Following the significant easing of U.S. sanctions against Burma/Myanmar (“Burma”) in 2012, the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) recently further eased these sanctions with the issuance of General License No. 19 (Feb. 22, 2013). This general license authorizes “U.S. Persons” (defined below) to conduct most transactions with four major Burmese banks identified as Specially Designated Nationals (“SDNs”): Myanmar Economic Bank, Myanmar Investment and Commercial Bank, Asia Green Development Bank, and Ayeyarwady Bank (“GL19 Banks”). The U.S. State Department and OFAC have also recently updated and clarified the reporting requirements for “new investments” in Burma authorized under General License No. 17 (July 11, 2012). While the reporting requirements for “new investments” in Burma have not been significantly revised, the clarifications provided by the State Department and OFAC may limit the reach of these requirements, particularly where U.S. Persons are only supporting or facilitating “new investments” by non-U.S. companies.
General License No. 19
To encourage additional U.S. economic involvement in Burma and in response to feedback from U.S. companies seeking to operate in Burma, General License No. 19 prospectively authorizes “U.S. Persons” (i.e., entities organized under U.S. laws and their non-U.S. branches; persons in the United States; U.S. citizens and permanent resident aliens wherever located) to engage in most transactions involving the four GL19 Banks even though these banks remain SDNs. Notwithstanding General License No. 19, the property and interests in property of the GL19 Banks blocked as of February 22, 2013 remain blocked.
Ayeyarwady Bank was formally designated as an SDN on the same day General License No. 19 was issued because it is owned by another SDN, Zaw Zaw, a Burmese business tycoon. The designation of Ayeyarwady Bank demonstrates that the U.S. Government continues to be concerned about certain Burmese parties, even as part of the relaxation of U.S. sanctions.
Previously, under General License No. 16 (July 11, 2012), U.S. Persons were permitted only to transfer funds to or from accounts at the GL19 Banks, provided the accounts were not on the books of a U.S. financial institution. Under General License No. 19, U.S. Persons may now engage in most transactions with the GL19 Banks, including opening and maintaining accounts and engaging in related financial services. Despite the broad authorization of General License No. 19, the following activities involving GL19 Banks remain prohibited consistent with General License Nos. 16 and 17:
- Transactions by U.S. Persons with other SDNs;
- In connection with the provision of security services, the exportation of financial services by U.S. Persons to the Burmese Ministry of Defense, any state or non-state armed group, or any entity in which any of foregoing own a 50% or greater interest; and
- “New investments” in any of the GL19 Banks themselves—a “new investment” for these purposes broadly includes the entry into agreements for the economic development of resources in Burma, but excludes agreements involving the sale or purchase of goods, services, or technology (unless the agreement itself includes characteristics of “new investment”).
Finally, General License No. 19 clarifies that the special anti-money laundering measures imposed against Burma under Section 311 of the USA PATRIOT Act no longer apply to the operation of correspondent accounts and transactions through such accounts on behalf of the GL19 Banks, provided such transactions are otherwise authorized under the Burmese Sanctions Regulations and General License Nos. 16 to 19. The Section 311 special measures continue to apply to transactions with other Burmese SDN banks.
Clarification of “New Investment” Reporting Requirement
General License No. 17 authorizes U.S. Persons to engage in certain “new investments” in Burma, and U.S. Persons may only facilitate or be involved in such “new investments,” including by non-U.S. persons, to the extent authorized by this general license. General License No. 17 also requires that U.S. Persons with aggregate “new investments” valued at more than US$500,000 provide the State Department with information set forth in a document titled “Reporting Requirements on Responsible Investment in Burma” (“Reporting Requirements”).
The State Department recently issued a revised and updated version of the Reporting Requirements for review by the Office of Management and Budget, and OFAC issued clarifications on March 18, 2013 regarding the Reporting Requirements through recently updated FAQs on its website. The State Department and OFAC provided the following clarifications about reports pursuant to the Reporting Requirements:
- The Reporting Requirements are triggered once the cumulative value of a U.S. Person’s “new investments” exceeds US$500,000.
- Once the US$500,000 threshold for “new investments” is crossed, a U.S. Person is required to submit a report pursuant to the Reporting Requirements and annually thereafter, unless and until the value of that party’s aggregate “new investments” falls below US$500,000.
- Initial and annual reports are now due each July 1, instead of April 1 as previously proposed by the State Department.
- The Reporting Requirements apply only to U.S. Persons engaging in “new investments” in Burma. U.S. Persons employed by non-U.S. companies engaging in “new investments” or who otherwise facilitate non-U.S. companies’ “new investments” in Burma are not required to file a report.