On July 11, 2012, the Office of Foreign Assets Control (“OFAC”) implemented two general licenses authorizing the exportation of financial services and new investment in Burma (Myanmar). These general licenses follow earlier announcements that the U.S. government would take steps to ease sanctions on Burma, and follows the lead of Canada and the European Union. This should open the door for the participation of U.S. companies and investment funds in the development of Burma’s vast natural resources.
Since 1997, the United States has prohibited new investment in Burma by U.S. persons, and U.S. persons’ facilitation of new investment in Burma by foreign persons. These sanctions were expanded in 2003 with the Burmese Freedom and Democracy Act, in 2007 and 2008 with several Executive Orders, and with passage of the Tom Lantos Block Burmese JADE Act of 2008. In response to historic reforms in Burma over the past year and in the wake of Secretary Clinton’s visit to that country, the U.S. government and many Western allies have eased their sanctions.
B. Financial Services
In particular, OFAC issued General License 16 authorizing the exportation or reexportation of financial services to Burma. The Burmese Sanction Regulations broadly define the exportation or reexportation of financial services to include:
- “The transfer of funds, directly or indirectly, from the United States or by a U.S. person, wherever located, to Burma; or
- The provision, directly or indirectly, to persons in Burma of insurance services, investment or brokerage services (including but not limited to brokering or trading services regarding securities, debt, commodities, options or foreign exchange), banking services, money remittance services; loans, guarantees, letters of credit or other extensions of credit; or the service of selling or redeeming traveler’s checks, money orders and stored value.”
These transactions are now largely authorized under the General License, although U.S. persons continue to be prohibited from exporting financial services to the Burmese Ministry of Defense; any Burmese armed group; or any Specially Designated National; or from engaging in any transaction involving a blocked account.
C. New Investment
Prior to the implementation of the General License, the U.S. government’s prohibition against new investment was targeted at the exploration of natural resources in Burma, including contracts “conferring rights to explore for, develop, extract, or refine petroleum, natural gas, or minerals in the ground in Burma; or a contract to assume control of a mining operation in Burma, acquire a forest or agricultural area for commercial use of the timber or other crops, or acquire land for the construction and operation of a hotel or factory.” 31 C.F.R. § 537.302(b). Now, subject to certain limitations and reporting requirements, General License 17 will authorize these new investments.
Limitations include continued prohibitions on new investment pursuant to an agreement with the Burmese Ministry of Defense, state or non-state armed groups (which includes the military), or entities owned by the foregoing, or any person blocked under the Burma sanctions program. Also, U.S. persons that engage in new investment in excess of $500,000 are required to file reports with the U.S. Department of State.