Introduction

In its first year, the Trump administration has tackled sanctions issues involving Cuba, Iran, North Korea, Russia, Sudan and Venezuela, as well as individuals involved in human rights abuses and corruption. In some cases (eg, Iran, Russia and North Korea), the result has been forced by Congress; in others, the president has 'made good' on campaign promises. Most have involved the heightened rhetoric and threats characteristic of Trump's presidency, but the rhetoric has often outpaced the actual action.

This update examines the actions taken by the Trump administration on a country-specific basis, beginning with the sanctions that it has addressed primarily on its own terms (ie, Cuba, Sudan and Venezuela) before addressing the more complex scenarios (ie, Russia, Iran and North Korea) where the administration has had to accept congressional directive in the form of the Countering America's Adversaries Through Sanctions Act (CAATSA), which was signed into law by President Trump on August 2 2017 after being passed with overwhelming (and veto-proof) support by Congress.(1) The update concludes with a summary of the 'Global Magnitsky' sanctions targeting individuals involved in human rights abuses and corruption.

Cuba: tweaking the borders

In November 2016, during his presidential campaign, then-candidate Trump told an audience in Miami, "we will cancel Obama's one-sided Cuban deal made by executive order, if we do not get the deal we want, and the deal that people living in Cuba and here deserve".(2) On June 16 2017 Trump issued a national security presidential memorandum entitled Strengthening the Policy of the United States Toward Cuba (NSPM-5),(3) announcing changes to the Obama administration's relaxation of the Cuba sanctions, stating that "we will not be silent in the face of communist oppression any longer".(4)

On November 9 2017 the Department of the Treasury's Office of Foreign Assets Control (OFAC) and the Department of Commerce's Bureau of Industry and Security (BIS) published amended regulations(5) and the Department of State published a list of restricted entities to implement the Trump administration's announced changes. The changes tweak the Obama administration regulations on their borders but do not approach cancelling the Obama deal.

The changes are two-fold, as follows.

  • The individual people-to-people travel general licence has been replaced by a group people-to-people general licence. The president instructed the OFAC to issue regulations to end individual 'people-to-people' travel – that is, educational travel that does not involve academic study pursuant to a degree programme and does not take place under the auspices of an organisation subject to US jurisdiction that sponsors such exchanges in order to promote people-to-people contact. In other words, persons wishing to use this general licence must once again travel under the oversight of an official group and must maintain a full-time schedule of educational exchange activities that are intended to:
    • enhance contact with the Cuban people;
    • support civil society in Cuba; or
    • promote the Cuban people's independence from Cuban authorities.

Further, these activities must result in meaningful interaction between the traveller and those in Cuba.(6) This new group people-to-people travel is still authorised by the general licence, so individuals need not apply to the OFAC for a specific licence. In addition, persons engaging in authorised educational travel must now do so under the auspices of an organisation that is subject to US jurisdiction and must also be accompanied by a person subject to US jurisdiction who is a representative of the sponsoring organisation.

  • ?Transactions with Cuban military organisations have been prohibited. The administration has prohibited economic activity with Cuban military, intelligence and security services, including the Cuban military monopoly Grupo de Administracion Empresarial. The restrictions include travel-related transactions.

The Department of State has published the Cuba Restricted List,(7) a list of entities and sub-entities with which direct financial transactions are generally prohibited pursuant to the OFAC regulations.(8) BIS has also amended its regulations to establish a general policy of denial for licence applications to export items for use by entities and sub-entities on the Cuba Restricted List unless the transaction is otherwise consistent with NSPM-5. Since the Cuba Restricted List includes many hotels, tourist agencies and marinas, in addition to several companies, these restrictions will have a substantial effect on trade and commerce between the United States and Cuba – particularly in the travel arena. The administration continues to support US individuals and businesses in developing ties to the private small-business sector in Cuba. Indeed, BIS slightly expanded the scope of the Support for the Cuban People licensing exception by creating a single provision authorising the export and re-export to Cuba of items – without specifying types of activities, as was previously the case – for use by the Cuban private sector for private sector economic activities.

Sudan: economic sanctions revoked, export controls remain

On January 13 2017 President Obama issued Executive Order (EO) 13761,(9) which established July 12 2017 as the date by which portions of EO 13067 and all of EO 13412 relating to Sudan sanctions would be revoked, provided that the secretary of state – in consultation with the secretary of the treasury, the director of national intelligence and the administrator of the US Agency for International Development – had conducted an assessment and reported to the president that the Sudanese government had sustained certain positive actions, including:

  • the cessation of hostilities in conflict areas;
  • continued improvement of humanitarian access throughout Sudan; and
  • maintaining cooperation with the United States on addressing regional conflicts and the threat of terrorism.

On January 13 2017, the same date that EO 13761 was issued, the OFAC issued a general licence(10) that effectively removed most US sanctions against (North) Sudan, beginning January 17 2017. The new general licence was an amendment to the Sudanese Sanctions Regulations(11) that broadly authorised all prohibited transactions, including transactions involving property in which the Sudanese government has an interest. On July 11 2017 Trump issued EO 13804, extending the review period by three months to October 12 2017.

On October 6 2017 the US government announced that it would replace the general licence by revoking the sanctions with respect to Sudan pursuant to EO 13761, as amended by EO 13804, effective October 12 2017. The Department of State published the necessary report,(12) finding that the Sudanese government had sustained the positive actions that had given rise to EO 13761. Accordingly, as of October 12 2017, Sections 1 and 2 of EO 13067 and all of EO 13412 – the provisions that blocked the property of the Sudanese government and generally prohibited US persons from engaging in transactions with Sudan and its government – were revoked, permitting US persons to engage in transactions that were previously prohibited under the Sudanese Sanctions Regulations.

However, US persons must still watch out for remaining laws relating to Sudan, including:

  • US export controls – most items subject to export controls under the US Export Administration Regulations that are listed on the Commerce Control List (ie, not Export Administration Regulations 99) still require a licence for export and re-export to Sudan. In particular, items subject to anti-terrorism controls – including low-level controlled items like GPS devices – still require a licence, although consumer communication devices such as phones and laptops can be exported under licence exception CCD;
  • Terrorism List Governments Sanctions Regulations, 31 CFR Part 596 – because Sudan remains on the State Sponsors of Terrorism List, these regulations prohibit US persons from engaging in transfers from the Sudanese government that would constitute a donation to a US person; or that a US person knows, or has reasonable cause to believe, would pose a risk of furthering terrorist acts in the United States;
  • OFAC sanctions relating to the conflict in Darfur, which were imposed pursuant to EO 13400 of April 26 2006;
  • OFAC designations of any Sudanese persons pursuant to other sanctions authorities; and
  • Trade Sanctions Reform and Export Enhancement Act 2000 – pursuant to this act, an OFAC licence is still required for certain exports and re-exports to Sudan of agricultural commodities, medicine and medical devices because Sudan remains on the State Sponsors of Terrorism List. However, the OFAC has issued General Licence A authorising the export and re-export of these products.

Venezuela: lots of SDNs and Russia-style sectoral sanctions

The Trump administration has imposed two kinds of sanction on Venezuela:

  • the designation of a number of prominent existing and former Venezuelan government officials,(13) including President Maduro,(14) as specially designated nationals (SDNs); and
  • the imposition of Russia-style financial sectoral sanctions on the Venezuelan government and state-owned enterprises.

The United States rarely adds countries' presidents to the SDN list. Before President Maduro, the last exception was the chair of the Workers' Party of North Korea, Kim Jong Un,(15) who was added on July 6 2016. The designation of President Maduro therefore sent a strong message of disapproval to the Venezuelan government from the Trump administration.

In case any doubt remained as to the US government's views, on August 24 2017 Trump imposed Russia-like sectoral sanctions in EO 13808.(16) These are not blocking sanctions; they target transactions specific to bonds and other securities because the Venezuelan government:

"is selling assets for much less than they are worth at the expense of the Venezuelan people and using proceeds from these sales to enrich supporters of the regime. Bonds and other securities are among the assets being sold."(17)

Section 1 of EO 13808 prohibits US persons from engaging in:

"(a) All transactions related to, provision of financing for, and other dealings in […]:

(i) new debt with a maturity of greater than 90 days of Petroleos de

Venezuela, S.A. (PdVSA);

(ii) new debt with a maturity of greater than 30 days, or new equity, of the Government of Venezuela, other than debt of PdVSA […];

(iii) bonds issued by the Government of Venezuela prior to the [issuance of EO 13808]; or

(iv) dividend payments or other distributions of profits to the Government of Venezuela from any entity owned or controlled, directly or indirectly, by the Government of Venezuela.

(b) The purchase, directly or indirectly, by a United States person or within the United States, of securities from the Government of Venezuela, other than securities qualifying as new debt with a maturity of less than or equal to 90 or 30 days as covered by subsections (a)(i) or (a)(ii) [above], respectively, is prohibited."

The 'Government of Venezuela' is defined as:

"the Government of Venezuela, any political subdivision, agency, or instrumentality thereof, including the Central Bank of Venezuela and PdVSA, and any person owned or controlled by, or acting for or on behalf of, the Government of Venezuela."

The OFAC has published a list of FAQs in which it explains that this means that the executive order prohibitions automatically apply to "entities owned 50 percent or more, individually or in the aggregate, by the Government of Venezuela".(18)

On the same day that Trump signed EO 13808, the OFAC issued four general licences to address some of the provisions coming out of the order:

  • General Licence 1: "Authorizing certain activities to wind down existing contracts" (valid only until September 24 2017);
  • General Licence 2: "Authorizing Certain Transactions Involving CITGO Holding, Inc";
  • General Licence 3: "Authorizing Transactions Related to, Provision of Financing for, and Other Dealings in Certain Listed Bonds and Bonds Issued Prior to August 23, 2017"; and
  • General Licence 4: "Authorizing New Debt Transactions Related to the Exportation or Reexportation of Agricultural Commodities, Medicine, Medical Devices, or Replacement Parts and Components".

The new Venezuela sanctions are reminiscent of the Russia sanctions imposed by the OFAC on certain financial, banking and military listed entities (the Sectoral Sanctions List) under Directives 1, 2 and 3. Just as the Russia sectoral sanctions punished banks and companies that sold to the respective Russian sectors, the new Venezuela sanctions punish US companies that sell to companies of which the Venezuelan government owns 50% or more. In order to comply with the sanctions, companies must first put in place a due diligence process to identify state-owned Venezuelan customers. They must then determine whether those customers are owned by PDVSA, CITGO or another Venezuelan state-owned entity in order to identify the sanctions that apply.

Further, the new Venezuela and Russia sanctions define 'debt' to include extensions of credit, in addition to more traditional debt such as bonds, loans, loan guarantees, letters of credit, drafts, bankers' acceptances, discount notes or bills and commercial paper. This means that a US company selling to a state-owned Venezuelan company, other than CITGO, must ensure that it does not offer terms of credit longer than 30 days (or 90 for PDVSA and its subsidiaries), and that it is actually paid in no longer than 30 days (or 90 for PDVSA and its subsidiaries). Unless the state-owned customer is willing to pay cash in advance, this poses a certain degree of risk – and anxiety – for US exporters. Considering that companies must also ensure that the individual that signs is not an SDN in his or her own right (eg, one current PDVSA executive is an SDN), it all adds up to a significant compliance burden for companies that plan to continue to do business with Venezuela.

The Russia sanctions also imposed a large compliance burden on exporters and financial institutions alike, with some in the relevant sectors having to add compliance resources in order to ensure compliance. The Russia sanctions were imposed multilaterally with the European Union, Canada and Australia – to name just a few – imposing similar sanctions. This is not yet the case for the most recent debt and equity sanctions on Venezuela, although Canada recently imposed similar blocking sanctions.(19) The unilateral nature of the recent US sanctions on Venezuela will only increase the compliance burden, as companies and financial institutions have an added layer of analysis: deciding whether a particular transaction is subject to US jurisdiction.

Russia: congressional review and secondary sanctions

Trump has not imposed new Russia sanctions so much as had them thrust on him. Partly in reaction to allegations of Russian meddling in the US presidential election, the Senate voted 98-to-two on July 27 2017 to pass HR 3364, a bill to impose additional sanctions on Russia, Iran and North Korea. The following week, the House of Representatives voted 419-to-three to pass the same bill. Although Trump called the bill "seriously flawed",(20) he signed CAATSA into law on August 2 2017.

A detailed discussion of the provisions of the Russia sanctions section of CAATSA is beyond the scope of this update. However, broadly speaking, three principal themes can be discerned.

First, Congress aimed to restrict the Trump administration's ability to roll back the Obama administration's sanctions without first consulting Congress by:

  • codifying into law the Obama executive orders sanctioning Russia, meaning that the president cannot terminate them without congressional approval enacting the termination (Section 222); and
  • imposing a 30-day congressional review of any presidential decision to terminate or waive sanctions on a sanctioned person or take any licensing action that significantly alters US foreign policy towards Russia, creating congressional oversight of executive-branch sanctions determinations and OFAC licensing (Section 216).

The latter is unprecedented in that it subjects individual licensing determinations to congressional review. Trump was likely referring to this provision when he stated that:

"by limiting the Executive's flexibility, this bill makes it harder for the United States to strike good deals for the American people, and will drive China, Russia, and North Korea much closer together. The Framers of our Constitution put foreign affairs in the hands of the President. This bill will prove the wisdom of that choice."(21)

Second, Section 223 of CAATSA revised the Russia sectoral sanctions Directives 1, 2, and 4 as follows:

  • OFAC Directive 1 (financial sector sanctions) has been amended to prohibit debt transactions with designated entities with a maturity of greater than 14 (instead of 30) days (Section 223) (amended September 29 2017; changes effective since November 28 2017);
  • OFAC Directive 2 (sanctions on the Russian energy sector) has been amended to prohibit debt transactions with designated entities with a maturity of greater than 60 (instead of 90) days (Section 223) (amended September 29 2017; changes effective since November 28 2017); and
  • OFAC Directive 4 (additional sanctions on the Russian energy sector) has been amended to target new (ie, initiated on or after January 28 2018) deep water, Arctic offshore or shale projects of designated persons outside the boundaries of Russia where those projects are more than 33% owned by designated persons (Section 223) (amended October 31 2017; changes effective since January 28 2018).

Of these, the Directive 4 amendments are likely to prove the most difficult for industry to implement in practice, as projects targeted include projects outside Russia, thereby requiring an in-depth analysis of the ownership of all oil-producing projects in deep-water, Arctic offshore and shale-formation locations.

Third, CAATSA requires (in most cases) and permits (in one case) the president to impose secondary sanctions on a wide variety of behaviour involving Russia and, in some cases, Russia and Syria. These are summarised below.

  • The president must impose sanctions on persons who knowingly:
    • engage in significant activities undermining cybersecurity; or
    • materially assist, sponsor or provide financial, material or technological support for, or goods or services to, those persons (Section 224).
  • The president must impose sanctions on foreign persons who knowingly:
    • make a significant investment in a special Russian crude oil project;
    • engage in significant transactions with those persons; or
    • facilitate a significant financial transaction on behalf of any Russian SDN or blocked person (Sections 225 and 226).
  • The amended Sovereignty, Integrity, Democracy and Economic Stability of Ukraine Act 2014 requires the president to impose sanctions in cases of significant corruption, foreign sanctions evaders and serious human rights abusers in Russia (Section 227).
  • The president must impose sanctions on an entity that knowingly engages in 'significant' transactions with:

"a person that is part of, or operates for or on behalf of, the defense or intelligence sectors of the government of the Russian Federation, including the Main Intelligence Agency of the General Staff of the Armed Forces of the Russian Federation or the Federal Security Service of the Russian Federation."

The key terms are not defined (Section 231), but pursuant to the law, the Department of State has published a list of persons that it has determined are part of, or operate for or on behalf of, the defence or intelligence sectors of the Russian government for the purposes of Section 231 of CAATSA.(22) From January 29 2018, the Department of State must begin sanctioning any entities that it finds to have engaged in significant transactions with a listed entity. The Department of State has indicated that it will look at the totality of factors in making this decision, but in its initial implementation stage, it intends to focus on significant transactions of a defence or intelligence nature with persons named in its guidance:

"If a transaction for goods or services has purely civilian end-uses and/or civilian end-users, and does not involve entities in the intelligence sector, these factors will generally weigh heavily against a determination that such a transaction is significant for purposes of Section 231."(23)

  • The president can, in coordination with allies of the United States, impose sanctions on any person determined to make an investment that directly and significantly contributes to Russia's ability to construct energy export pipelines or sell, lease or provide to Russia related goods, services, technology, information or support of $1 million or more (or $5 million in one 12-month period) (Section 232). The Department of State has published guidance that its focus will be on:

"energy export pipelines that:

(1) originate in the Russian Federation, and

(2) transport hydrocarbons across an international land or maritime border for delivery to another country.

Pipelines that originate outside the Russian Federation and transit through the territory of the Russian Federation would not be the focus of implementation."(24)

  • The president must impose sanctions on persons making an investment of $10 million or more that contributes to Russia's ability to privatise state-owned assets in a manner that unjustly benefits Russian government officials, their close associates or their family members (Section 233).
  • The president must impose sanctions on foreign persons determined to have knowingly exported, transferred or otherwise provided Syria with significant financial, material or technological support that materially contributes to the Syrian government's ability to acquire or develop weapons of mass destruction (WMDs) (or their means of delivery) or conventional weapons (Section 234).

The sanctions to be imposed throughout the bill vary, but several key sections – 224(a)(2), 231(b), 232(a) and 233(a) – require that the president impose five or more of the list of 12 sanctions, which vary in severity.(25) The Department of State has published guidance on a number of the sections for whose implementation it is responsible.(26)

Apart from the congressional review and Directive 1 and 4 revisions, the remaining secondary sanctions allow the administration a significant degree of freedom. The president is only 'required' to impose these sanctions after making certain findings – all of which would require a factual inquiry, and many of which contain a certain degree of legal leeway. Further, many of the provisions allow the president to select the five sanctions, allowing him full discretion as to the magnitude of sanctions to impose. Just as the Obama administration did not impose all of the Iran Sanctions Act sanctions that it could theoretically have applied, it seems likely that the Trump administration will carefully select its targets under CAATSA.

Iran: JCPOA in peril and ever more sanctions

In a now-famous speech to the American Israel Public Affairs Committee on March 21 2016, then-candidate Trump told the audience that his "number-one priority is to dismantle the disastrous deal with Iran".(27) However, thus far he has not done so, with the announcement from the administration on September 14 2017 continuing the sanctions waivers necessary to sustain the US commitment to the Joint Comprehensive Plan of Action (JCPOA) – the official name of that "deal with Iran". However, on October 12 2017 Trump announced that he would not certify Iran's compliance with the JCPOA.(28) This launched a 60-day period during which Congress could have passed fast-track legislation re-imposing the sanctions lifted under the JCPOA. In mid-January 2018, after the 60-day deadline had passed, the president faced two new decisions – whether to:

  • decertify Iran's compliance; and
  • continue the sanctions waivers necessary to sustain the US commitment to the JCPOA.

In a statement released on January 12 2018, Trump stated that his administration would continue the sanctions waivers under the JCPOA. However, he went on to state that this existing waiver would be the "last chance" to work with the US Congress and European allies in order to strengthen the agreement.(29)

Many, including former OFAC Director Adam Szubin, have questioned the rationale behind this decision, as abandoning the JCPOA would primarily benefit the Iranian government by leaving it theoretically free to begin enriching uranium again.(30) However, the president might see this as firmly sticking to his campaign promises and playing to his key support base. At the end of 2017, some members of Congress were reportedly working on alternative Iran sanctions legislation that would sanction Iran for reasons outside the nuclear deal, thereby providing the president with the cover that he needs to stay tough on Iran while maintaining the JCPOA.

Meanwhile, as mentioned above, the JCPOA has not prevented the Trump administration from imposing additional US sanctions outside the nuclear space, and Congress has presented the administration with additional authority to sanction persons:

  • broadly involved in Iran's ballistic missile programme;
  • supporting terrorism;
  • violating the arms embargo on Iran under UN Security Council Resolution 2232; and
  • committing or supporting human rights violations in Iran.

While CAATSA also limits the president's ability to curtail Iran sanctions, it seems he does not care about those particular limits to his foreign affairs power.

North Korea: endless sanctions, but worth it if it prevents nuclear war

North Korea sent missiles over Japan on August 28 and September 15 2017, and claimed its largest ever nuclear test on September 3 2017. In response, the United Nations and the United States have imposed a series of increasingly severe economic sanctions.

Trump administration sanctions

On September 21 2017 Trump signed EO 13810, imposing further sanctions on North Korea over a wider range of economic sectors, as well as broadly targeting North Korean persons. The latest executive order also targets persons outside North Korea who facilitate and participate in certain economic activity involving North Korea.

EO 13810:

  • establishes several new designation criteria;
  • prohibits vessels and aircraft that have called or landed at a port or place in North Korea in the previous 180 days – and vessels that have engaged in a ship-to-ship transfer with such a vessel in the previous 180 days – from entering the United States;
  • provides authority to block any funds transiting accounts linked to North Korea that come within the United States or the possession of a US person; and
  • provides authority to impose sanctions on foreign financial institutions that have knowingly conducted or facilitated, on or after the date of the order, any significant transaction:
    • on behalf of certain blocked persons; or
    • in connection with trade with North Korea.

Section 1, which sets out the criteria for additional OFAC designations, provides for the blocking of persons determined to:

  • operate in the construction, energy, financial services, fishing, IT, manufacturing, medical, mining, textile or transportation industries in North Korea;
  • own, control or operate any port in North Korea, including any seaport, airport or land port of entry;
  • have engaged in at least one significant importation from or exportation to North Korea of any goods, services or technology;
  • be a North Korean person, including a North Korean person who has engaged in commercial activity that generates revenue for the government of North Korea or the Workers' Party of Korea;
  • have materially assisted, sponsored or provided financial, material or technological support, goods or services to or in support of any person whose property and interests in property are blocked pursuant to EO 13810; or
  • be owned or controlled by, or to have acted or purported to act for or on behalf of, directly or indirectly, any person whose property and interests in property are blocked pursuant to EO 13810.

Section 2 imposes secondary sanctions on foreign persons who have presumably been involved in economic activity involving North Korea, evidenced by the passage of aircraft or vessels through North Korea. This section restricts from entry into the United States any aircraft or vessel in which a foreign person has an interest and that has attempted to enter the United States within 180 days of having been in North Korea. With regard to vessels, the prohibition also extends to vessels that have engaged in ship-to-ship transfers with a vessel that has been in North Korea within 180 days. However, the OFAC has issued General Licence 10, authorising the entry of vessels in distress or seeking refuge.

Section 3 imposes financial sanctions in an effort to exclude North Koreans from the US financial system by requiring US persons to block all funds of any North Korean person that come within the possession or control of any US person and that originate from, are destined for or pass through a foreign bank account. In addition, no US persons, whatever their location, may approve, finance, facilitate or guarantee a transaction by a foreign person where that transaction would involve dealing in the blocked funds of a North Korean person. The OFAC has advised that it:

"will provide appropriate notice and additional guidance, as necessary, to clarify its expectations for implementation [and] [a]bsent such a determination and notice from Treasury, this provision does not create any immediate compliance obligations on U.S. persons."

Section 4 sets out the secondary sanctions that may be imposed on a foreign financial institution if the secretary of the treasury determines that the foreign financial institution has knowingly conducted or facilitated any significant transaction:

  • on behalf of any person whose property and interests in property are blocked pursuant to any of the previous executive orders relating to North Korea, or of any person whose property and interests in property are blocked pursuant to EO 13382 in connection with North Korea-related activities; or
  • in connection with trade with North Korea.(31)

However, even before the issuance of EO 13810, the administration was imposing secondary sanctions on third-country actors that had provided support to the North Korean government. For example, on August 22 2017 the OFAC imposed sanctions on 16 Chinese and Russian entities and individuals for providing aid to North Korea. Specifically, the OFAC designated 10 entities and six individuals that were targeted for:

  • assisting already designated persons who supported North Korea's nuclear and ballistic missile programmes;
  • dealing in the North Korean energy trade;
  • facilitating North Korea's exportation of workers; and
  • enabling sanctioned North Korean entities to access the US and international financial system.(32)

With EO 13810 in place, the pace of designations and secondary sanctions on those that support North Korea is likely to increase.

CAATSA sanctions

In addition to his own broad executive order, Trump can rely on statutory authority under the North Korea section of CAATSA, also referenced as the Korean Interdiction and Modernisation of Sanctions Act (KIMSA). KIMSA is largely an expansion of an existing wide range of sanctions in response to North Korea's continued WMD proliferation, human rights abuses and human trafficking. Many of the provisions are already provided for in several executive orders, but CAATSA largely accomplishes this through amendments to the North Korea Sanctions and Policy Enhancement Act 2016 and others.(33)

Global Magnitsky sanctions

On December 20 2017 Trump signed EO 13818, which declared that the prevalence and severity of human rights abuse and corruption threatens the stability of international political and economic systems. EO 13818 blocked the assets of specific individuals listed in the annex of the order – the 13 persons hailing from 13 different countries around the world – and laid the framework for applying blocking and US visa restrictions on additional persons in the future. EO 13818 is based on the authority provided to the president under the International Emergency Economic Powers Act and the Global Magnitsky (GLOMAG) Human Rights Accountability Act,(34) signed into law by Obama on December 23 2016.

On December 21 2016 the OFAC imposed sanctions on an additional 39 individuals and entities affiliated with the 13 designated in the newly issued order, bringing the total number of sanctioned individuals and entities to 52 under the OFAC SDN designator.(35) A Department of Treasury press release details the reasons why these persons and entities were sanctioned.(36)

EO 13818 also authorises future blocking and US visa restrictions by the OFAC (acting in consultation with the secretary of state and the attorney general). Pursuant to EO 13818, the OFAC can sanction foreign persons who are:

  • responsible for or complicit in, or have directly or indirectly engaged in, serious human rights abuse;
  • a current or former government official, or a person acting for or on behalf of such an official, who is responsible for or complicit in, or has directly or indirectly engaged in:
    • corruption, including the misappropriation of state assets, the expropriation of private assets for personal gain, corruption relating to government contracts or the extraction of natural resources, or bribery; or
    • the transfer, or facilitation thereof, of the proceeds of corruption.

Human rights abuses, corruption and the transfer or facilitation of the proceeds of corruption by foreign persons are the targeted activities at the heart of the executive order. However, the executive order reaches beyond those who are "responsible for", "complicit in" or "directly or indirectly engaged" in the targeted activities. It also authorises the US administration to block the assets and apply visa restrictions to:

  • foreign persons who are part of the same government that conducted the targeted activities;
  • foreign persons who have attempted to commit the targeted activities; and
  • any person – US or foreign – who materially assists, sponsors or provides financial, material or technological support, goods or services to the targeted activities or designated persons.

US persons are prohibited from engaging in transactions with a GLOMAG SDN and with entities in which GLOMAG SDNs own 50% or more. Additionally, parties that engage in transactions with a GLOMAG SDN risk being designated as an SDN. This alone is not new, as other laws and executive orders have authorised the imposition of blocking sanctions on those providing material assistance to SDNs.

That said, the executive order in question also authorises blocking sanctions on those that materially assist, sponsor or provide financial, material, or technological support for, or goods or services to, the targeted activities even in the absence of an SDN. This means that any individual or company involved with parties that may be engaged in human rights violations or corrupt activities – even if not designated an SDN – runs the risk of being designated under this broad authorisation.

Comment

It is difficult to draw a simple conclusion from the mixture of administration and congressional sanctions that have been issued in the first year of the Trump administration. However, the two themes thus far seem to be:

  • an increased congressional role in economic sanctions, be it through Congress reaching for greater authority through legislation or the Trump administration leaving key decisions to Congress; and
  • a fair degree of uncertainty as to how aggressively the administration will pursue campaign promises relating to foreign policy – or even whether those positions will remain the same.

For further information on this topic please contact Kay C Georgi, Regan K Alberda or Lamine Hardaway at Arent Fox LLP by telephone (+1 202 857 6000) or email (kay.georgi@arentfox.com, regan.alberda@arentfox.com or lamine.hardaway@arentfox.com). The Arent Fox LLP website can be accessed at www.arentfox.com.

Endnotes

(1) Countering America's Adversaries Through Sanctions Act, Pub L 115-44, 131 Stat 886 (2017).

(2) David Jackson and Alan Gomez, "Trump to Change Cuba Policy by Limiting Travel and Business Transactions", USA Today, June 15 2017.

(3) See 82 Fed Reg 48,875, October 20 2017.

(4) Reuters, "President Trump Just Made Sweeping Changes to Obama's Cuba Policy", Fortune, June 16 2017.

(5) 82 Fed Reg 51,998, OFAC, November 9 2017; 82 Fed Reg 51,983, BIS, November 9 2017.

(6) US Department of Treasury, OFAC, "Frequently Asked Questions on President Trump's Cuba Announcement", July 25 2017.

(7) "List of Restricted Entities and Subentities Associated with Cuba as of November 9, 2017" US Department of State (November 8 2017).

(8) 31 CFR Section 515.209.

(9) EO 13761, "Recognizing Positive Actions by the Government of Sudan and Providing for the Revocation of Certain Sudan-Related Sanctions", 82 Fed Reg 5331, January 13 2017.

(10) Sudanese Sanctions Regulations, 82 Fed Reg 4793, January 17 2017.

(11) 31 CFR pt 538.

(12) US Department of State, "The Secretary's Report on Whether the Government of Sudan Has Sustained the Positive Actions That Gave Rise to E.O. 13761", October 12 2017.

(13) US Department of Treasury, "Treasury Sanctions 13 Current and Former Senior Officials of the Government of Venezuela", July 26 2017.

(14) US Department of Treasury, "Venezuela-related Designation", July 31 2017.

(15) US Department of Treasury, "North Korea Designations", July 6 2017.

(16) EO 13808, 82 Fed Reg 41,155, August 29 2017.

(17) US Department of Treasury, "OFAC FAQs: Other Sanction Programs", October 31 2017, Topic 512.

(18) US Department of Treasury, "OFAC FAQs: Other Sanctions Programs", Topic 513, October 10 2017.

(19) David Ljunggren, "Canada to Impose Sanctions on Venezuela's Maduro and Top Officials", Reuters, September 22 2017.

(20) Statement by President Donald J Trump on Signing the "Countering America's Adversaries Through Sanctions Act", August 2 2017.

(21) Id.

(22) US Department of State, Section 231 of CAATSA, October 27 2017.

(23) US Department of State, Public Guidance/FAQ, October 27 2017.

(24) US Department of State, CAATSA/CRIEEA Section 232 Public Guidance, October 31, 2017.

(25) The list of 12 sanctions includes:

  • restricting export-import bank assistance for exports to sanctioned persons;
  • not granting specific licence, permission or other authority to export any goods or technology to sanctioned persons;
  • prohibiting any US financial institution from making loans or providing credits to the sanctioned persons totalling more than $10 million in any 12-month period;
  • opposing any loan from an international financial institution that would benefit the sanctioned person;
  • if the person is a financial institution:
    • neither the Board of Governors of the Federal Reserve Bank of New York nor the Federal Reserve Bank of New York may designate the financial institution as a primary dealer in US government debt instruments; and
    • the financial institution may not serve as an agent of the US government or as a repository for US government funds;
  • prohibiting the US government from procuring or entering into any contract for procurement with the sanctioned person;
  • prohibiting any transactions in foreign exchange that are subject to the jurisdiction of the United States and in which the sanctioned person has any interest;
  • prohibiting any transfers of credit or payments between financial institutions or by, through or to any financial institution, to the extent that they are subject to US jurisdiction and involve any interest of the sanctioned person;
  • prohibiting a sanctioned person from acquiring, holding, withholding, using, transferring, withdrawing, transporting, importing or exporting any property that is subject to US jurisdiction and with respect to which the sanctioned person has any interest; dealing in or exercising any right, power, or privilege with respect to such property; or conducting any transaction involving such property;
  • prohibiting any US person from investing in or purchasing significant amounts of equity or debt instruments of the sanctioned person;
  • directing the secretary of state to deny a visa to, and the secretary of homeland security to exclude from the United States, any alien that the president determines is a corporate officer or principal of, or a shareholder with a controlling interest in, the sanctioned person; and
  • imposing on the principal executive officer or officers of the sanctioned person, or on persons performing similar functions and with similar authorities as such officer or officers, any of the sanctions under Subsection 235.

(26) US Department of State, "Release of Public Guidance for the Countering America's Adversaries Through Sanctions Act", October 31 2017.

(27) Sarah Begley, "Real Donald Trump's Speech to AIPAC", Time, March 21 2016.

(28) Mark Landler and David E Sanger, "Trump Disavows Nuclear Deal, But Doesn't Scrap It", The New York Times, October 13 2017.

(29) Statement by the President on the Iran Nuclear Deal, January 12 2018.

(30) Adam J Szubin, "The debate over the Iran deal is utterly perplexing", The Washington Post, September 21 2017.

(31) With respect to any foreign financial institution determined by the secretary of the treasury to meet the above criteria, the secretary may:

  • prohibit the opening and prohibit or impose strict conditions on the maintenance of correspondent accounts or payable-through accounts in the United States; or
  • block all property and interests in property that are in the United States, that hereafter come within the United States or that are or hereafter come within the possession or control of any US person of such foreign financial institution, and provide that such property and interests in property may not be transferred, paid, exported, withdrawn or otherwise dealt in.

(32) US Department of Treasury, "Treasury Targets Chinese and Russian Entities and Individuals Supporting the North Korean Regime", August 22 2017.

(33) A section-by-section analysis of KIMSA would be too detailed for this update, but the National Committee on North Korea has published a summary, available here.

(34) Pub L 114-328, Subtitle F, 130 Stat 2000 (2016).

(35) US Department of Treasury, "Issuance of Global Magnitsky Executive Order; Global Magnitsky Designations", December 21 2017.

(36) US Department of Treasury, "United States Sanctions Human Rights Abusers and Corrupt Actors Across the Globe", December 21 2017. The OFAC has also published FAQs on the executive order and created a webpage for the GLOMAG sanctions.

An earlier version of this article was first published in The Current: The Journal of PLI Press.

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