Presenting a live 90-minute webinar with interactive Q&A OFAC Sanctions on Iran, Syria, Yemen, and Burma: Compliance Strategies Meeting Strict and Rapidly Changing U.S. Sanctions Requirements TUESDAY, AUGUST 28, 2012 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: John J. Sullivan, Partner, Mayer Brown , Washington, D.C. Thaddeus R. McBride, Partner, Sheppard Mullin Richter & Hampton , Washington, D.C. Stevenson Munro, Compliance Leader, Economic Sanctions and Anti-Corruption, General Electric Capital , Norwalk, Conn. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
U.S. Sanctions: Key Issues Strafford Publications August 28, 2012 Washington, DC Thaddeus R. McBride Stevenson Munro Sheppard Mullin Richter & Hampton General Electric Capital tmcbride@sheppardmullin.com stevenson.munro@ge.com
Agenda • Sanctions overview • Specific countries • Syria • Iran • Burma • Yemen • Compliance best practices • Questions / Discussion 3
Sanctions Overview • Administered by U.S. Treasury Department, Office of Foreign Assets Control (OFAC) • Approximately 25 different U.S. sanctions programs at present • Some comprehensive, e.g. , Cuba, Iran, and some selective, e.g. , Burma, Zimbabwe 4 4
Key Concept: Jurisdiction • Sanctions apply to actions by U.S. persons and persons subject to U.S. jurisdiction, as follows: • All U.S. citizens and residents, wherever located • All U.S.-organized or incorporated companies or entities • All persons in United States, regardless of nationality • In case of Cuba ( and now Iran ), sanctions apply to certain entities owned/controlled by U.S. person 5
Jurisdiction (cont.) • Under recent statutory amendment (IEEPA Enhancement Act), any person who “causes” a violation can be subject to liability • Lloyds - $350 million (2009) • Credit Suisse - $536 million (2009) • Barclays - $298 million (2010) 6
Key Concept: SDNs • Specially Designated Nationals (SDNs) • Listed on OFAC’s SDN List • List updated regularly • Individuals and entities are listed by sanctions programs, e.g. , narcotics trafficking, terrorism • Many SDNs reside in non-sanctioned countries such as Canada, Mexico, Panama, UAE 7
Key Concept: Export of Services • U.S. sanctions prohibit direct and indirect provision of services to sanctions targets • Providing service anywhere may be prohibited if benefit of service is received by sanctioned party or in sanctioned country 8 8
Export of Services (cont.) • Marketing services • Business services • Consulting services • Example : Cannot give consulting or marketing advice to a non-U.S. company related to its business in Iran • Legal services are permissible in certain cases 9 9
Key Concept: Facilitation • Facilitation is specifically prohibited • U.S. persons are prohibited from facilitating action that would be prohibited if performed by U.S. person • Broadly defined – covers virtually any assistance to a prohibited transaction 10
Facilitation (cont.) • Specific prohibitions from regulations • Changing policies or procedures to allow foreign entity to conduct transaction prohibited to the U.S. person • Referring prohibited business deals to a foreign person • Financing / insuring a foreign subsidiary’s trade with sanctioned country 11
Syria • 2002 - Targeted sanctions imposed under Terrorism List Government Sanctions Regulations • 2005 - OFAC imposes asset freezing / blocking on designated Syrian individuals • 2011 - Executive Order 13582 establishes comprehensive economic sanctions on Syria • 2012 - Iran Threat Reduction and Syria Human Rights Act extends restrictions on Syria 12
Syria (cont.) • Sanctions introduced in 2011 respond to Syrian government’s actions against Syrian protests • Asset freeze expanded to entire government • Access to U.S. banks is restricted • U.S. persons blocked from exporting services to Syria 13
Syria (cont.) • ITRSHRA signed on August 10, 2012 • Sanctions on persons engaged in human rights abuses and censorship • Restrictions on persons who facilitate transfers of goods and technology likely to be used to commit human rights abuses in Syria • Could be extended to non-U.S. and non-Syrian parties that sell specified goods / technology to Syria 14
Syria (cont.) • Overlapping sanctions regulations • SSR, TLGSR, and ITRSHRA (and export embargo) • Differing restrictions, e.g. , more limits on dealing with government than civilians • Incremental expansion of sanctions • Respond to foreign policy imperatives • Congressional involvement 15
OFAC Compliance IRAN, BURMA, YEMEN – RECENT DEVELOPMENTS August 28, 2012 John J. Sullivan Partner Strafford Webinar 202-263-3004 JJSullivan@mayerbrown.com Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe-Brussels LLP both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.
IRAN SANCTIONS – BACKGROUND • Complex patchwork of legislation, regulations, and Executive Orders implemented in part by OFAC and in part by the State Department – International Emergency Economic Powers Act – Iranian Sanctions Act (ISA) • Amended by the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (CISADA) – Iran Threat Reduction and Syria Human Rights Act (ITRSHRA) – Iranian Transactions Regulations, 31 CFR Part 560 – Iranian Assets Control Regulations, 31 CFR Part 535 – Executive Orders 17
IRAN SANCTIONS – BACKGROUND • Comprehensive sanctions • Most transactions by US Persons prohibited • Facilitation by US Persons prohibited • Increasing extraterritorial reach – Foreign subsidiaries of US companies – Foreign persons who evade US sanctions – Foreign financial institutions • Blocking of Government of Iran assets 18
IRAN SANCTIONS – IRAN THREAT REDUCTION AND SYRIA HUMAN RIGHTS ACT (ITRSHRA) • Signed into law August 10, 2012 • For the first time extends to foreign subsidiaries of US companies the preexisting sanctions against Iran • Imposes new reporting requirements on firms with securities traded on US stock exchanges • Expands the scope of ISA/CISADA to target additional activities and impose new sanctions with respect to conduct of non-US companies 19
IRAN SANCTIONS – ITRSHRA Principal Provisions – Section 218 • Previously OFAC sanctions against Iran did not extend to the foreign subsidiaries of US companies, although any US entity, US citizen, or US resident (“US Person”) that facilitated the Iranian business in which the foreign subsidiary engaged could be penalized • Prohibits any entity owned or controlled by a US Person and established or maintained outside the US from knowingly engaging in any transaction directly or indirectly with the Government of Iran or persons subject to the jurisdiction of Iran if such transaction would violate US sanctions law if a US Person engaged in it 20
IRAN SANCTIONS – ITRSHRA Principal Provisions – Section 218, cont’d • A US Company will be subject to civil penalties for the activities of its foreign subsidiaries under this provision unless it divests or terminates the business with the foreign subsidiary within 180 days of enactment 21
IRAN SANCTIONS – ITRSHRA Principal Provisions – Section 219 • Any company whose stock is traded on US exchanges is required to make public disclosure filings to the SEC if it, or any affiliate, has knowingly engaged in certain activities prohibited by ISA/CISADA or by OFAC sanctions • The President must initiate an investigation to determine whether penalties should be imposed as a result of reported activities 22
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