United States Lifts Burma (Myanmar) Sanctions in Response to Ongoing Democratic Reforms

October 10, 2016

On October 7, 2016, the Obama Administration announced the lifting of almost all remaining sanctions against Myanmar.  The unwinding of sanctions comes on the heels of Aung San Suu Kyi’s visit to the White House on September 14, 2016.[1]  This comprehensive unwinding of sanctions concludes a gradual relief process that first began in 2012.  Most recently, on May 17, 2016, the Administration announced further easing of sanctions on Myanmar in response to Myanmar’s historic November 2015 elections in which the National League for Democracy (NLD) – the long-time opposition party led by Aung San Suu Kyi – won an overwhelming majority of seats in the national legislature.[2]

In a new Executive Order issued on October 7, 2016, President Obama officially revoked Executive Orders 13047, 13310, 13448, 13464, 13619, and 13651 regarding Myanmar, and continued to waive financial and blocking sanctions provided by the JADE Act of 2008.[3]  With this action, the vast majority of restrictions on the ability of U.S. persons to engage in transactions involving Myanmar and with Myanmar entities have been lifted. 

It is rare for an active sanctions regime to be terminated in such a comprehensive fashion.  Additions to the SDN list had been made under this sanctions program in the Spring of 2016, and violations of the Myanmar sanctions were still being pursued via civil enforcement actions as recently as 2015.  The last sanctions program the President ended, in September 2016, was the program imposing the Côte d’Ivoire restrictions, which – like the Liberia sanctions that President Obama lifted in November 2015 – were effectively dormant by the time the program was ended.

In conjunction with the October 7, 2016 announcement, the Department of the Treasury’s Office of Foreign Assets Control ("OFAC") also published a Fact Sheet and a set of Frequently Asked Questions ("FAQs") regarding the implementation of the new Executive Order.[4]  As explained in OFAC’s Fact Sheet, the effects of the new Executive Order include:

• the removal of all 111 individuals and entities blocked pursuant to the Burmese Sanctions Regulations ("BSR") from OFAC’s Specially Designated Nationals and Blocked Persons ("SDN") List;
• the unblocking of all property and interests previously blocked pursuant to the BSR;
• the revocation of the ban on the import into the United States of Burmese-origin jadeite and rubies;
• the removal of all OFAC restrictions regarding banking or financial transactions with Myanmar; and,
• the continuation of the President’s waiver of the financial and blocking sanctions in the JADE Act.

While all OFAC-administered restrictions regarding banking with Myanmar have been terminated, OFAC’s sister agency in the Department of the Treasury – the Financial Crimes Enforcement Network ("FinCEN") – has retained its classification of Myanmar as a "jurisdiction of primary money laundering concern" under Section 311 of the USA PATRIOT Act.  This finding has been in place since 2004 and has imposed special measures against the country and limited the ability of U.S. banks to host Myanmar correspondent bank accounts (which are critical for expanding and easing international trade flows).  Though FinCEN noted that Myanmar has significant work to do before the 311 finding can be removed, FinCEN issued an administrative exception alongside OFAC’s new Executive Order suspending certain restrictions so that U.S. financial institutions could provide correspondent services to Myanmar banks, subject to the due diligence requirements of Section 312 of the USA PATRIOT Act.[5]

Note that these changes do not impact the status of individuals or entities in Myanmar that remain sanctioned pursuant to other OFAC sanctions programs, such as the counter-narcotics and North Korea sanctions regulations. Currently, ten companies and 23 individuals in Myanmar remain on the SDN list under either the North Korea or counter-narcotics sanctions programs.  U.S. persons generally remain prohibited from dealing with these entities and individuals as well as with any unlisted entities that may be blocked pursuant to OFAC’s 50 percent rule.[6]

Analysis

The termination of the BSR has a couple additional follow-on effects.  First, the required reporting that went along with new investment by U.S. persons in Myanmar has now been rescinded.  The reporting requirements – which had been a hindrance to all but the largest companies interested in investing in Myanmar – were based upon a general license issued pursuant to executive orders which have now been terminated.  Consequently, U.S. persons can now invest in all sectors – including the oil and gas sector which had more stringent reporting requirements in place – without any U.S. Government reporting obligations.  Non-governmental organizations – some of whom were dismayed by the lifting of the sanctions – may respond by increasing their public scrutiny of such investments.  Consequently, some companies may wish to continue preparing and filing such reports on a voluntary basis.

Second, the lifting of the sanctions will likely finally implement significant components of relief the Obama Administration had sought to provide Myanmar over the past few years.  Since 2012, the Administration had expanded the number of general licenses allowing U.S. persons to engage with Myanmar.  In particular, OFAC had promulgated general licenses which, inter alia, allowed U.S. persons, including banks, to conduct business with certain ports and financial institutions in the country – even though these entities had remained on the SDN list.  Many institutions and companies around the world did not find the licenses sufficient to be able to truly authorize the activity contemplated, given the entities’ continued status as SDNs.  As such, on the whole, the Myanmar banks and ports had not experienced meaningful sanctions relief.  With the SDN designations now removed (and the accompanying general licenses nullified), that relief should be quickly effectuated. 

The opportunities for international business in Myanmar are considerable.  The country has a large, young population, significant natural resources, nearly universal literacy, a highly advantageous geographic location, and it enjoys significant international good will.  However, challenges are significant.  Even without sanctions, Myanmar is still a complicated, emerging market.  Lack of transparency and corruption are endemic, regional instability and violence remain stubbornly high, infrastructure is insufficient, and the political situation – though much improved – remains a work in progress.  

Further, the continuation of sanctions with respect to Burmese entities linked to North Korea and narcotics trafficking is also a risk for international investors.  While the days of more comprehensive sanctions on Myanmar are unlikely to return, given the expected increased attention on North Korea (and perhaps also on narcotics trafficking) in the next administration, further Myanmar-linked designations (potentially including of large corporations and other significant economic actors) are a possibility. 

   [1]   https://www.whitehouse.gov/blog/2016/09/15/president-obama-and-daw-aung-san-suu-kyi-celebrate-burmese-progress

   [2]   For further details on prior sanctions relief, see our May 20, 2015 Client Alert.

   [3]   E.O. ______, Oct. 7, 2016 "Termination of Emergency with Respect to the Actions and Policies of the Government of Burma," available at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/burma_eo_termination.pdf.

   [4]   U.S. Treasury Dep’t, Treasury Implements Termination of Burma Sanctions Program, Oct. 7, 2016, available at https://www.treasury.gov/resource-center/sanctions/Programs/Documents/burma_fact_sheet_20161007.pdf; U.S. Treasury Dep’t, OFAC FAQs: Burma Sanctions, available at https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_other.aspx.

   [5]   U.S. Treasury Dep’t, 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.

    [6]   This rule provides that "any entity owned in the aggregate, directly or indirectly, 50 percent or more by one or more blocked persons is itself considered to be a blocked person. The property and interests in property of such an entity are blocked regardless of whether the entity itself is listed in the annex to an Executive order or otherwise placed on OFAC’s list of Specially Designated Nationals ("SDNs").  Accordingly, a U.S. person generally may not engage in any transactions with such an entity, unless authorized by OF AC."  See U.S. Treasury Dep’t, Revised Guidance on Entities Owned by Persons whose Property and Interests in Property are Blocked, Aug. 13, 2014, available at https://www.treasury.gov/resource-center/sanctions/Documents/licensing_guidance.pdf.