On November 15, 2021, the US Treasury Department’s Office of Foreign Assets Control (OFAC) designated the Public Ministry of Nicaragua and nine Nicaraguan government officials as Specially Designated Nationals (SDNs) pursuant to Executive Order (EO) 13851 and the Nicaragua Human Rights and Anticorruption Act of 2018 (NHRAA). According to a Treasury Department press release, the designations respond to the Nicaraguan government’s repression of opposition politicians leading up to “sham” elections in November 2021.
Among the designated persons is a senior banking regulatory official in Nicaragua, which underscores the risk to financial institutions in particular seeking to navigate US sanctions risks while operating in Nicaragua.
These latest OFAC designations of officials in Nicaragua came five days after President Biden signed the Reinforcing Nicaragua’s Adherence to Conditions for Electoral Reform Act of 2021 (“the RENACER Act”), which calls for, among other things, the use of targeted sanctions against persons involved in human rights violations and undermining democratic elections in Nicaragua. The RENACER Act also calls for coordinating sanctions with US allies.
The pre-existing statute underlying these particular designations is the NHRAA, which directs the President to impose blocking sanctions and visa bans against any foreign person determined (i) to have been involved in significant acts of violence or human rights violations in Nicaragua; (ii) to be responsible for, or complicit in, actions or policies undermining democratic processes or institutions in Nicaragua; or (iii) to be a government official involved in significant corruption, or a senior associate of such an official.
Concurrently with the adoption of the NHRAA, on November 27, 2018, the President issued EO 13851, authorizing blocking sanctions against persons determined to be involved in actions described in the NHRAA, as well as actions or policies that threaten the peace, security, or stability of Nicaragua; repression of individuals and the media in Nicaragua; and certain other conduct.
The EO also authorizes blocking sanctions against persons determined to be a leader or official of an entity involved in activities listed in the EO; an official of the Nicaraguan government at any time on or after January 10, 2007; or to have materially assisted, sponsored, or provided financial, material, or technical support for, or goods or services in support of SDNs or activities targeted under the EO.
Compliance and Sanctions Policy Implications
All property and interests in property of these SDNs (and any entity that is owned 50 percent or more by one or more SDNs) must be “blocked,” i.e., frozen if within the United States or in the possession or control of a US person. Additionally, there is a broad prohibition on dealing directly or indirectly with the SDNs or their “blocked” property to the extent US persons are involved.
The latest designations are the second round of Nicaragua-related designations under the Biden administration, with the Trump administration also having been active in supporting OFAC designations of individuals and entities in Nicaragua. In June 2021, OFAC had designated four Nicaraguan officials under EO 13851, including the President of Nicaragua’s Central Bank (“BCN”). According to OFAC, the President of the BNC oversees implementation of Nicaragua’s Law for the Protection of Consumers and Users, “which could obligate Nicaraguan financial institutions to do business with Nicaraguan SDNs at the risk of facilitating sanctionable transactions.” In the latest round, OFAC designated the country’s Superintendent of the Superintendency of Banks and Other Financial Institutions, who is also responsible for implementing the law. Financial institutions operating in Nicaragua should be cautious regarding any potential need to interact with these sanctioned officials, including when acting in their official capacities.
These designations of Nicaraguan government officials based on their implementation of this local law may be particularly noteworthy as other countries implement or consider implementing laws that could similarly seek to discourage local companies from complying with OFAC sanctions.
The latest round of Nicaragua-related designations by OFAC was coordinated with the UK and Canada, reflecting the Treasury Department’s emphasis on multilateral sanctions, as outlined in the Treasury Department’s 2021 Sanctions Review report and the RENACER Act.