Since the Myanmar military’s coup of Feb. 1, the United States, European Union and other western countries have imposed targeted sanctions on military generals. On March 25, in a coordinated move, both the US and UK imposed sanctions on the military- owned Myanmar Economic Cooperation (MEC) and Myanmar Economic Holdings Limited (MEHL).
Recently, US authorities have become more aggressive enforcing sanction laws placing Myanmar and foreign businesses at increased risk of civil and criminal penalties including worldwide bank account seizures, heavy fines, and criminal prosecutions.
The US sanctions list, known as the Specially Designated Nationals and Blocked Persons List (SDN), now includes the generals who are members of the State Administration Council, Senior General Min Aung Hlaing’s two children and their businesses, and military-owned entities MEC, and MEHL. US sanction laws also stipulate a “50% rule” where businesses directly or indirectly owned 50 percent or more in the aggregate by one or more sanctioned persons are considered sanctioned. According to leaked company registration records, up to 133 companies are wholly or partly owned by MEC and MEHL, including well-known companies such as Mytel and Myawaddy bank. These companies will all certainly now be sanctioned.
Many Myanmar and foreign businesses would be surprised to learn that they could be at risk of severe civil and criminal penalties even if the businesses are not owned by US persons or have any relationship with the US. Although the sanctions announcements from the US Department of the Treasury would indicate that the sanctions laws typically prohibit “US persons” from dealings with the sanctioned individuals or entities, recently the US Treasury has been expanding enforcement to non-US persons and corporations.
The highest risk for businesses is engaging in US dollar transactions directly or indirectly involving a sanctioned person or entity. Any transaction involving US dollars, regardless of whether the transaction involves a US or non-US bank, will pass through the US financial system, and be subject to scrutiny by US authorities. For instance, if a Myanmar company attempts to transfer US dollars from its non-US bank account to a Singaporean firm’s Singapore bank account as payment for goods and services destined for a sanctioned entity, US authorities will likely flag this transaction as a violation, block the transaction, seize the funds, bank accounts and/or impose penalties on the involved parties.
The next most common risk is trading goods and services that include US parts with a sanctioned party. For instance, a Myanmar company selling equipment that contains US parts to a sanctioned individual or entity, and was purchased from a Chinese manufacturer, may result in penalties for both the buyer and seller.
The most serious violations may result in criminal charges and possible long prison sentences. Prosecutors are able to add the criminal charge of fraud in cases where there is an effort to conceal or misrepresent the transaction of the alleged violation, charges that may result in prison sentences of up to 20 years. Even persons who do not travel to the US or have any intention of setting foot in the United States remain at risk.
As illustrated by the high profile case of the Huawei Chief Financial Officer detained in Canada currently pending extradition to the US on charges of violating sanctions imposed on Iran, US authorities can deliver an unpleasant surprise to an unsuspecting person in a foreign country that has a extradition treaty with the US by issuing an arrest warrant, and cause the person to be detained in the country prior to extradition to the US. Of particular concern to Myanmar nationals is that the US has extradition treatises with over 100 countries, many of them Myanmar’s neighbors and popular destinations for Myanmar nationals including Thailand and Singapore.
The fines for violations can also be substantial. In many cases they can reach millions of dollars per violation, and even billions in some high-profile cases. Indeed, enforcement actions resulted in $1.5 billion in 2019 alone. US authorities can effectively seize or freeze bank accounts of suspected infringers even if the accounts are at non-US banks.
Even small dollar transactions are not immune. In one example, the payment in US dollars for a small shipment of Cuban cigars was discovered as a violation of US sanctions when the fund transfer was processed through the SWIFT wire transfer, resulting in seizure of the payment and penalties. Penalties will especially be significant for repeat offenders.
There is no statute of limitations, and suspected violators may be charged even long after sanctions have been lifted.
Although the criminal case against the Huawei executive and massive fines on BNP Paribas and ZTE have captured the media’s attention, the list of enforcement actions on the US Treasury website show smaller trading companies are increasingly being targeted by the US authorities.
Sanctions enforcement has undoubtedly become a priority for the US government. With the situation in Myanmar grabbing global headlines, transactions involving sanctioned Myanmar individuals and entities will almost certainly now receive extra scrutiny. There may also be a desire to punish violators of sanctions imposed on Myanmar individuals and entities to set an example as such a move would prove politically popular. Businesses that are unsure of their exposure to the dangers of civil and criminal penalties imposed as a result of US sanctions should promptly consult with qualified legal counsel.
John Squire is a pseudonym. He is an American attorney who specializes in US sanctions and export laws. He advises businesses on mitigating the risks of civil and criminal penalties. His views are his own.
You may also like these stories: