Newly Imposed U.S. Sanctions Target Burmese Military
- The United States has launched a new sanctions regime, designating 10 Burmese military officials and three companies connected to the military as Specially Designated Nationals (SDNs) in response to the coup d'état on Feb. 1, 2021, in which the Burmese military overthrew the democratically elected government and arrested certain civilian leaders.
- The targeted sanctions are likely only the first round of U.S. sanctions. However, for geopolitical reasons, broad U.S. sanctions on Burma are unlikely.
President Joe Biden on Feb. 11, 2021, issued an Executive Order, "Blocking Property with Respect to the Situation in Burma," which targets senior Burmese military officials responsible for the coup and authorizes a variety of sanctions, including prohibited transactions, freezing of assets, blocked property and interests, visa denial and designation as a Specially Designated National (SDN).1
What Are the New Sanctions?
The U.S. Department of Treasury's Office of Foreign Assets Control (OFAC) updated its Specially Designated Nationals and Blocked Persons List on Feb. 11, 2021, pursuant to the Executive Order, designating 10 current and former military officials (two such military officials were already sanctioned for their human rights abuses in 2019) and three companies in the jade/jewel industry tied to the Burmese military.
Effective Feb. 11, 2021, all U.S. persons are prohibited from entering into transactions involving property and interests in property of these sanctioned persons and entities as well as any entities that are owned, directly or indirectly, 50 percent or more by such persons and entities.
According to announcements made by the Biden Administration, these designations are only the first round of targets.2 Potential future targets for sanctions include entities or individuals who are:
- in the defense sector
- directly or indirectly responsible for the Feb. 1, 2021, coup
- military or security forces leaders or officials
- officials of the government on or after Feb. 2, 2021
- "political subdivisions, agencies, or instrumentalities of the Government of Burma," or
- owned or controlled by the Burmese military
OFAC has yet to issue any formal guidance on the sanctions or any general licenses for winding-down business in Burma. However, based on informal guidance, the sanctions will apply only to individuals and entities who have been specifically designated as SDNs (and entities owned or controlled by such SDNs). This means that sanctions have not been levied on the whole of the Government of Burma but only select agencies or instrumentalities. However, the Executive Order also calls for sanctioning spouses and adult children of sanctioned individuals.
In addition to the sanctions, the U.S. Department of Commerce is imposing export controls on "sensitive goods" to Burma's Ministry of Defense, Ministry of Home Affairs, armed forces and security services. Approximately $1 billion of Burmese government funds have also been frozen by the United States.3
Are Further Sanctions Likely?
The Biden Administration has threatened additional action if the Burmese military does not withdraw control and restore power to the democratically elected leadership4 and will work with its international allies to hold accountable those responsible for overturning the Burmese government.5 The Biden Administration likely will limit sanctions to targeted sanctions for geopolitical reasons. For example, there are two allegedly military-owned conglomerates that might be the target of future sanctions: Myanmar Economic Holdings Limited and Myanmar Economic Corp. These entities have investments spanning various sectors, including banking, gems, copper, telecommunications and clothing.
The Biden Administration is walking a tightrope, because broad sanctions on Burma could increase China's influence in Burma. China blocked a United Nations Security Council joint statement condemning the coup. Further, this will be a test of whether the Biden Administration will be able to coordinate sanctions with allies, who may have little appetite for broad sanctions on Burma. For example, on Feb. 8, 2021, the European Union (EU) condemned the coup and called for targeted sanctions on military leaders and targeted financial sanctions on the Union to the Myanmar Armed Forces, but the EU has yet to make any new designations.6
- The U.S. Department of Commerce has announced it is assessing additional actions including Entity List designations subjecting Burma to the same military end-use/end-user restrictions as China, Venezuela and Russia, and otherwise placing additional restrictions on the export or reexport of U.S. goods to Burma.7
- The U.S. Financial Crimes Enforcement Network (FINCEN) could take action, such as those taken regarding Venezuela, that would cause U.S. financial institutions to limit access to the U.S. financial system for Burma entities and Burma-related transactions.
Will These Sanctions Apply Extraterritorially?
Nothing in the Executive Order specifically authorizes "secondary sanctions" on non-U.S. entities, except, similar to other sanctions orders, the Executive Order calls for sanctioning any person who provides material support or goods or services to blocked persons. Although these sanctions will apply only to international transactions with a U.S. nexus (e.g., U.S. dollar wire transactions clearing through the U.S. financial system), as with any sanctions regime, these sanctions will have a chilling effect on international trade with Burma as foreign financial institutions and insurers assess risk in dealing with potential SDNs in Burma.
What Can Companies Do?
Companies with supply chains or business in Burma should be taking steps to protect themselves. For example, such companies should be taking stock of who owns counterparties in Burma, putting in place special procedures for enhanced due diligence for future transactions with Burmese entities and making contingency plans for possible designation of counterparties.
For more information on the implications of these newly imposed sanctions or assistance in conducting a risk assessment or development of compliance policies and procedures, please contact the authors or another member of Holland & Knight's International Trade Group.
1 This Executive Order does not reinstate the broad financial sanctions on Burma that were terminated on Oct. 7, 2016 (EO 13742, "Termination of Emergency With Respect to the Actions and Policies of the Government of Burma").
Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.