As to the second issue–the circumstances under which entities are considered "academic and research institutions" such that the general licenses are available and whether government-affiliated institutions could be so considered–OFAC clarified that an entity need only be an academic or a research institution to qualify for the general license, and an entity is an academic or research institution if the primary function of the entity is research and/or teaching.[181]  A government-affiliated entity can qualify under this standard if its primary function is research or teaching.[182]  This, again, though, is a case-by-case determination that the person relying on the general license must make.[183]

As to the third issue–whether providing peer review, style- and copy-editing, or marketing services falls within the scope of the exemptions and general licenses–OFAC clarified that peer review, style- and copy-editing are generally outside of the scope of the exemptions for providing "information and informational materials" but generally are within the scope of the general licenses for publishing.[184]  However, these activities may not be performed for sanctioned governments or for individuals publishing on behalf of a sanctioned government.[185]  But there are limited aspects of these activities–those that do not involve "substantive or artistic alteration or enhancement of informational materials"–that would qualify as exempt under the sanctions programs.[186]  Essentially, publication of a "camera ready" article with no edits more substantive than conforming the article to the publication’s physical format and font requirements would be exempt.[187]

      2.      Self-Disclosure

On October 2, 2016, DOJ published guidance describing how DOJ will assess whether an entity facing prosecution for a sanctions violation can receive voluntary self-disclosure, cooperation, and remediation credit.[188]  The guidance notes that entities have typically disclosed export-control and sanctions violations to the relevant regulatory agency, be it OFAC, the State Department, or the Commerce Department, and the guidance encourages entities to continue that practice, but the guidance also requires entities to separately disclose willful violations to DOJ in order to receive credit for having voluntarily self-disclosed the violation.[189]  This is a significant departure from past practice, in which the relevant regulatory agency would, in its discretion, decide whether to refer a case to DOJ for prosecution.

In order to receive full credit for having voluntarily self-disclosed a violation, an entity must disclose the conduct "prior to an imminent threat of disclosure or government investigation," "within a reasonably prompt time after becoming aware of the offense," and must disclose "all relevant facts known to it, including all relevant facts about the individuals involved in any export control or sanctions violation."[190]

To receive cooperation credit, an entity must conduct an appropriately tailored investigation and disclose the material facts concerning wrongdoing that it discovers–in particular with respect to any involvement by the corporation’s officers, employees, and agents.[191]  In addition, an entity is expected to preserve, collect, and disclose all relevant documents, provide timely updates on the investigation, provide information as to potential criminal conduct by third-party actors, make available its officers and employees to be interviewed, and translate foreign documents.[192]

Remediation credit requires that an entity implement an effective compliance program, the criteria for which will vary depending on the size and resources of the organization.[193]  Generally, an effective compliance program will include:  1) a culture of compliance; 2) dedication of sufficient resources to the compliance function; 3) adequate training of compliance personnel to identify potentially risky transactions; 4) independent compliance function; 5) effective risk assessment; 6) a technology control plan and related regular training to ensure export-controlled materials are appropriately handled; 7) appropriate compensation and promotion of a company’s compliance personnel, as compared to non-compliance employees; 8) auditing of the compliance program to ensure its effectiveness; and 9) a reporting structure of compliance personnel that facilitates the identification of compliance problems to senior officials as soon as possible.[194]

Companies that meet these criteria can benefit from reduced penalties and the possibility of a non-prosecution agreement.[195]  Notably, however, this guidance differs from DOJ’s similar Foreign Corrupt Practices Act Enforcement Plan and Guidance (the "pilot program") in that it does not specifically quantify the benefits a qualifying company could receive–the FCPA pilot program specifies a 50 percent reduction off the bottom of the sentencing fine range and a declination of prosecution, but the export control guidance provides that the prosecutors retain discretion to determine the appropriate level of credit.[196]

Notably, the Guidance does not apply to financial institutions, on account of their unique disclosure obligations under other statutory and regulatory regimes.[197]

            C.      Significant Designations

The following chart summarizes significant OFAC designations made in 2016. 

 

Country
(if applicable)

Date

Authority

Designation(s)

Central African Republic

Mar. 8, 2016

E.O. 13667

OFAC added three entities and an individual to its SDN List, including Lord’s Resistance Army and its leader, Joseph Kony, for engaging in the targeting of civilians in the Central African Republic and Zimbabwe through the commission of acts of violence, abduction, and forced displacement.[198]

Democratic Republic of the Congo ("DRC")

Dec. 12, 2016

E.O. 13413

E.O. 13671

OFAC designated two DRC government officials, Evariste Boshab and Kalev Mutondo, for engaging in actions or policies that undermine democratic processes or institutions in the DRC.[199]

Mexico

Sept. 23, 2016

Kingpin Act

OFAC designated four Mexican nationals, pursuant to the Kingpin Act targeting a Tijuana-based cell of the Sinaloa cartel.  OFAC designated Eliseo Imperial Castro, a.k.a. "Cheyo Antrax," Alfonso Lira Sotelo, a.k.a. "El Atlante," Javier Lira Sotelo, a.k.a "El Hannibal" or "El Carnicero," and Alma Delia Lira Sotelo for their narcotics trafficking and money laundering in support or on behalf of the Sinaloa Cartel and its high-ranking members.[200]

North Korea

Jul. 6, 2016

E.O. 13687.  E.O. 13722

OFAC added senior North Korean government officials including Kim Jong Un.[201] 

North Korea

Dec. 2, 2016

E.O. 13383

E.O. 13722

E.O. 13687

OFAC added 7 individuals, 16 entities, and 16 aircraft belonging to North Korea’s national carrier, Air Koryo.[202]

Russia

Jan. 9, 2017

The Magnitsky Act

OFAC added several individuals to the SDN List under the authority of the Magnitsky Act.[203] 

Russia

Feb. 1, 2016

The Magnitsky Act

OFAC added several individuals to the SDN List under the authority of the Magnitsky Act.[204] 

Russia

Sept. 1, 2016

E.O. 13661

E.O. 13660

E.O. 13685

OFAC updated the SDN List and the SSI List to target sanctions evasion and other activities related to the conflict in Ukraine, by designating certain individuals and entities.[205]  

Russia

Nov. 14, 2016

E.O. 13660

OFAC updated the SDN List on November 14, 2016 with the names of six individuals who represent Crimea and Sevastopol in the Russian State Duma (Parliament).[206] 

Russia

Dec. 20, 2016

E.O. 13661

OFAC updated the SDN List and the SSI List with the names of individuals, entities, and vessels to target sanctions evasion and other activities related to the conflict in Ukraine.[207] 

Russia

Dec. 29, 2016

E.O. 13694

OFAC designated two Russian individuals, Evgeniy Mikhailovich Bogachev and Aleksey Alekseyevich Belan, for their activities related to the significant misappropriation of funds or economic resources, trade secrets, personal identifiers, or financial information for private financial gain.[208]

 

 

Syria

July 21, 2016

E.O. 13582

E.O. 13573

E.O. 13572

E.O. 13382

OFAC designated eight people and seven entities for supporting the Syrian government, assisting its weapons program, and helping entities already subject to the SDN List. OFAC designated, among others, a shipping company used by the Syrian Air Force and the firm’s manager; a firm that supplied aircraft tires to the Syrian defense ministry and the firm’s sales manager; and a money changer who moved funds between Syria, Russia, and Lebanon on behalf of the Syrian government.[209] 

Syria

Dec. 23, 2016

E.O. 13582

E.O. 13573

E.O. 13572

E.O. 13382

OFAC designated eighteen individuals and five entities in response to the continued acts of violence committed by the Government of Syria, led by Bashar al-Assad, against its own citizens.  The designated individuals and entities provided support or services to the Government of Syria, acted as senior officials of the Government of Syria, supported designated individuals and entities, and aided Syria’s weapons of mass destruction program.[210]

Zimbabwe

March 8, 2016

E.O. 13667

OFAC added three entities and an individual to its SDN List, including Lord’s Resistance Army ("LRA") and its leader, Joseph Kony, for engaging in the targeting of civilians in the Central African Republic and Zimbabwe through the commission of acts of violence, abduction, and forced displacement.[211]

N/A

Oct. 20, 2016

E.O. 13224

OFAC added four individuals and one entity to the SDN List in order to disrupt the operations, fundraising, and support networks of Hizballah.[212]

N/A

Nov. 20, 2016

E.O. 13224

OFAC added four individuals to the SDN List with the aim of disrupting al-Nusrah Front’s military, recruitment, and financing operations.  Specifically, OFAC designated four key al-Nusrah Front leaders from Syria: Abdallah Muhammad Bin-Sulayman al-Muhaysini, Jamal Husayn Zayniyah, Abdul Jashari, and Ashraf Ahmad Fari al-Allak.[213]

 

III.      Enforcement

Although 2016 was a busy year for sanctions-related policy, it was a light year for OFAC enforcement actions, with under $22 million in collective civil enforcement penalties in nine separate enforcement actions.  This dip is consistent with similar patterns in antitrust and False Claims Act enforcement, suggesting that the drop in the number of actions may have to do with the rollover of personnel common with the end of any administration. 

 

            A.      Selected OFAC Enforcement Actions

      1.      CGG Services S.A. (February 22, 2016)[216]

CGG Services S.A., formerly known as CGGVeritas S.A. ("CGG France"), agreed to pay $614,250 on its own behalf and on behalf of its affiliated companies to settle potential civil liability for alleged violations of the CACR on February 22, 2016.  CGG France and its affiliated companies provide services, spare parts, and equipment for oil and gas exploration and seismic surveys.

According to the settlement documents, CGG France violated the Regulations through a series of transactions in which CGG France exported U.S.-origin goods to vessels operating in Cuba’s territorial waters from September 2010 through July 2011.  The vessels were unaffiliated with CGG France.  OFAC determined that CGG France did not voluntarily self-disclose the alleged violations to OFAC, and that the alleged violations constituted a non-egregious case.  The statutory maximum civil monetary penalty amount for the alleged violations was $2,340,000 and the base penalty amount was $975,000.

OFAC considered the following facts and circumstances: CGG France acted with reckless disregard for U.S. sanctions requirements by exporting U.S.-origin goods to Cuban waters, especially after its U.S. affiliate informed it that such exports could be a violation of U.S. sanctions; CGG France was aware of the conduct giving rise to the alleged violations because it knew where the vessels were located and the origin of the goods; the transactions had a total value of $2,758,701 and were related to oil exploration, which likely caused significant harm to U.S. sanctions program objectives by providing a substantial economic benefit to Cuba; CGG France and its affiliated companies had not been the subject of a penalty notice or Finding of Violation from OFAC in the five years preceding the earliest date of the transactions giving rise to the alleged violations; CGG France took some steps to avoid OFAC violations as part of its compliance program, including removing U.S. personnel and equipment from certain vessels prior to entering Cuba’s territorial waters; and CGG France has adjusted its supply procedures to minimize the risk of future sanctions violations. 

      2.      Alcon Laboratories, Inc. (July 5, 2016)[217]

Alcon Laboratories, Inc. ("Alcon") agreed to settle potential civil liability with OFAC in the amount of $7,617,150 for apparent violations of the ITSR and the Sudanese Sanctions Regulations, 31 C.F.R. part 538 ("SSR"), on July 5, 2016.  Alcon’s settlement with OFAC is concurrent with its settlement agreement with the BIS.

In the course of BIS’s and OFAC’s investigations it was determined that from August 2008 to December 2011 Alcon violated the ITSR on 452 occasions and the SSR on 61 occasions when it engaged in the sale and exportation of medical, surgical, and pharmaceutical products from the United States to distributors located in Iran and Sudan without OFAC authorization.

OFAC determined that Alcon did not make a voluntary self-disclosure and that the alleged violations constituted a non-egregious case. The statutory maximum civil monetary penalty amount for the violations was $138,982,584 and the base penalty amount was $16,927,000.  OFAC considered the following to be aggravating factors in this case: (1) Alcon demonstrated reckless disregard for U.S. sanctions requirements by having virtually no compliance program, despite significant business involving the exportation of goods from the United States to Iran and Sudan; (2) Alcon and its then-senior management knew of the conduct giving rise to violations; and (3) Alcon is a sophisticated multinational corporation with extensive experience in international trade.  OFAC considered the following to be mitigating factors in this case: (1) harm to U.S. sanctions program objectives was limited because the exports involved medical end-use products that were licensable under the Trade Sanctions Reform and Export Enhancement Act of 2000, and in fact had been previously and subsequently licensed by OFAC for Alcon; (2) Alcon has no prior OFAC sanctions history; (3) Alcon took remedial action by ceasing the unlicensed exports to sanctioned countries, initiating an internal investigation of the violations, and instituting a robust compliance program; and (4) Alcon substantially cooperated with OFAC’s investigation.

      3.      PanAmerican Seed Company (September 13, 2016)[218]

PanAmerican Seed Company ("PanAm Seed") agreed to pay $4,320,000 to settle potential civil liability for alleged violations of the ITSR on September 13, 2016.  Specifically, OFAC alleged that from May 5, 2009 to about March 2, 2012, PanAm Seed violated the ITSR by indirectly exporting seeds, primarily of flowers, to two Iranian distributors on 48 occasions.

PanAm Seed shipped the seeds to consignees located in Europe or the Middle East, and PanAm Seed’s customers arranged for the re-exportation of the seeds to Iran.  Personnel from various levels within PanAm Seed were aware of U.S. economic sanctions programs involving Iran and the need to obtain a specific license from OFAC in order to export the seeds in question.  Despite this knowledge, PanAm Seed engaged in practices designed to conceal the involvement of Iran and obscure the fact that the seeds were ultimately destined for distributors located in Iran.

OFAC determined that PanAm Seed did not voluntarily self-disclose the violations to OFAC, and that the violations constituted an egregious case.  Both the statutory maximum and base penalty civil monetary penalty amounts for the violations were $12,000,000.  OFAC considered the following to be aggravating factors: (1) PanAm Seed willfully violated U.S. sanctions on Iran by engaging in, and systematically obfuscating, conduct it knew to be prohibited; (2) PanAm Seed demonstrated recklessness with respect to U.S. sanctions requirements by ignoring its OFAC compliance responsibilities, despite substantial international sales and warnings that OFAC sanctions could be implicated; (3) multiple PanAm Seed employees, including mid-level managers, had contemporaneous knowledge of the transactions giving rise to the violations; (4) PanAm Seed engaged in this pattern of conduct over a period of years, providing over $770,000 in economic benefit to Iran; and (5) PanAm Seed did not initially cooperate with OFAC’s investigation, providing some information that was inaccurate, misleading, or incomplete.

OFAC considered the following to be mitigating factors: (1) PanAm Seed had not received a Penalty Notice or Finding of Violation from OFAC in the five years preceding the earliest date of the transactions giving rise to the violations; (2) the exports at issue were likely eligible for an OFAC license; (3) PanAm Seed took remedial steps to ensure future compliance with OFAC sanctions, including stopping all exports to Iran, implementing a compliance program, and training at least some of its employees on OFAC sanctions; and (4) PanAm Seed cooperated with OFAC by agreeing to toll the statute of limitations for a total of 882 days.

      4.      National Oilwell Varco, Inc. (November 14, 2016)[219]

National Oilwell Varco, Inc., a Delaware corporation, and its subsidiaries ("NOV") agreed to settle their potential civil liability for apparent violations of the CACR, the ITSR and the SSR for $5,976,028 on November 14, 2016.  NOV’s settlement with OFAC is concurrent with both a settlement agreement between NOV and the BIS, and a Non-Prosecution Agreement ("NPA") executed by NOV with the U.S. Attorney’s Office for the Southern District of Texas.

According to the settlement documents, NOV engaged in a series of transactions in violation of the ITSR, CACR, and SSR from 2002 to 2009, including approving commission payments to a United Kingdom entity that related to the sale of goods from NOV to Iran; facilitating transactions involving sales and exportation of goods to Iran; knowingly exporting goods from the United States for the specific purpose of filling orders from Iranian customers; engaging in transactions involving the sale of goods to Cuba; and engaging in transactions involving the exportation of goods from the United States to Sudan.

OFAC determined that NOV did not voluntary self-disclose the Apparent Violations.  OFAC also determined that the violations involving the commission payments were egregious because senior-level finance executives within NOV approved the four commission payments; NOV willfully blinded itself to the consequences of its approval; NOV had reason to know that the commission payments involved Iran; and NOV ignored several warning signs over the course of three years that approving the commission payments was prohibited conduct.  OFAC determined that the remaining apparent violations were nonegregious.  The statutory maximum civil monetary penalty amount for the violations was $37,766,212.  The base penalty amount for the violations was $8,537,183.  NOV’s $5,976,028 settlement with OFAC will be deemed satisfied by its payment of $25,000,000 as specifically set forth in the NPA arising out of the same pattern of conduct.

OFAC considered the following to be aggravating factors: (1) NOV’s conduct that gave rise to the violations demonstrated at least reckless disregard for U.S. sanctions requirements; (2) senior managers at NOV knew or had reason to know that their respective business transactions giving rise to the violations involved Iran; (3) NOV’s conduct caused harm to sanctions program objectives by providing a significant and sustained economic benefit to the petroleum industries in Cuba, Iran, and Sudan; (4) NOV is a large and sophisticated company that is engaged in the business of providing oilfield services around the world; and (5) NOV’s compliance program at the time of the violations was wholly inadequate.

OFAC considered the following to be mitigating factors: (1) NOV had not received a Penalty Notice or Finding of Violation in the five years preceding the date of the earliest transaction giving rise to the violations; (2) NOV cooperated with OFAC’s investigation, including by agreeing to toll the statute of limitations for more than 2,600 days; and (3) NOV has made efforts to remediate its compliance program and agreed to further compliance enhancements.

            B.      New York State Actions

In 2016, the New York State Department of Financial Services ("DFS") concluded five main enforcement actions that included sanctions-related components, all involving the New York-based activities of foreign banks and three involving large monetary penalties totaling $630 million.

First, the Federal Reserve Bank of New York ("FRBNY") and DFS entered into unrelated but similar agreements with the Industrial Bank of Korea and the National Bank of Pakistan (and their New York Branches) on February 24, 2016[220] and March 14, 2016,[221] respectively, in which the banks agreed to strengthen their Bank Secrecy Act/Anti-Money Laundering ("BSA/AML") and OFAC controls.[222]  During each of the bank’s most recent examinations of their New York branches, the FRBNY and DFS uncovered "deficiencies" in the Industrial Bank of Korea’s and "significant breakdowns" in the National Bank of Pakistan’s risk management and compliance programs.[223]  As a result, each bank has undertaken to create a written plan to enhance the oversight of the New York branches’ compliance with the BSA/AML, OFAC, and DFS laws and regulations, and ensure that those responsible for the compliance function possess the relevant expertise and are supported by adequate resources.[224]  Specifically relating to sanctions, the banks must create "a written plan to enhance the Branch’s compliance with the OFAC Regulations acceptable to the Supervisors."[225]

In the second half of the year, DFS concluded three enforcement actions against foreign banks and their New York branches for BSA/AML and sanctions violations, reaping a total of $630 million in monetary penalties.  DFS also used these actions as an opportunity to remind the financial community that DFS’s new regulation requiring strengthened transaction monitoring and filtering and board or management oversight was going into effect on January 1, 2017.[226]  Indeed, two of the consent orders even took the unusual step of underscoring the responsibility of senior management and the board of directors in the order itself.[227]

On August 19, 2016, DFS issued a consent order against Taiwanese Mega International Commercial Bank Co. Ltd. ("Mega Bank") and its New York branch for numerous compliance failures relating to Mega Bank’s BSA/AML and OFAC compliance programs.[228]  As the result of an examination, DFS found that the bank was indifferent toward risks posed by suspicious transactions between the New York and Panama branches, as well as transactions involving customer entities formed by the Mossack Fonseca law firm, which had been at the center of the "Panama Papers" scandal.[229]  Such risky behavior resulted from overall compliance failures at the bank, including that the New York branch’s head AML officer–who was based in Taiwan–and chief compliance officer lacked familiarity with U.S. AML and sanctions laws; compliance staff did not review monitoring criteria to identify suspicious transactions; and the New York branch had inconsistent compliance policies and could not demonstrate whether affiliate branches had any corresponding controls.[230]

Mega Bank paid DFS a monetary penalty of $180 million.[231]  Additionally, the bank is required to enhance its compliance program through certain actions, including hiring an independent compliance consultant to revise policies and procedures to cure the current deficiencies and hiring an independent monitor for two years to conduct a review of the bank’s compliance program.  The monitor will also conduct a transaction review to determine whether any transactions from 2012 through 2014 violate OFAC, AML, or other laws and, if so, whether they had previously been properly identified and reported in the relevant period.[232]

Shortly thereafter, on November 4, 2016, DFS issued a consent order against the Agricultural Bank of China and its New York branch for "serious and persistent compliance failures" at the New York branch, demonstrating "a fundamental lack of recognition of the need for a vigorous compliance infrastructure."[233]  Among its violations, DFS found that the New York branch increased its dollar clearing activity even after, in 2013, the bank had been warned not to increase such activity until it improved its compliance function, notwithstanding that the bank could not "satisfy even basic compliance requirements."[234]  Additionally, the bank used non-transparent SWIFT messaging procedures that hid the true parties to transactions, preventing DFS from identifying whether such transactions ran afoul of OFAC and AML laws and regulations.[235]  The examination also revealed suspicious transactions between certain companies and countries, including those in Russia, China, Yemen, Turkey, and Afghanistan.[236]  Moreover, once the New York branch’s chief compliance officer identified and raised some of these issues with management, the Chief Compliance Officer’s activities were curtailed and he eventually resigned; the bank was unable to retain a competent Chief Compliance Officer since his resignation in 2015.[237]

The Agricultural Bank of China paid DFS $215 million, and is subject to undertakings relating to its compliance program.[238]  The bank must retain an independent monitor to conduct a two-year review of the New York branch’s BSA/AML compliance program, as well as a review of the New York branch’s dollar clearing activity from May 1, 2014 through October 31, 2015 for possible violations of OFAC regulations, money laundering, or other types of suspicious activity.[239]  Additionally, the bank must undertake an enhancement of its BSA/AML, OFAC, suspicious activity reporting, and customer due diligence compliance, and strengthen corporate governance and management oversight.[240]

DFS closed out 2016 by issuing its largest sanctions-related penalty of the year; on December 15, the Department issued a consent order against Intesa SanPaolo[241] for a monetary penalty of $235 million for "severe compliance failures" relating to "deficiencies in the implementation and oversight of its transaction monitoring system."[242]  The failures in Intesa’s transaction monitoring system–resulting in the processing of thousands of potentially suspicious transactions–were compounded by poor instruction by senior compliance personnel as well as absence of oversight by senior management.[243]  Additionally, DFS found that approximately $11 billion in U.S. dollar clearing transactions conducted between 2002 and 2006 involved Iranian clients, which potentially ran afoul of U.S. sanctions.[244]  These transactions could not be effectively monitored due to non-transparent SWIFT methods, thereby "subvert[ing] controls designed to detect illegal transactions in the New York branch."[245]

In addition to the monetary penalty, Intesa was required to extend the engagement of an independent consultant–who had already been engaged as a result of a 2007 agreement with DFS and FRBNY and had discovered many of the violations that are the subject of the consent order–to analyze and test the bank’s compliance programs, which the bank must enhance and submit to DFS for review.[246]  The bank must also create a plan to enhance management’s oversight of the New York branch’s compliance with BSA/AML and OFAC requirements and regulations.[247]

INTERNATIONAL

I.      The United Nations

The United Nations remains a significant international forum for the coordination of multilateral sanctions. In 2016, the United Nations provided a forum for the international community to exert or moderate sanctions pressure on Iran and North Korea.   

With regard to Iran, on Implementation Day (discussed above), the United Nations terminated all resolutions that imposed sanctions on Iran, except for U.N. Security Council Resolution 2231, which implemented the JCPOA.  Under the JCPOA, the United Nations arms embargo remains in force for five years, though countries may petition the U.N. Security council for authorization to sell certain weapons systems, and certain sanctions on individuals designated for participating in Iran’s nuclear and ballistic missile programs remain in place.  Prior U.N. sanctions, including the intrusive economic sanctions found in U.N. Security Council Resolution 1929, are subject to "snap-back" (rapid re-institution) should Iran substantially fail to perform its obligations under the JCPOA.

In parallel to the U.S. sanctions against North Korea, the U.N. Security Council passed Resolution 2270 placing restrictions including an asset freeze on all funds owned or controlled by entities of the North Korean government or the Worker’s Party of Korea.[248]  The Resolution also banned the supply of luxury goods to North Korea and the sale or transfer of precious minerals.  The Resolution further expanded an arms embargo against North Korea to include small arms and any items which could improve North Korea’s military capabilities.  Finally, the U.N. Security Council expanded the asset freeze list to an additional 12 entities and 16 individuals.  The European Union implemented the U.N. Resolution through the passage of Council Regulation (EU) 2016/682 on April 29 (discussed below).[249]

On November 20, 2016, the U.N. Security Council passed a unanimous resolution further strengthening the sanctions against North Korea in response to further nuclear tests by North Korea.  Resolution 2321 prohibited the export of copper, silver, nickel and zinc from North Korea and similarly adds newly complicated restrictions on coal.  Resolution 2321 revised Resolution 2270’s prohibition on procuring coal from North Korea by instead imposing a maximum export limit on coal and prohibiting the procurement of coal from designated individuals or entities, individuals or entities involved in North Korea’s nuclear or ballistic missile programs, or those owned or controlled by, or acting on the behalf of such individuals or entities.  The Resolution further prohibited the transfer to North Korea of an expanded list of dual-use items that have possible WMD- or conventional arms-related applications and designated an additional 10 entities and 11 individuals.

II.      The United Kingdom

Six months after the United Kingdom’s historic vote to leave the European Union, much political and legal uncertainty persists, including in relation to the world of financial and trade sanctions.  Until the UK formally leaves the EU, EU law remains in force and the UK is obliged to give effect to EU law, including sanctions legislation.  Notably, the UK’s underlying obligation to implement United Nations Security Council sanctions will continue, but the mechanics (namely implementation first at EU level, then by regulation in the UK) will need to change.  While UK’s easing of sanctions against Iran through the JCPOA should not be affected., but the UK’s departure from the EU may have significant practical ramifications for the EU’s political stance on the imposition and targets of sanctions.  Significantly, the bloc’s approach to sanctions against Russia may undergo a policy shift.

There are a number of policy options as to how a UK outside the EU will address sanctions issues.  It may choose to move in step with United States sanctions policy.  It may simply adopt EU sanctions wholesale.  It could take a path of its own and adopt autonomous sanctions regime separate from the EU much like it did with Iran during 2011.  Finally, less likely option would be to follow the Swiss model of adopting watered-down versions of EU sanctions.  It should be noted that the UK can and has acted unilaterally on sanctions in the recent past, most notably by introducing financial transfer restrictions on notification obligations in relation to Iran in November 2011.

Two important developments over the past year, which will greatly impact the UK’s sanctions enforcement landscape are firstly the passage of the Policing and Crime Act 2017 through Parliament and secondly the formation of the Office of Financial Sanctions Implementation ("OFSI") within HM Treasury in March 2016.  These and other UK sanctions developments are described below, and additional analysis is set forth in our 2016 Mid-Year United Kingdom White Collar Crime Update.

            A.      Policing and Crime Act 2017

On January 31, 2017 the Policing and Crime Act 2017, received Royal Assent bringing it into law.  The Act will significantly strengthen sanctions enforcement in the UK and empower the recently-created OFSI (see below) to impose civil penalties for the first time.  Presented to Parliament in February 2016, OFSI’s consultation on the Act, mentioned below, provides an estimated timetable for the act coming into force in April 2017.  Part 8 of the Act, which remained largely unchanged during the parliamentary process, brings about the following key developments:

  • Increase in maximum custodial sentences:  The maximum custodial sentence for violating UK financial sanctions rules will be substantially increased from two to seven years (on indictment) and to two years (on summary conviction), in line with sentences for offences under the Terrorist Asset-Freezing Act 2010.
  • Imposition of civil monetary penalties:  As an alternative to criminal prosecution for non-compliance with financial sanctions, OFSI will be able to impose civil monetary penalties of the greater of £1 million or 50% of the value of the funds or resources involved. The Act envisions that senior officers and managers of companies can be fined on the same scale.
  • Availability of Deferred Prosecution Agreements (DPAs) and Serious Crime Prevention Orders (SCPOs):  Under the Act, financial sanctions breaches are added to the list of offences for which DPAs and SCPOs are available (by amendment to the Crime and Courts Act 2013 and the Serious Crime Act 2007, respectively). For discussion of the UK’s DPA regime see our 2013 Mid-Year Update on Corporate DPAs and NPAs). An SCPO is a court order which can be imposed as part of a criminal sentence and which prevents involvement in serious crime by imposing prohibitions, restrictions or requirements on individuals or entities. Breach of an SCPO is punishable by a fine and/or imprisonment of up to five years.
  • Rapid implementation of U.N. sanctions:  The Act also addresses the delay between adoption of sanctions by the UN Security Council and their implementation by the EU, which can take up to a month. OFSI will be empowered to adopt temporary regulations to give immediate effect to the UN’s resolutions and which would then fall away once the EU publishes its regulation (this mechanism will, of course, have to be adapted post-Brexit).
  • Channel Islands, the Isle of Man and British Overseas Territories:  The Act also allows HM Treasury to extend its temporary regulations to the Channel Islands, the Isle of Man and British Overseas Territories.  However, this power will not be used in relation to any Crown dependency or overseas territory that has implemented its own legislative measures to implement sanctions without delay. At present, the Government of Jersey is the only one to have taken such steps and therefore, at its request, Jersey has been omitted from the section of the Act dealing with rapid implementation.

            B.      OFSI

A key recent development has been the formation of a new government body to oversee sanctions enforcement in the United Kingdom–the OFSI.  This body, established within HM Treasury and headed by Rena Lalgie, became operational on March 31, 2016, after plans for its creation were first announced in the UK’s budget in March 2015.  OFSI’s stated purpose is to "provide a high quality service to the private sector, working closely with law enforcement to help ensure that financial sanctions are properly understood, implemented and enforced".

In the March 31, 2016 announcement, George Osborne, then Chancellor of the Exchequer, commented that OFSI would be a "centre of excellence for financial sanctions, raising awareness and providing clear guidance to promote compliance with financial sanctions, providing a professional service to the public and industry, and working closely with other parts of government to ensure that sanctions breaches are rapidly detected and effectively addressed."

Since its creation, OFSI has published on its website numerous guidance papers, including in relation to current lists of designated persons in various countries, general guidance on financial sanctions obligations and the approach it will take when issuing licences and considering compliance.  It has also taken responsibility for HM Treasury’s annual frozen assets reporting and issued a reminder in October 2016 for all persons holding or controlling funds belonging to sanctioned persons to provide details of these funds to OFSI.

When the Policing and Crime Act comes into force, OFSI and the U.K.’s prosecuting authorities will have a multi-faceted and flexible enforcement regime.  As promised by Ms. Lalgie in a May 2016 speech, and as required by the Act, a public consultation was launched in early December 2016 to seek views on the draft guidance relating to the imposition and determination of civil monetary penalties.  In summary, this guidance explains OFSI’s powers under the Act, its compliance and enforcement approach, how it will assess whether or not to apply a monetary penalty and, if so, what factors will be taken into account, as well as the procedure for deciding and imposing details of penalties.  The guidance states that OFSI will assess each case "fairly and proportionately", basing its approach on the relevant facts.  Each factor is weighted by reference to OFSI’s strategy, policy, guidance and processes and to the case facts.

The following mitigating and aggravating factors will all be taken into account for the purpose of determining penalty levels:

  • direct provision of funds or economic resources to designated persons;
  • circumvention of sanctions;
  • severity;
  • knowledge and compliance standards in the relevant sector;
  • behavior;
  • failure to apply for a licence/breach of licence terms;
  • professional facilitation;
  • repeated, persistent or extended breaches;
  • reporting of breaches to OFSI (see "Expectation of cooperation", below);
  • public interest, strategic priority and future compliance effect; and
  • other relevant factors.

When it comes to the procedure for penalty imposition, the guidance suggests that OFSI will begin by writing to the relevant person(s) and setting out the reasons for and the amount of the penalty. The person(s) will then be able to make representations about "any relevant matters", including matters of law and fact, OFSI’s interpretation of the facts, whether OFSI has followed its processes and whether the penalty is fair and proportionate. Thereafter, the person(s) will have the chance to request ministerial review of both the fact of a penalty or the amount of the penalty. While the bill was passing through the House of Lords a further right of appeal to the Upper Tribunal was added. Whilst both OFSI and the Minister’s decisions would of course be subject to judicial review, recourse to the Upper Tribunal would "ensure that there can be a full-merits hearing on points of law and fact", whereas a judicial review hearing before the High Court would only allow an examination of points of law (as observed by Baroness Chisholm of Owlpen during the December 7, 2016 House of Lords report stage).  No penalty will be imposed where: (i) it would have no meaningful effect (e.g. the value is too low to act as a deterrent or provide restitution for the wrongdoing); (ii) it would be "perverse" (e.g. if it arose as a result of improper coercion or blackmail); or (iii) it is not in the public interest to impose a penalty.

A further key point to draw from the guidance is that OFSI expects all persons involved in a breach to co-operate, even if doing so would result in their being subject to enforcement action.  Failure to co-operate will be taken "very seriously" and result in the imposition of a monetary penalty.  The guidance also makes clear that OFSI places a "premium" on voluntary disclosures.  As a result, where a person makes a prompt and complete voluntary disclosure, a reduction of up to 50% of the final penalty amount may be available.

One of OFSI’s main goals is deterrence and, as such, details of all monetary penalties imposed will be published and include details including the person(s) fined, a case summary, the values of the breach and penalty and "compliance lessons OFSI wishes to highlight" to help others avoid committing a similar breach.

Given that the guidance focuses on monetary penalties, OFSI’s approach to DPAs is not covered. However, one can look to Ms. Lalgie’s May 2016 speech for guidance on this point.  In particular, Ms. Lalgie noted that the terms of a DPA should be expected to include a fine, disgorgement of profits and possibly the imposition of a compliance monitor.

We will be responding to the consultation in due course and will keep our clients and friends updated on further developments.

            C.      Enforcement

                  a.      United Kingdom – HM Treasury

As part of its announcement of the above-mentioned consultation, on December 1, 2016 HM Treasury issued a release stating that during 2016 HM Treasury had dealt with over 100 suspected breaches of financial sanctions rules, the highest-value of which was worth around £15 million.  The details of these breaches and any enforcement action taken have not otherwise been made public.

                  b.      Royal Court of Guernsey – Bordeaux Services (Guernsey) Limited & Ors v Guernsey Financial Services Commission

On May 11, 2016, the Royal Court of Guernsey handed down final judgment in Bordeaux Services (Guernsey) Limited & Ors v Guernsey Financial Services Commission (unreported, May 11, 2016), an appeal by Bordeaux Services against the length and level of certain penalties imposed on it and three of its directors by the GFSC in July 2015 (see our 2015 Year-End United Kingdom White Collar Crime Update).  Bordeaux Services was fined £150,000, whilst the three directors received £50,000, £30,000 and £30,000 penalties, as well as prohibition orders of 15 years, 15 years and five years. The penalties were imposed in relation to various breaches of Guernsey sanctions regulations as to training and sanctions screening.  The appellants appealed against the length of the prohibitions and the level of the penalty against Bordeaux Services, arguing that the GFSC’s decision-maker, the Senior Decision Maker ("SDM"), had failed to consider the appropriate criteria and that the penalties imposed were disproportionate and unreasonable.

The Royal Court held that SDM was right to impose prohibition orders on each director and the fifteen-year prohibition orders imposed on the first two directors, although "at or very near the upper limit of what is reasonable and proportionate", were upheld.  However, the Royal Court held that the "absence of any rational explanation" for the reduction in length of the orders imposed on the third director, meant that the order imposed on the latter was disproportionate and should be remitted to the GFSC for reconsideration and/or clarification.  Although also accepted as rightly imposed, the specific financial penalty conferred on Bordeaux Services was held to be unreasonable and disproportionate by the Court, particularly in light of the "paucity of reasoning" regarding the likely financial consequences to the company. The Royal Court thus remitted the decision in respect of the amount of the fine to the GFSC for reconsideration and/or clarification.  The judgment shows that decisions of the GFSC can be subject to judicial scrutiny on appeal. It remains to be seen whether the Royal Court’s views on the proportionality of financial penalties will survive the GFSC’s new powers to impose greater fines.

      2.      Other Case Law

                  a.       Supreme Court of Bermuda – Cornhill Natural Resources Fund Ltd v Libyan Investment Authority

The Supreme Court of Bermuda handed down a judgment on January 29, 2016 upholding the decision of Cornhill Natural Resources Fund Limited to deny the Libyan Investment Authority ("LIA") the ability to redeem investment shares held in it by its nominee (Cornhill Natural Resources Fund Limited v Libyan Investment Authority [2016] SC Bda 9 (Com)).  The judgment concerned the meaning and effect of the Libya (Restrictive Measures) (Overseas Territories) Order 2011 (the "Order"), in particular the correct interpretation of an article permitting persons to deal with frozen funds provided that they fall within specific listed exceptions.

Cornhill Fund argued that it could not process a redemption request from LIA, whose assets had been frozen under the Order, without first obtaining a specific license from the Governor of Bermuda. In response, LIA argued that the Order allowed payments into frozen accounts where due under contractual obligations concluded prior to the account holder becoming a designated person and that its investment in Cornhill Fund occurred prior to its assets being frozen.  Rejecting LIA’s argument, the Supreme Court held that LIA was not a designated person; its assets were frozen on separate grounds and therefore a license had to be obtained from the Governor.  This decision is significant in being the first ruling by the Bermudan Supreme Court on sanctions legislation. In particular, it highlights the difficulties which may be faced by parties whose assets have been frozen, and the need to ensure that the correct method is used when trying to release frozen funds.

                  b.      English Court of Appeal – Libyan Investment Authority v Maud [2016] EWCA Civ 788 

The related EU regulatory exemption concerning the treatment of frozen funds has also recently been the subject of an English case.  In this the Court of Appeal overturned a High Court judgment (Maud v Libyan Investment Authority [2015] EWHC 1625), which set aside a statutory demand by the LIA for payment under a guarantee which pre-dated the inclusion of the LIA as a sanctioned entity.  Before the High Court, Glenn Maud had successfully argued that he could not pay the LIA without breaching the EU’s sanctions against Libya, which froze the LIA’s assets.  However, according to the Court of Appeal, the EU’s sanctions measures had to be construed as far as possible compatibly with the U.N. Security Council Resolutions they sought to implement and pointed to recent easing of U.N. sanctions against the LIA.

Mr. Maud further argued that his guarantee fell within the definition of "funds" and that payment under the guarantee would therefore breach the asset freeze against the LIA.  However, the Court of Appeal held that payment of the guarantee was caught by a separate prohibition on making funds available to the LIA, which allowed for derogation in instances of payments due under agreements concluded before a person was designated and paid into frozen accounts.  The Court of Appeal also dismissed Mr. Maud’s argument that the LIA’s statutory demand for payment was a form of claim, and so by not setting it aside the Court would be satisfying a claim on behalf of the LIA in contravention of a prohibition on doing so under EU sanctions.

III.      THE EUROPEAN UNION

The European Union has adopted further sanctions regulations in 2016, most of which simply amend the duration of the imposed sanctions and the list of targeted persons, entities and groups. Substantive developments concerned the following countries and organizations:[250]

            A.      Belarus

The restrictive measures against Belarus have been extended until February 28, 2017[251] in light of the political developments in the country.  The measures in place include an embargo on arms and related materiel, a ban on exports of equipment for internal repression, a ban on the provision of certain services, admission restrictions of listed individuals, as well as the freezing of funds and economic resources of listed persons, entities and bodies.   

            B.      Bosnia and Herzegovina

The restrictive measures remain in place, and have been extended until March 31, 2017[252].  The sanctions regime for Bosnia and Herzegovina provides for admission restrictions of listed individuals who are considered to undermine the sovereignty, territorial integrity, constitutional order and international personality of the country, who seriously threaten the security situation or who undermine the Dayton/Paris General Framework Agreement for Peace.  Further, the measures in place include the freezing of funds and economic resources of listed persons, entities and bodies.

            C.      Burundi

The restrictive measures imposed with regard to Burundi have been extended until October 31, 2017,[253] due to the ongoing repression and human rights violations in the country.  These restrictions include admission restrictions of certain individuals and the freezing of funds and economic resources of certain persons, entities and bodies that are considered to be undermining the democratic process following the disputed re-election of President Nkurunziza. 

            D.      Central African Republic

The arms embargo, travel ban and assets freeze have all been extended until January 31, 2017.[254]  In addition, certain amendments have been made to the exemptions to the arms embargo as well as to the designation criteria used to identify the relevant individuals, entities and bodies.  Several persons have been added to the list of persons and entities subject to restrictive measures as a result.[255]

            E.      Cote d’Ivoire

The EU has repealed Regulation (EC) No 174/2005 imposing restrictions on the supply of assistance related to military activities, and Regulation (EC) No 560/2005 imposing certain specific restrictive measures directed against certain persons and entities.[256]  Similarly, Decision 2010/656/CFSP renewing the restrictive measures has been repealed.[257]

            F.      Democratic Republic of Congo ("DRC")

On December 12, 2016, the EU identified an additional 7 high-ranking officials from the Congolese security forces to be added to the list of targeted individuals, entities and bodies.  The EU undertook this action in response to acts of violence which occurred in September 2016, with a death toll of at least 50 people. The killings were allegedly carried out by Congolese security forces.[258]  The European Council has also called upon the Congolese government to comply with an independent Committee investigating the alleged violence and was prepared to extend sanctions in case of future acts of violence.[259] The measures in place include asset freezes and restrictions on economic resources of the listed individuals who are considered to be obstructing a peaceful solution towards elections in DRC or are planning serious human rights violations in the DRC.[260]

            G.      Egypt

The restrictive measures in place have been renewed until March 22, 2017.[261]  These restrictive measures include the freezing of funds and economic resources of persons identified as responsible for misappropriating Egyptian State funds and natural or legal persons, entities and bodies associated with these persons.[262]

            H.      North Korea

In a response to the nuclear test conducted on January 6, 2016 and the missile launch of February 2016, the EU adopted new measures reflecting past sanctions,[263] including an embargo on arms and related materials, a ban on exports of certain goods and technology, a prohibition of procurement from North Korea of arms, related materials and other goods and technology, a ban on provision of certain services, a ban on provision of new North Korean banknotes and coins, a ban on trade in gold, precious metals and diamonds with the Government of North Korea, a ban on exports of luxury goods, and a ban on funding for trade where such support could contribute to North Korea’s nuclear, ballistic missile, or other WMD programs.

            I.      Iraq

As of August 19, 2016, September 5, 2016, September 12, 2016 and September 21, 2016, several entities have been deleted from the list of targeted individuals, entities and bodies whose funds and economic resources are frozen as part of the sanctions regime in place against Iraq.[264]

            J.      Liberia

After the United Nations Security Council decided to terminate, with immediate effect, the arms embargo with regard to the situation in Liberia, the EU repealed its position concerning restrictive measures imposed against Liberia.  This included the lifting of the arms embargo the EU held in place against Liberia.[265]

            K.      Myanmar

As of April 23, 2013, the EU’s trade, financial and targeted sanctions were lifted permanently, despite the ongoing oppression against the Rohingya people which are classified as acts of "ethnic cleansing."[266]  The arms embargo and the ban on exports of equipment for internal repression remain in place and have been extended until April 30, 2017.[267]

            L.      Russian Federation

On July 1, 2016, the EU extended the economic sanctions adopted in 2014 in response to Russia’s annexation of Crimea and Sevastopol.  The measures remain in place at least until January 31, 2017.[268] On December 19, 2016, the sanctions were further extended until July 31, 2017.[269]  Hence, the restrictive measures continues to include bans on trade in arms and limitations to EU capital markets for five major Russian majority state-owned financial institutions and three major Russian energy companies.

            M.      Ukraine

Given that the EU does not recognize the Crimea and Sevastopol annexation to Russia, sanctions have imposed against theses territories (regarded by the EU as Ukrainian territory).[270]  The measures in place include a ban on the import of goods from Crimea or Sevastopol (except goods that have been authorized by the recognized Government of Ukraine),[271] a ban on exports of goods and technology to said territories relating to the transport, telecommunication, energy and mineral resources sectors, a ban on the acquisition of proprietary rights of entities in Crimea and Sevastopol and related investment services.[272]  These restrictive measures have been extended until June 23, 2017.[273]

            N.      Iran

On January 16, 2016, the Council of the EU partially lifted nuclear-related economic and financial EU sanctions against Iran pursuant to Iran’s compliance with the JCPOA.[274]  In particular, all restrictions relating to public financing have been lifted, meaning that the Iranian State and Iranian entities are now able to enter the international bond market and thus finance and invest in the Iranian economy and public projects on a large-scale basis.

In addition, the hundreds of individuals and companies named on the basis of being involved in, or supporting, Iran’s nuclear program have been de-listed. Billions of dollars held in EU accounts by these entities will now be unfrozen.  Transfers to and from these individuals and entities will now be unrestricted, and debts long outstanding to listed entities can now lawfully be paid.  The combined consequence of unfreezing accounts and allowing payments may have the effect of transforming the liquidity of many of the Iranian companies previously sanctioned.

Crucially, the restriction of financial transfers to and from Iran is lifted completely.  Banking activities, such as the establishment of non-listed Iranian banks in Member States are permitted, too.  Such banks are also entitled to acquire proprietary rights in EU financial and credit institutions and vice versa.  However, given the recent confusion over the Nuclear Accord since the election of Donald J. Trump in the United States (as well as a Republican-dominated Congress), European banks are still hesitant to commence financial and banking operations in Iran.  This is exacerbated by the continued U.S. ban on dollar transactions related to Iran.[275]

The import of fossil fuels such as crude oil, petroleum products and gas from Iran is also permitted.  Conversely, exports of equipment, technology and services are now permitted to Iranian oil and gas producers, refiners and those involved in exploration and development.  The country with the world’s fourth largest proven oil reserves has just been enabled to re-enter the EU energy market.  While currently low oil prices reflect, in part, the expected rise in supply from Iran, the long-term prospect of capital expenditure, investment and modernization of Iran’s energy sector should remain the focus for participants in this space.

In conjunction to the lifting of sanctions to Iran’s oil, related restrictions for the insurance of Iranian oil shipments have also been lifted, which is a development that will be of great importance in insurance markets in London and other cities of Europe.  Moreover, many Iranian companies have been delisted, which included a lot of Iranian shipping companies that were primarily engaged in oil shipping. Accordingly, the trade in Iranian oil is expected to increase appreciably.

Restrictive measures relating to the transport sector have also been lifted, which has already led to major business deals with European Aircraft maker Airbus and a joint venture with Car manufacturer Groupe PSA (Peugeot and Citroen).[276]

A control mechanism has been introduced whereby prior consent for services regarding nuclear-related transfers, metals and software must be obtained from the Member States which submit such requests to the U.N. Security Council for approval on a case-by-case basis.[277]  Sanctions related to the proliferation of missile technology, the arms embargo remain in force.[278]

It should be noted, however, that Iran has formally requested from the EU’s High Representative Federica Mogherini that a E3/EU+3 meeting should be held, after the US congress has voted for an extension on Iran sanctions for another ten years.[279]  Iran has argued that this has been a contravention of the Nuclear Deal, while the White House has disputed this.[280]

            O.      Syria

On May 27, 2016, the EU extended its trade sanctions relating to Syria for a further year until June 1, 2017.  The sanctions range from an oil embargo, asset freezes on the Syrian central bank in the EU, export restrictions on equipment and technology that might be used for internal repression, and a prohibition on participation in the construction of new power plants for electricity production and technology that allows the interception of electronic communications like internet and telephony.  However, sanctions relating to oil and petroleum have been amended, providing for an exemption based on the sole purpose of humanitarian relief to the Syrian population.  This derogation also covers assets freezes and travel bans.  These exceptions are available to public entities providing aid to Syria, as well as other entities authorized by Member States.[281]

While the EU import of arms is prohibited, the supply of arms to Syria remains unaffected as an attempt to allow weapons sales to the Syrian opposition.  Regarding the situation in Aleppo, the EU’s High Representative, Federica Mogherini, has stated recently that the EU intends to further extend the list of Syrian individuals and entities that were in support of the Assad Regime as long as reprisals and human rights violations continue against civilians.[282]

            P.      Tunisia

The restrictive measures have been extended until January 31, 2017.  Measures in place include the freezing of funds and economic resources of 48 persons considered responsible for misappropriation of Tunisian State funds, and natural or legal persons or entities associated with them.[283]  The list of persons, entities and bodies targeted has also been revised.

            Q.      Zimbabwe

Taking into account the political developments in Zimbabwe, the EU extended its restrictive measures until February 20, 2017.[284]  These restrictive measures include an export ban on arms (and related materials) and  equipment for internal repression, a ban on the provision of certain services, admission restrictions and an asset freeze for listed individuals, entities and bodies.  Furthermore, the temporary suspension of the admission restriction and asset freeze in certain cases was extended.  The list of persons, entities and bodies has been revised, as well as the list of persons, entities and bodies befitting from the temporary suspension.

IV.      European Union Case Law

Unlike in the United States, where judicial challenges to OFAC’s regulations are comparatively infrequent and rarely successful, the European Union has seen substantial litigation relating to its sanctions laws.  Several cases have successfully challenged the European Council’s designations, often resulting in delisting.

            A.      Judgments Relating to the Relisting of Iranian Banks

On November 30, 2016, the General Court upheld the European Council’s decision to re-list the Export Development Bank of Iran and Bank Refah Kargaran as targets for the EU’s restrictive measures, on the ground they are providing support for the Government of Iran.[285]  In particular, the banks were directly or indirectly state-owned.  The Court agreed that the European Council was not required to evidence that these banks have made specific finance payments with regards to Iran’s nuclear program.  It was sufficient for the European Council to establish that such payments were in themselves quantitatively and qualitatively significant.

            B.      First Judgment Regarding Russia Sanctions

On November 30, the General Court handed down its first judgment relating to the EU’s restrictive measures imposed against Russia.[286]  The Court upheld the listing of Arkady Rotenberg, a Russian businessman subject to the restrictive measures since his listing in 2014. 

As of July 30, 2014, Mr. Rotenberg was originally listed on the grounds of being a long-time acquaintance of President Putin and being favored by "Russian decision-makers" in the award of important contracts.  Mr. Rotenberg was considered the "major shareholder" of Giprotransmost, a company which received a contract from the Russian government for a feasibility study for a bridge between Crimea and Russia, which contributed to consolidating its integration into the Russian Federation, thereby further undermining the territorial integrity of Ukraine.  The restrictive measures against Mr. Rotenberg were extended on March 15, 2015, on the additional grounds that Mr. Rotenberg is also the owner of Stroygazmontazh, a company that received a contract from the Russian government for the construction of the bridge between Crimea and Russia.  Further, he is the chairman of the board of directors of publishing house Prosvescheniye, which implements the "To the Children of Russia: Address – Crimea" project, a PR-campaign designed to persuade Crimean children that they are Russian citizens living in Russia, and to support the Russian government’s policy to integrate Crimea into Russia.  The measures were again extended, on the same grounds, until March 15, 2016 and again until September 15, 2016.  Mr. Rotenburg appealed the restrictive measures adopted until September 15, 2016. 

The Court partly upheld Mr. Rotenburg’s action for annulment, in that it annulled the restrictive measures in place between July 30, 2014 and March 14, 2015, concluding that the European Council’s statement of reasons was based on manifest errors of assessment (i.e., the reference to "Russian decision-makers" from which Mr. Rotenberg allegedly received favour was too vague, the Council did not provide evidence that Mr. Rotneberg was favoured by President Putin when he took action against Ukraine, and the Council did not prove that Mr. Rotenburg was a shareholder or majority shareholder in Giprotransmost).

However, the Court rejected the action for annulment and upheld the sanctions in place between March 15, 2015 and September 15, 2016.  The Council’s statement of reasons for the extension of the sanctions covering this period included additional grounds (i.e., an undisputed shareholding in Stroygazmontazh, which was awarded the State contract to construct the bridge between Russia and Crimea, and the board position in publishing house Prosvescheniye, which undertook the "To the Children of Russia: Address – Crimea" project on the orders of the Russian President in connection with the alignment of Crimea to Russian educational standards), which the Court did not find to be vitiated by manifest errors of assessment. 

            C.      Judgment Regarding Belarus Sanctions

On November 23, 2016, the General Court handed down its judgment regarding the listing of Vadzim Ipatau, the former Vice-President of the highest electoral authority in Belarus.[287]  The Court considered the listing as sufficiently reasoned, given that the sanctions targeted individuals who were involved in breaches of electoral standards in Belarus and the Council’s statement was not vitiated by any manifest errors of assessment.

            D.      Judgment Relating to the Syria Sanctions

On September 9, 2016, the General Court annulled the listing of Tri-Ocean Trading, an entity established in the Cayman Islands with activities in the shipping of oil and gas in the Middle East, and its parent company, Tri-Ocean Energy, an entity established in Egypt.  Both entities had originally been subjected to restrictive measures in 2014 as part of the EU’s sanctions regime against Syria on the grounds that Tri-Ocean Trading was "providing support to the Syrian regime and benefiting from the regime by organizing covert shipments of oil to the Syrian regime."  In making its decision, the Council had relied on internal Council documents, extracts of two third-party reports, and two Reuters articles.  

The Court agreed with the applicant that the indicia provided by the Council were insufficiently specific, precise and consistent to establish that there was a sufficient link between the listed entities and the regime being combated.[288]  On November 15, 2016, the Council complied with the General Court’s judgments and delisted the two entities accordingly.  In a separate case, the General Court also annulled the listing of Mohamed Farahat, the Vice President of Tri-Ocean Energy.   

In three further judgments, the General Court upheld the listing of several entities and individuals in the context of the EU’s sanctions against Syria.  In these cases, the Court found that the EU Council had provided sufficient evidence that demonstrated that the listed individuals and entities either supported, associated with, or benefitted from the Assad Regime.  In arriving at its decision, the Court considered the probative value of certain pieces of evidence and the evidentiary burden which must be satisfied to show that individuals were associated with the Assad Regime.  For example, the Court accepted that the EU Council’s documentary evidence was sufficient to justify its re-listing of Mohamad Hamcho, a prominent Syrian businessman and owner of the Syrian holding company Hamcho International, as well as his company by relying on documentation showing that he is close to important figures of the Syrian regime and that he performs economic and representative functions which tie him to the Syrian Regime. 

LOOKING FORWARD

As we went to press on this Alert, scarcely two weeks after the inauguration of President Donald J. Trump, the new administration had set an aggressive course to carry through on many campaign promises by executive fiat.  President Trump issued a spate of executive orders purporting to roll back the policies of the previous administration in his first week in office, abandoning the Trans-Pacific Partnership ("TPP"), former President Obama’s signature trade deal, during his first day on the job.  By the end of his first week, President Trump had signaled plans to build his long promised wall on the border of Mexico and to renegotiate the North American Free Trade Agreement ("NAFTA").  Given candidate Trump’s extensive criticism of President Obama’s approach to Iran, Russia, and Cuba–relationships in which the imposition or easing of sanctions played a key part–we believe that he could act quickly to alter many of the sanctions programs by executive action. 

Notably, many of President Trump’s initial executive orders appear to have been drafted without the traditionally robust input of relevant agencies, which has at times led to confusion about the manner in which those orders are to be interpreted and implemented.  In the first week of the new administration, for example, reports indicated that the Trump Administration’s decision to freeze all pending regulations had effectively stalled the official easing of sanctions against Burma.[289]  It remains to be seen how, and when, the new administration will approach the various sanctions policies of its predecessor.  We discuss the likely impact on the main U.S. sanctions programs below. 

            A.      Iran

Reading the tea leaves after the November 2016 election, we assessed that it was highly likely that the new administration would move quickly to reassess–if not turn back–some aspects of the Iran nuclear deal.  We stand by that analysis.  Given President Trump’s campaign statements and the existence of more than two dozen Iran sanctions bills percolating in Congress, we believe that the new administration will act fast to carry through on campaign promises to roll back the Iran nuclear deal.  President Trump can either take the lead via executive order, as he did with several other actions in his first week in office, or allow Congress to provide him direction via legislation. 

On February 3, less than 48 hours after the Trump administration’s statement that Iran had been "put on notice" following its test of a ballistic missile, the United States issued a set of new sanctions against Iran.  The new sanctions target thirteen individuals and twelve corporate entities for their alleged role in supporting Iran’s ballistic missile program.  OFAC also named officials and businesspeople tied to Iran’s elite military unit, the Islamic Revolutionary Guard Corps, for their suspected role in aiding the Lebanese militia, Hezbollah, and Tehran’s defense industries.[290]  For more analysis regarding these recent sanctions, please see our  client alert, New Sanctions Against Iran

Acting alone through executive action or together with the Republican Congress, the new administration will face numerous challenges if it chooses to significantly depart from the sanctions relief the Obama Administration negotiated.  Absent significant Iranian noncompliance with its nuclear commitments, U.S. allies will be unlikely to go along with any return to pre-relief sanctions.  Such a move would also increase instability in the Middle East–a region from which Trump has promised to further extricate the United States–and compound the uncertainty posed by Iran’s own presidential elections in May 2017.  Further, President Trump would have to be willing to risk some high-paying manufacturing jobs, many of which are at least partly secured at U.S. aerospace companies via future sales to Iran that have already been authorized.

To the extent that President Trump’s executive proclamations are able to be carried into force, we view it as likely that his administration may move to impose substantial new non-nuclear sanctions on Iran–staying true to the text of the nuclear accord while pressuring Iran’s activities in missile development and its support of troublesome players in Syria, Yemen, and elsewhere.  Depending upon what sort of individuals and enterprises are caught up in these measures, such new orders could greatly impact the current state of sanctions relief.  Certain entities (including financial institutions and major companies, for example), that were delisted under the nuclear deal could be relisted under different, non-nuclear authorities.

            B.      Russia

At the dawn of the new administration, both President Trump and Russian President Vladimir Putin have appeared to express a mutual interest in moving away from the tensions between Washington and Moscow that emerged following Russia’s actions in Ukraine and Syria.  While Russia sanctions did not play as large a role in the campaign as did the Iran sanctions, if President Trump is sincere in his desire to re-establish a closer working relationship with Russia, President Putin has made it clear that sanctions need to be addressed.  Current Russia sanctions are multifaceted and extensive, including restrictions on individuals and companies (including prominent business people and the largest banks and energy firms in the country); sanctions due to Moscow’s activities in Eastern Ukraine; a near complete embargo on Crimea; sanctions on various Russian entities for involvement in Syria; and human-rights-related sanctions under the Magnitsky Act. 

During the campaign, then candidate Trump stated that he would be open to examining whether to recognize Crimea as Russian territory, which could lead to a near immediate removal of the embargo.  Though he was broadly silent on other components of the sanctions, we assume that President Trump will request a full review of all measures.  President Trump will need to make an initial determination on Russia sanctions by March 2017, which is when the "national emergency" concerning Russia – which forms the basis for the sanctions regime – must be renewed. 

As with Iran, the new administration could face challenges if it tries to walkback the Obama administration’s measures.  Fellow Republicans have been very critical of President Putin’s activities.  Among other challenges, it would be difficult for Trump to forcibly annul the statutory Magnitsky Act (though he could choose to cease adding names to the list) and it is not clear whether U.S. allies in Europe and elsewhere would concur with a strategy to ease sanctions on Russia.  Further, a bipartisan group of U.S. Senators (Cardin (D-MD), McCain (R-AZ), Menendez (D-NJ), Graham (R-SC), Shaheen (D-NH), Rubio (R-FL), Klobuchar (D-MN), Sasse (R-NE), Durbin (D-IL), and Portman (R-OH)) introduced the Countering Russian Hostilities Act of 2017 (S. 94), on January 11, 2017–just days before the inauguration.  The proposed legislation would codify most of the sanctions on Russia imposed by Executive Order under the Obama Administration and go several steps further–for example, by imposing secondary sanctions applicable to non-U.S. persons and targeting a wider swath of activities in the Russian oil and gas, technology, financial, defense/intelligence, construction, engineering, and civil nuclear sectors.  If passed, the bill would make it more difficult (though not impossible) for the Trump Administration to revoke existing sanctions by executive action.  There would, of course, be a significant question about how the Trump Administration would implement the measures proposed in S.94 if it was signed into law.

As described above, on February 2, 2017 OFAC issued a general license to allow U.S. companies to enter into limited transactions with the FSB, fixing a technical–and unintended–issue with the prior sanctions.  While acknowledging the limited nature of this sanctions relief, Republicans in Congress suggested that the timing of the announcement was "tone deaf."  The OFAC announcement came as President Trump’s United Nations ambassador, Nikki Haley, criticized Moscow in her first U.N. Security Council appearance and warned that U.S. sanctions relating to Russia’s annexation of Crimea would remain in place until Moscow returns control over the peninsula to Ukraine.[291]

            C.      Cuba

As we noted in our recent update Trade Under Trump: How the New Administration Will Impact U.S. Economic Sanctions and Export Controls, an amount of uncertainty surrounds how the new Trump Administration may approach Cuba sanctions.  During the campaign, Trump noted that he would "cancel" any sanctions-relief deal if it was not to his liking and if it did not serve the people of Cuba in "protecting religious and political freedom."[292]  After the election, President-elect Trump remarked on Twitter that "[i]f Cuba is unwilling to make a better deal for the Cuban people, the Cuban/American people and the U.S. as a whole, I will terminate deal."[293]  When asked about any prospective policy changes towards Cuba on February 3, White House spokesman Sean Spicer responded that the Trump administration was in the midst of a "full review of all U.S. policies towards Cuba" with a focus on its human rights policies.[294]  The nature of that review was not clear. 

Though we think it unlikely that President Trump will undo all of President Obama’s policy choices, we assess that the pace of Cuba sanctions easing may slow or stall, at least initially.  As specific appointments and policies begin to take shape over the next few months, Gibson Dunn experts will continue to monitor the developments in this area and to provide additional information and analysis in subsequent alerts.


   [1]   John Kerry, U.S. Department of State, "Remarks on  Implementation Day" (Jan. 16, 2016), available at https://2009-2017.state.gov/secretary/remarks/2016/01/251336.htm.

   [2]   John Kerry, Waiver Determination and Findings (Oct. 18, 2015), available at https://www.state.gov/documents/organization/248501.pdf.

   [3]   OFAC FAQs: FAQs Relating to the Lifting of Certain U.S. Sanctions Under the Joint Comprehensive Plan of Action (JCPOA) on Implementation Day ("OFAC JCPOA FAQs"), Questions M.4. available at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/jcpoa_faqs.pdf (last visited Jan. 31, 2017).

   [4]   Id.

   [5]   Id., Question M.5.

   [6]   Id.

   [7]   Id.

   [8]   JCPOA, Annex II (Jul. 10, 2015), available at http://www.state.gov/documents/organization/245320.pdf

   [9]   OFAC, General License J, "Authorizing the Reexportation of Certain Civil Aircraft to Iran on Temporary Sojourn and Related Transaction" (July 29, 2016); OFAC, General License J-1, "Authorizing the Reexportation of Certain Civil Aircraft to Iran on Temporary Sojourn and Related Transaction" (Dec. 15 2016).  The change in General License J-1 relates to permitting flights that are labeled as codeshares with Iranian carriers on the same terms as other temporary sojourns.

[10]   Id.

[11]   Id.

[12]   E.g. Yeganeh Torbati, "U.S. allows Amerian-made planes to be flown to Iran," Reuters (Jul. 29 2016), available at http://www.reuters.com/article/us-iran-usa-aviation-idUSKCN1092KM.

[13]   OFAC, General License H, "Authorizing Certain Transactions Relating to Foreign Entities Owned or Controlled by a United States Person" (Jan. 16, 2016), available at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/iran_glh.pdf.

[14]   Id.

[15]   See OFAC JCPOA FAQs, Questions K.2., K.17.

[16]   See id.

[17]   OFAC JCPOA FAQs, Question K.13.

[18]   Id.

[19]   OFAC JCPOA FAQs, Question K.4.

[20]   OFAC JCPOA FAQs, Question K.5.

[21]   Id., Question K.6.

[22]   Id., Question K.8.

[23]   Id., Questions K.6., K.7., K.20.

[24]   Id., Question K.6.

[25]   Id., Question K.20.

[26]   Id., Questions K.21, K.22.

[27]   Id., Question K.10.

[28]   Id., K.10, K.12.

[29]   Id. Question K.11.

[30]   OFAC, Statement of Licensing Policy for Activities Related to the Export or Re-Export to Iran of Commercial Passenger Aircraft and Related Parts and Services, available at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/lic_pol_statement_aircraft_jcpoa.pdf (last visited Feb. 2, 2017). 

[31]   E.g., Thomas Erdbrink and Nicola Clark, "U.S. Allows Boeing and Airbus to Sell Planes to Iran," N.Y. Times (Sept. 21, 2016), available at https://www.nytimes.com/2016/09/22/world/middleeast/iran-airbus-boeing-aircraft.html?_r=0.

[32]   OFAC JCPOA FAQs, Question J.9.

[33]   OFAC, General License I, Authorizing Certain Transactions Related to the Negotiation of, and Entry into, Contingent Contracts for Activities Eligible for Authorization Under the Statement of Licensing Policy for Activities Related to the Export or Re-export to Iran of Commercial Passenger Aircraft and Related Parts and Services (Mar. 24, 2016).

[34]   31 C.F.R. § 560.534; 81 Fed. Reg. 3330 (publication of final rule).

[35]   31 C.F.R. § 560.535; 81 Fed. Reg. 3330 (publication of final rule).

[36]   OFAC JCPOA FAQs, Question C.6.

[37]   Id., Question C.7.

[38]   Id., Question C.15.

[39]   See id.

[40]   Id., Question M.11.

[41]   Id.

[42]   Id., Question M.12.

[43]   Id.

[44]   Id.

[45]   Id., Question M.10.

[46]   Id.

[47]   Id., Question C.11

[48]   OFAC, Guidance on the Provision of Certain Services Relating to the Requirements of U.S. Sanctions Laws (Jan. 12, 2017) available at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/compliance_services_guidance.pdf (last visited Jan. 30, 2017).

[49]   Id.

[50]   OFAC JCPOA FAQs, Question J.3.

[51]   Id.

[52]   Id.

[53]   Id.

[54]   See id., Questions J.3., J.4.

[55]   Id., Question J.4.

[56]   See id., Question J.5.

[57]   See id.

[58]   See id.

[59]   Id., Question J.6.

[60]   Id., Question J.4.

[61]   Id., Question J.8.

[62]   Id., Question J.7.

[63]   Iran Sanctions Extension Act, Pub. Law No. 114-277.

[64]   White House, Press Release, "Statement by the Press Secretary on H.R. 6297 – Iran Sanctions Extension Act" (Dec. 15, 2016), available at https://obamawhitehouse.archives.gov/the-press-office/2016/12/15/statement-press-secretary-hr-6297-iran-sanctions-extension-act.

[65]   Ladane Nasseri and Golnar Motevalli, "Rouhani Urges Obama to Block Iran Sanctions Law Extension," Bloomberg, (Dec. 4, 2016), available at https://www.bloomberg.com/news/articles/2016-12-04/rouhani-urges-obama-to-block-iran-sanctions-extension-law.

[66]   81 Fed. Reg. 94254.

[67]   Id., 94256.

[68]   Id.

[69]   Id.

[70]   Id.

[71]   The first set of amendments was announced on January 27, 2016.  Press Release, U.S. Dep’t of Treasury, Fact Sheet:  Treasury and Commerce Announce Further Amendments to the Cuba Sanctions (Jan. 27, 2016), available at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/fact_sheet_01262016.pdf; CACR, 31 C.F.R. pt. 515 (2016), available at http://www.ecfr.gov/cgi-bin/text-idx?tpl=/ecfrbrowse/Title31/31cfr515_main_02.tpl.

[72]   On March 15, 2016, the U.S. Treasury and Commerce Departments released additional amendments.  Press Release, U.S. Dep’t of Treasury, Fact Sheet:  Treasury and Commerce Announce Significant Amendments to the Cuba Sanctions Regulations Ahead of President Obama’s Historic Trip to Cuba (Mar. 15, 2016), available at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/cuba_fact_sheet_03152016.pdf; CACR, 31 C.F.R. pt. 515, § 515.565(b) (2016), available at http://www.ecfr.gov/cgi-bin/text-idx?tpl=/ecfrbrowse/Title31/31cfr515_main_02.tpl; 15 C.F.R. pts. 730-774 (2016), available at http://www.ecfr.gov/cgi-bin/text-idx?SID=18fb45eea9bdf59daad0e2834eee5376&mc=true&tpl=/ecfrbrowse/Title15/15CVIIsubchapC.tpl.

[73]   CACR, 31 C.F.R. pt. § 515.571.

[74]   Id. § 515.585(c).

[75]   Id. § 515.584(d)-(h).

[76]   Id. § 515.542; 573; 578.

[77]   On October 14, 2016, the U.S. Treasury and Commerce Departments announced regulatory amendments implementing the Presidential Policy Directive on United States-Cuba Normalization issued by President Barack Obama the same day.  Press Release, The White House, Presidential Policy Directive – United States-Cuba Normalization (Oct. 14, 2016), available at https://www.whitehouse.gov/the-press-office/2016/10/14/presidential-policy-directive-united-states-cuba-normalization.

[78]   CACR, 31 C.F.R. § 515.337-38.

[79]   Id. § 515.547.

[80]   15 C.F.R. § 740.21(b)(4).

[81]   CACR, 31 C.F.R. § 515.533(a).

[82]   Id.

[83]   Id. § 515.560.

[84]   31 C.F.R. § 515.584(d) (authorizing U.S. financial institutions to process funds transfers that neither originate nor terminate in the United States and where neither the originator nor the beneficiary is a person subject to U.S. jurisdiction (so-called "U-turn" transactions)).

[85]   See OFAC, Cuba-Related FAQs ("OFAC Cuba-Related FAQs"), Question 65, available at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/cuba_faqs_new.pdf (January 10, 2017).

[86]   Id.

[87]   Id. (citing 31 C.F.R. § 515.584(d)).

[88]   Id., Question 66.

[89]   Id.

[90]   Id.

[91]   Id., Question 84.

[92]   Id. (citing 31 C.F.R. § 515.566).

[93]   Id. (citing 31 C.F.R. § 515.533).

[94]   Id.

[95]   Id.

[96]   Id.

[97]   See id.

[98]   Id., Questions 44, 52.

[99]   Id., Question 44.

[100]   See id.

[101]   Id., Question 52.

[102]   Id.

[103]   Id.

[104]   Id.

[105]   Id., Questions 38, 39.

[106]   Id., Question 38.

[107]   Id., Question 39.

[108]   Id.

[109]   Press Release, U.S. Dep’t of Treasury, Fact Sheet:  Guidance Regarding Travel Between the United States and Cuba (Oct. 14, 2016), available at https://www.treasury.gov/press-center/press-releases/Pages/jl0581.aspx.

[110]   U.S. Dep’t of Treasury, Guidance Regarding Travel Between the United States and Cuba (October 14, 2016), available at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/guidance_cuba_travel.pdf.

[111]   Id.

[112]   Id.; 31 C.F.R. part 515.

[113]   Id.

[114]   Id.

[115]   Id.

[116]   Id.

[117]   Id.

[118]   See OFAC Cuba-Related FAQs, Questions 29, 31, 76.

[119]   Id., Question 31.

[120]   See id., Question 32.

[121]   See id., Question 107.

[122]   See id., Question 108.

[123]   Id.

[124]   See id., Question 70.

[125]   Id.

[126]   Exec. Order No. 13742, 81 Fed. Reg. 70,673 (Oct. 16, 2016).  E.O. 13742 revoked E.O.s 13047, 13310, 13448, 13464, 13619, and 13651.

[127]   Id.; Tom Lantos Block Burmese JADE (Junta’s Anti-Democratic Efforts) Act of 2008, Pub. Law No. 110-286, 122 Stat. 2632 (Jul. 29, 2008).

[128]   See OFAC FAQs: Burma Sanctions, Question 481, available at https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_other.aspx#burma  (October 7, 2016).         

[129]   Id.  

[130]   Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001, Pub. L. No. 107-56 (2001).

[131]   U.S. Dep’t of Treasury, Exception to Prohibition Imposed by Section 311 Action against Burma, Oct. 7, 2016, available at https://www.fincen.gov/sites/default/files/shared/Burma%20311%20Exception%20-%20Final%20for%20Publication.pdf.

[132]   Press Release, U.S. Dep’t of the Treasury, "Treasury Sanctions Individuals and Entities for Sanctions Evasion and Activities Related to the Conflict in Ukraine" (Sep. 1, 2016), available at https://www.treasury.gov/press-center/press-releases/Pages/jl5048.aspx.

[133]   Exec. Order No. 13757, 82 Fed. Reg. 1 (Jan. 3, 2017).

[134]   Exec. Order No. 13694, 80 Fed. Reg. 18,077 (Apr. 2, 2015).

[135]   Exec. Order No. 13757, 82 Fed. Reg. 1 (Jan. 3, 2017), available at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/cyber2_eo.pdf.

[136]   Statement by the President on Actions in Response to Russian Malicious Cyber Activity and Harassment (Dec. 29, 2016), available at https://www.whitehouse.gov/the-press-office/2016/12/29/statement-president-actions-response-russian-malicious-cyber-activity.

[137]   OFAC, Cyber-related General License 1 (Feb. 2, 2017), available at  https://www.treasury.gov/resource-center/sanctions/Programs/Documents/cyber_gl1.pdf.  The general license was issued pursuant to E.O. 13694, authorizing all otherwise prohibited transactions and activities that are necessary and ordinarily incident to requesting certain licenses and authorizations for the importation, distribution, or use of certain information technology products in the Russian Federation, as well as transactions necessary and ordinarily incident to comply with rules and regulations administered by, and certain actions or investigations involving, the FSB.

[138]   Exec. Order No. 13685, 79 Fed. Red. 247 (Dec. 19, 2014), available at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/ukraine_eo4.pdf.

[139]   OFAC, General License No. 10 (Aug. 31, 2016), available at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/ukraine_gl10.pdf.

[140]   OFAC, General License No. 11 (Dec. 20, 2016), available at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/ukraine_gl11.pdf.

[141]   Id.

[142]   See Resource Center, U.S. Dep’t of the Treasury, "Magnitsky-related Designations" (Jan. 9, 2017), available at https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20170109.aspx; "Magnitsky-related Designations" (Feb. 1, 2016), available at  https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20160201.aspx.

[143]   Resource Center, U.S. Dep’t of the Treasury, "Russia/Ukraine-related Designations and Identifications" (Dec. 20, 2016), available at https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20161220.aspx.

[144]   Resource Center, U.S. Dep’t of the Treasury, "Russia/Ukraine-related Designations" (Nov. 14, 2016), available at https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20161114_33.aspx.

[145]   Press Release, U.S. Dep’t of the Treasury, "Treasury Sanctions Individuals for Activities Related to Russia’s Occupation of Crimea" (Nov. 14, 2016), available at https://www.treasury.gov/press-center/press-releases/Pages/jl0609.aspx.

[146]   Resource Center, U.S. Dep’t of the Treasury, "Russia/Ukraine-related Designations and Identifications" (Sept. 1, 2016), available at https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20160901.aspx.

[147]   North Korea Sanctions and Policy Enhancement Act of 2016, Pub. Law No. 114-122, 130 Stat. 93.

[148]   U.S. Congress, Bill History for H.R. 757, available at https://www.congress.gov/bill/114th-congress/house-bill/757/all-actions?overview=closed#tabs (last visited Jan. 20, 2017).

[149]   NKSPEA, § 104(a).

[150]   House Committee on Foreign Affairs, H.R. North Korea Sanctions Enforcement Act of 2016:  Section-by-Section, available at https://foreignaffairs.house.gov/files/HR%20757%20North%20Korea%20Sanctions%20Section-by-Section.pdf (last visited Feb. 2, 2017).

[151]   NKSPEA, § 102.

[152]   Id. § 104(b).

[153]   Id.§ 203; see also House Committee on Foreign Affairs, H.R. North Korea Sanctions Enforcement Act of 2016:  Section-by-Section, available at https://foreignaffairs.house.gov/files/HR%20757%20North%20Korea%20Sanctions%20Section-by-Section.pdf. (last visited Feb. 2, 2017). 

[154]   H.R. 5208 (not passed).  See https://www.congress.gov/bill/114th-congress/house-bill/5208/text.

[155]   U.S. Treasury, Press Release, "Treasury Takes Actions To Further Restrict North Korea’s Access to The U.S. Financial System" (June 1, 2016) available at https://www.treasury.gov/press-center/press-releases/Pages/jl0471.aspx; Imposition of Special Measure Against North Korea as a Jurisdiction of Primary Money Laundering Concern, 81 Fed. Reg. 78715 (Nov. 9, 2016) available at https://www.federalregister.gov/documents/2016/11/09/2016-27049/imposition-of-special-measure-against-north-korea-as-a-jurisdiction-of-primary-money-laundering.

[156]   Id. §§ 209, 301-303.

[157]   Exec. Order No. 13722, 81 Fed. Reg. 14,943 (Mar. 15, 2016).

[158]   U.S. Dep’t of Treasury, North Korea General Licenses 1-9, available at https://www.treasury.gov/resource-center/sanctions/Programs/pages/nkorea.aspx. (last visited Feb. 2, 2017)

[159]   OFAC Designations (Jul. 6, 2016).

[160]   OFAC Designations (Dec. 2, 2016).

[161]   See OFAC FAQs: North Korea Sanctions, Question 459, available at https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_other.aspx#nk (Mar. 16, 2016).

[162]   Id., Question 464.

[163]   See id.

[164]   Id.

[165]   Press Release, U.S. Department of the Treasury, Treasury Sanctions the Waked Money Laundering Organization (May 5, 2016), available at https://www.treasury.gov/press-center/press-releases/Pages/jl0450.aspx.  

[166]   Id.

[167]   Id.

[168]   OFAC, Kingpin Act Designations (May 5, 2016), available at https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20160505.aspx.  

[169]   Press Statement, Office of Foreign Assets Control, Statement on the Felix Maduro Group (June 1, 2016), available at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/20160601_felix_maduro_group.pdf.

[170]   Press Release, U.S. Department of the Treasury, Treasury Sanctions Rosenthal Money Laundering Organization (Oct. 7, 2015), available at https://www.treasury.gov/press-center/press-releases/Pages/jl0200.aspx.

[171]   Press Release, U.S. Department of the Treasury, Treasury Sanctions the Waked Money Laundering Organization (May 5, 2016), available at https://www.treasury.gov/press-center/press-releases/Pages/jl0450.aspx.   

[172]   Exec. Order 13726, 81 Fed. Reg. 23,559 (Apr. 21, 2016).

[173]   Exec. Order No. 13739, 81 Fed. Reg. 63,673 (Sept. 16, 2016).

[174]   Implementation of the Federal Civil Penalties Inflation Adjustment Act, 81 Fed. Reg. 127 (July 1, 2016), available at https://www.treasury.gov/resource-center/sanctions/Documents/fr81_43070.pdf.

[175]   Press Release, U.S. Dep’t of the Treasury, "Implementation of the Federal Civil Penalties Inflation Adjustment Act" (July 1, 2016), available at https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20160701.aspx.

[176]   While it falls outside the time-period covered by this publication, it is important to note that on January 13, 2017 President Obama issued Executive Order 13761, "Recognizing Positive Actions by the Government of Sudan and Providing for the Revocation of Certain Sudan-Related Sanctions."  Exec. Order No. 13761, 82 Fed. Reg. 5331 (Jan. 13, 2017).  This E.O. provides for the future revocation of E.O.s 13067 and 13412 on July 12, 2017, if Sudan sustains its positive actions taken over the last six months.  In conjunction with the E.O., OFAC issued a general license immediately authorizing all transactions prohibited by the SSR and by E.O.s 13067 and 13412.  31 C.F.R. § 538.540, 82 Fed. Reg. 4793 (Jan. 17, 2017) (publication of final rule).  As explained in an OFAC fact sheet on the developments, under the general license U.S. persons will generally be able to transact with individuals and entities in Sudan.  Press Release, U.S. Dep’t of Treasury, Fact Sheet: Treasury to Issue General License to Authorize Transactions with Sudan (Jan. 13, 2017), available at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/sudan_fact_sheet.pdf.

[177]   See U.S. Dep’t of Treasury, Guidance on Certain Publishing Activities, 1 (October 28, 2016), available at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/guidance_on_certain_publishing_activities.pdf

[178]   Id. at 2.

[179]   Id.

[180]   Id.

[181]   Id.

[182]   Id.

[183]   Id.

[184]   Id. at 2-3.

[185]   Id.

[186]   Id.

[187]   Id.

[188]   U.S. Dep’t of Justice, Guidance Regarding Voluntary Self-Disclosures, Cooperation, and Remediation in Export Control and Sanctions Investigations Involving Business Organizations (Oct. 2, 2016), available at https://www.justice.gov/nsd/file/902491/download.

[189]   Id. at 3.

[190]   Id. at 5.

[191]   Id.

[192]   Id. at 5-6.

[193]   See id. at 7.

[194]   Id.

[195]   See id. at 8-9.

[196]   Compare U.S. Dep’t of Justice, The Fraud Section’s Foreign Corrupt Practices Act Enforcement Plan and Guidance 8 (Apr. 5, 2016) available at https://www.justice.gov/criminal-fraud/file/838416/download, with U.S. Dep’t of Justice, Guidance Regarding Voluntary Self-Disclosures, Cooperation, and Remediation in Export Control and Sanctions Investigations Involving Business Organizations 8-9 (Oct. 2, 2016), available at https://www.justice.gov/nsd/file/902491/download.

[197]   See U.S. Dep’t of Justice, Guidance Regarding Voluntary Self-Disclosures, Cooperation, and Remediation in Export Control and Sanctions Investigations Involving Business Organizations 2 n.3 (Oct. 2, 2016), available at https://www.justice.gov/nsd/file/902491/download.

[198]   OFAC, Zimbabwe Designations; Central African Republic-related Sanctions (Mar. 8, 2016), available at https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20160308.aspx; see also Press Release, U.S. Dep’t of the Treasury, Treasury Sanctions the Lord’s Resistance Army and Founder Joseph Kony (Mar. 8, 2016), available at https://www.treasury.gov/press-center/press-releases/Pages/jjl0376.aspx.

[199]   Press Release, U.S. Department of the Treasury, Treasury Sanctions Two Congolese Government Officials (Dec. 12, 2016), available at https://www.treasury.gov/press-center/press-releases/Pages/jl0682.aspx.  

[200]   Press Release, U.S. Department of the Treasury, Treasury Targets Tijuana-Based Cell of the Sinaloa Cartel (Sept. 23, 2016), available at  https://www.treasury.gov/press-center/press-releases/Pages/jl5058.aspx.  

[201]   Press Release, U.S. Department of the Treasury, Treasury Sanctions North Korean Senior Officials and Entities Associated with Human Rights Abuses (Jul. 6, 2016), available at https://www.treasury.gov/press-center/press-releases/Pages/jl0506.aspx.

[202]   Press Release, U.S. Department of the Treasury, Treasury Sanctions Individuals and Entities Supporting the North Korean Government and its Nuclear and Weapons Proliferation Efforts (Dec. 2, 2016), available at https://www.treasury.gov/press-center/press-releases/Pages/jl0677.aspx.

[203]   OFAC, Russian Designations (Jan. 9, 2017), available at https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20170109.aspx.

[204]   OFAC, Russian Designations (Feb. 01, 2016), available at https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20160201.aspx.

[205]   Press Release, U.S. Department of the Treasury, Treasury Sanctions Individuals and Entities for Sanctions Evasion and Activities Related to the Conflict in Ukraine (Sept. 01, 2016), available at https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20160901.aspx.

[206]   OFAC, Russian Designations (Nov. 14, 2016), available at https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20161114_33.aspx.

[207]   OFAC, Russian Designations, (Dec. 20, 2016), available at https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20161220.aspx.

[208]   Press Release, U.S. Department of the Treasury, Treasury Sanctions Two Individuals for Malicious Cyber-Enabled Activities (Dec. 29, 2016), available at https://www.treasury.gov/press-center/press-releases/Pages/jl0693.aspx. 

[209]   Press Release, U.S. Department of the Treasury, Treasury Sanctions Networks Providing Support to the Government of Syria (Jul. 21, 2016), available at https://www.treasury.gov/press-center/press-releases/Pages/jl0526.aspx.

[210]   Press Release, U.S. Department of the Treasury, Treasury Sanctions Additional Individuals and Entities in Response to Continuing Violence in Syria (Dec. 23, 2016), available at  https://www.treasury.gov/press-center/press-releases/Pages/jl0690.aspx.

[211]   OFAC, Zimbabwe Designations; Central African Republic-related Sanctions (March 8, 2016), available at https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20160308.aspx; see also Press Release, U.S. Dep’t of the Treasury, Treasury Sanctions the Lord’s Resistance Army and Founder Joseph Kony (Mar. 8, 2016), available at https://www.treasury.gov/press-center/press-releases/Pages/jjl0376.aspx.

[212]   Press Release, U.S. Dep’t of the Treasury, Treasury Sanctions Hizballah Financiers and Operatives (Oct. 20, 2016), available at https://www.treasury.gov/press-center/press-releases/Pages/jl0587.aspx.

[213]   Press Release, U.S. Dep’t of the Treasury, Treasury Designates Key Al-Nusrah Front Leaders (Nov. 11, 2016),  https://www.treasury.gov/press-center/press-releases/Pages/jl0605.aspx

[214]   Samuel Rubenfeld, "OFAC Uses Enforcement to Teach Compliance," Wall St. J’Nal (Mar. 9. 2016).

[215]   OFAC, Enforcement Information for February 8, 2016 (Feb. 8, 2016), available at https://www.treasury.gov/resource-center/sanctions/CivPen/Documents/20160208_barclays.pdf.

[216]   OFAC, Enforcement Information for February 22, 2016 (Feb. 22, 2016), available at https://www.treasury.gov/resource-center/sanctions/CivPen/Documents/20160222_CGG.pdf.

[217]   OFAC, Enforcement Information for July 5, 2016 (Jul. 5, 2016), available at https://www.treasury.gov/resource-center/sanctions/CivPen/Documents/20160705_alcon.pdf.

[218]   OFAC, Enforcement Information for September 13, 2016 (Sept. 13, 2016), available at https://www.treasury.gov/resource-center/sanctions/CivPen/Documents/20160913_panam.pdf.

[219]   OFAC, Enforcement Information for November 14, 2016 (Nov. 14, 2016), available at https://www.treasury.gov/resource-center/sanctions/CivPen/Documents/20161114_varco.pdf.

[220]   Written Agreement By and Among Industrial Bank of Korea (Feb. 24, 2016), available at http://www.dfs.ny.gov/about/ea/ea160224.pdf.

[221]   Written Agreement By and Among National Bank of Pakistan (Mar. 14, 2016), available at http://www.dfs.ny.gov/about/ea/ea160314.pdf.

[222]   NYDFS, Press Release, Industrial Bank of Korea Agrees to Strengthen Anti-Money Laundering Compliance and Controls at Bank’s New York Branch (Mar. 1, 2016), available at http://www.dfs.ny.gov/about/press/pr1603011.htm; NYDFS, Press Release, National Bank of Pakistan Agrees to Enhance Anti-Money Laundering Compliance and Controls (Mar. 24, 2016), available at http://www.dfs.ny.gov/about/press/pr1603241.htm.

[223]   Id.

[224]   Id.

[225]   Written Agreement By and Among Industrial Bank of Korea (Feb. 24, 2016), ¶ 4, available at http://www.dfs.ny.gov/about/ea/ea160224.pdf; Written Agreement By and Among National Bank of Pakistan (Mar. 14, 2016), ¶ 10, available at http://www.dfs.ny.gov/about/ea/ea160314.pdf.

[226]   NYDFS, DFS Fines Mega Bank $180 Million for Violating Anti-Money Laundering Laws, Press Release (Aug. 19, 2016), available at http://www.dfs.ny.gov/about/press/pr1608191.htm; NYDFS, DFS Fines Agricultural Bank of China $215 Million for Violating Anti-Money Laundering Laws and Masking Potentially Suspicious Financial Transactions, Press Release (Nov. 4, 2016), ¶ 7, available at http://www.dfs.ny.gov/about/press/pr1611041.htm; NYDFS, DFS Fines Intesa SanPaolo $235 million for Repeated Violations of Anti-Money Laundering Laws, Press Release (Dec. 15, 2016), available at http://www.dfs.ny.gov/about/press/pr1612151.htm.

[227]   In the Matter of Agricultural Bank of China Limited, Consent Order (Nov. 4, 2016), available at http://www.dfs.ny.gov/about/ea/ea161104.pdf ("The ultimate responsibility for the design and implementation of these policies and systems belongs at the very top echelon of the intuition."); In the Matter of Intesa SanPaolo S.p.A, Consent Order (Dec. 15, 2016), ¶ 5, available at http://www.dfs.ny.gov/about/ea/ea161215.pdf ("The ultimate responsibility for the design and implementation of a transaction monitoring system belongs at the very top echelon of the institution.").

[228]   In the Matter of Mega International Commercial Bank Co., Ltd., Consent Order (Aug. 19, 2016), available at http://www.dfs.ny.gov/about/ea/ea160819.pdf.

[229]   NYDFS, DFS Fine Mega Bank $180 Million for Violating Anti-Money Laundering Laws, Press Release (Aug. 19, 2016), available at http://www.dfs.ny.gov/about/press/pr1608191.htm.

[230]   Id.

[231]   Id.

[232]   Id.

[233]   In the Matter of Agricultural Bank of China Limited, Consent Order (Nov. 4, 2016), ¶ 10, available at http://www.dfs.ny.gov/about/ea/ea161104.pdf.

[234]   NYDFS, DFS Fines Agricultural Bank of China $215 Million for Violating Anti-Money Laundering Laws and Masking Potentially Suspicious Financial Transactions, Press Release (Nov. 4, 2016), available at http://www.dfs.ny.gov/about/press/pr1611041.htm.

[235]   Id.

[236]   Id.

[237]   Id.

[238]   Id.

[239]   Id.

[240]   In the Matter of Agricultural Bank of China Limited, Consent Order (Nov. 4, 2016), available at http://www.dfs.ny.gov/about/ea/ea161104.pdf.

[241]   In the Matter of Intesa SanPaolo S.p.A, Consent Order (Dec. 15, 2016), available at http://www.dfs.ny.gov/about/ea/ea161215.pdf.

[242]   NYDFS, DFS Fines Intesa SanPaolo $235 million for Repeated Violations of Anti-Money Laundering Laws, Press Release (Dec. 15, 2016), available at http://www.dfs.ny.gov/about/press/pr1612151.htm.

[243]   Id.

[244]   Id.

[245]   Id.

[246]   Id.

[247]   Id.

[248]   S.C. Res. 2270, U.N. Doc. S/RES/2270 (Mar. 2, 2016).

[249]   E.U. Council Regulation 2016/682 (Apr. 29, 2016).

[250]   See European Commission Restrictive measures in force (Article 215 TFEU), 11 October 2016, available at: https://eeas.europa.eu/sites/eeas/files/restrictive_measures-2016-10-11-clean.pdf. Countries for which new acts simply amend the list of persons, entities and groups targeted include: Afghanistan, Libya, Republic of Guinea-Bissau, and Terrorist Groups like IS and Al Qaida.

[251]   See Council Decision (CFSP) 2016/280 (OJ L 52/30, 27.2. 2016) and Council Implementing Regulation (EU) 2016/276 (OJ L 52/19, 27.2.2016).

[252]   See Council Decision (CFSP) 2016/477 (OJ L 85/47, 1.4.2016).

[253]   See Council Decision (CFSP) 2016/1745 (OJ L 264/29, 30.9.2016).

[254]   See Council Decision (CFSP) 2016/564 (OJ L 96/38, 12.4.2016).

[255]   See Council Decision (CFSP_ 2016/1446 (OJ L 235/13, 1.9.2016, p. 1) and Council Implementing Regulation (EU) 2016/1442 (OJ L 235/1, 1.9.2016) and Council Implementing Regulation (EU) 2016/354 (OJ L 67/18, 12.3.2016).

[256]   See Council Regulation (EU) 2016/907 (OJ L 153/1, 10.6.2016).

[257]   Council Decision (CFSP) 2016/917 (OJ L 153/38, 10.6.2016).

[258]   European Council Press Release 752/16 of Dec. 12, 2016, "Democratic Republic of the Congo (DRC): EU adopts sanctions against 7 individuals responsible for violence", available at: http://www.consilium.europa.eu/en/press/press-releases/2016/12/12-drc-sanctions/?utm_source=dsms-auto&utm_medium=email&utm_campaign=Democratic+Republic+of+the+Congo+(DRC)%3a+EU+adopts+sanctions+against+7+individuals+responsible+for+violence.

[259]   Id.

[260]   See Council Regulation 2016/2230 (OJ L336/1, 12.12.2016), amending Council Regulation 1183/2005 (OJ L193/1, 18.07.2005, p.1); Council Decision 2016/2231 (OJ L336/1, 12.12.2016), amending Decision 2010/788/CFSP (OJ L336/30, 20.12.2010).

[261]   See Council Decision (CFSP) 2016/411 (OJ L 74/40. 19.3.2016).

[262]   See Council Decision 2011/172/CFSP (OJ L 76/63, 22.3.2011).

[263]   See e.g. Council Decision (CFSP) 2016/849 (OJ L 141/79, 28.5.2016) and Council Regulation (EU) 2016/682 (OJ L 117/1, 3.5.2016).

[264]   See Commission Implementing Regulation (EU) 2016/1453 (OJ L 238/1, 6.9.2016, p2) and Commission Implementing Regulation (EU) 2016/1398 (OJ L 227/1, 20.8.2016) and Commission Implementing Regulation (EU) 2016/1642 (OJ L 244/9, 13.9.2016) and Commission Implementing Regulation (EU) 2016/1695 (OJ L 256/1, 22.9.2016).

[265]   See Council Decision (CFSP) 2016/994 (OJ L 162/21, 21.6.2016, p1) and Council Regulation (EU) 2016/983 (OJ L 162/1, 21.6.2016).

[266]   "Myanmar wants ethnic cleansing of Rohingya – UN official," BBC (November 24, 2016), available at  http://www.bbc.com/news/world-asia-38091816.

[267]   Council Decision (CFSP) 2016/627 of 21 April 2016 amending Decision 2013/184/CFSP concerning restrictive measures against Myanmar/Burma (OJ L 106/23, 22.4.2016).

[268]   Council Decision (CFSP) 2016/1071 (OJ L 178/21, 2.7.2016).

[269]   See Council Decision (CFSP) 2016/2315 (OJ L 345/65, 19.12.2016), amending Council Decision 2014/512/CFSP (OJ L 229/13, 31.07.2014).

[270]   Council Decision 2014/386/CFSP (OJ L 183/70, 24.6.2014).

[271]   Id.

[272]   Council Decision 2014/933/CFSP (OJ L 365/152, 19.12.2014), amending Council Decision 2014/386/CFSP.

[273]   Council Decision (CFSP) 2016/982 (OJ L 161/40, 18.6.2016).

[274]   Council Regulation (EU) 2015/1861 (OJ L 274/1, 18.10.2015)

[275]   Fabio Benedetti Valentini and Ladane Nasseri, Europe’s Banks Are Staying Out of Iran, Bloomberg (May 3, 2016), available at https://www.bloomberg.com/news/articles/2016-05-03/europe-s-banks-haunted-by-u-s-fines-forgo-iran-deals-amid-boom.

[276]   Michael Stothard, "Rouhani and Hollande shift from ‘old bitterness’ to new business," (Jan. 28, 2016) Financial Times, available at https://www.ft.com/content/a5d65a68-c5a5-11e5-808f-8231cd71622e; Najmeh Bozorgmehr, "Iran plans to buy 114 Airbus jets on Rouhani’s Europe visit," (Jan. 24, 2016) Financial Times, available at https://www.ft.com/content/cdcc295c-c290-11e5-b3b1-7b2481276e45.

[277]   Council Regulation (EU) 2015/1861 amending Regulation (EU) No 267/2012 concerning restrictive measures against Iran (OJ L274/174. 18.10.2015).

[278]   Id.

[279]   "Iran calls for meeting of nuclear deal powers over U.S. sanctions," Reuters, (Dec. 17, 2016) available at http://www.reuters.com/article/us-iran-eu-usa-sanctions-idUSKBN1460PC.

[280]   "Iran unveils nuclear ships plan in response to US sanctions move," Financial Times (Dec. 13, 2016) available at: https://www.ft.com/content/2679cea4-c157-11e6-9bca-2b93a6856354.

[281]   See Council Regulation 2016/2137 (OJ L332/3, 6.12.2016), amending Regulation (EU) No 36/2012 (OJ L16/1, 18.01.2012, p.1); Council Decision 2016/2144 (OJ L332/22, 6.12.2016), amending Decision 2013/255/CFSP (OJ L147/14, 31.05.2013).

[282]   European Council Press Release 762/16 of Dec. 9, 2016, "Declaration by the High Representative on behalf of the EU on the situation in Aleppo", available here.

[283]   See Council Decision (CFSP) 2016/119 (OJ L 23/65, 29.1.2016).

[284]   See Council Decision (CFSP) 2016/220 (OJ L 40/11, 17.2.2016).

[285]   T‑89/14 Export Development Bank of Iran v Council, Judgement of the General Court, 30 November 2016; T‑65/14 Bank Refah Kargaran v Council, Judgment of the General Court, 30 November 2016.

[286]   720, Judgement of the General Court, 30 November 2016.

[287]   Joined Cases T-694/13 & T-2/15 Ipatau v Council, Judgment of the General Court, 23 November 2016.

[288]   Particularly, the internal Council documents were merely preparatory and did not provide more information than the statement of reasons.  Further, the extracts of the two third-party reports were insufficient as they did not refer to any covert shipments of oil being made, or to the applicant’s name.  Additionally, one of the two Reuters articles was not relevant as it related to shipments of LNG, and not oil.  Finally, while the second Reuters article referred to a shipment of oil between the applicant’s parent company (not the applicant itself) and a company called Matra, this also was insufficient evidence:  while the Council argued that the applicant should have known Matra and Overseas Petroleum Trading ("OPT", a Lebanese company known to make shipments to Syria), the Court found that the applicant could not be held liable for events occurring after the delivery of the shipment as the sale was made "free on board" (i.e., all costs and liabilities of the shipment are for the buyer) and the contract stated that the shipment was to be made to a port in Romania.  The Court also noted that the evidence that OPT and Matra were a single company emerged after the listing andduring the investigation.  In that regard, the Court recalled that it is for the Council to provide the applicant’s conduct meets the criteria for the listing, and not for the applicant to adduce evidence to the contrary.  With regard to Tri- Ocean Energy, the Court also agreed that the EU Council had not identified the two entities unambiguously, given that its listing referred to "Tri-Ocean Trading or Tri Ocean Energy".  The Court found that, while Tri-Ocean Trading is a subsidiary of Tri Ocean Energy, they should have been identified as separate corporate entities. 

[289]   Josh Gerstein, "Agencies interpret Trump regulatory freeze broadly," Politico (Jan. 24, 2017), available at http://www.politico.com/blogs/under-the-radar/2017/01/agencies-give-trump-regulatory-freeze-broad-reach-234149.

[290] OFAC, "Iran-related Designations; Non-proliferation Designations; Counter Terrorism Designations; Balkans Designation Update" (Feb. 3, 2017), available at https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20170203.aspx.

[291]   Felicia Schwartz, "U.S. Allows Limited Exceptions to Sanctions Against Russia Spy Agency," Wall St. J’nal, (Feb. 2, 2017), available at https://www.wsj.com/articles/u-s-allows-limited-exceptions-to-sanctions-against-russia-spy-agency-1486089377

[292]   Donald J. Trump for President, Inc., Trade: Donald J. Trump’s Vision (2016), available at https://www.donaldjtrump.com/policies/trade.

[293]   Donald J. Trump (@realDonaldTrump), Twitter (Nov. 28, 2016), available at https://twitter.com/realDonaldTrump/status/803237535178772481?ref_src=twsrc%5Etfw

[294]   "Trump administration reviewing Cuba policy: White House spokesman," Reuters (Feb. 3, 3017), available at http://www.reuters.com/article/us-usa-trump-cuba-idUSKBN15I2LM


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