Hdeel Abdelhady Articles

Anti-Corruption

U.S. Multinationals, Dual Citizens Subject to Global Magnitsky Sanctions

The Global Magnitsky Act defines a “foreign person” as “any citizen or national of a foreign state (including any such individual who is also a citizen or national of the United States), or any entity not organized solely under the laws of the United States or existing solely in the United States.” Accordingly, under the Global Magnitsky Act, individuals who are dual (or more) nationals and companies that are organized under U.S. law(s) and foreign law(s) or exist (e.g., are present, authorized to conduct business) in the United States and one or more foreign jurisdictions, like “foreign persons” completely lacking U.S. status, are apparently subject to sanctions for committing or facilitating sanctionable corrupt acts and human rights abuses. Thus, these  “U.S. Persons,” when regarded as “foreign persons” under the Global Magnitsky Act, have additional sanctions exposure that would not apply to, for example, individuals holding only U.S. citizenship or companies organized only under U.S. law(s) and existing only in the United States.

Global Magnitsky Sanctions

United States Sanctions Corruption and Human Rights Abuses Globally

The financial penalties imposed by the Global Magnitsky Sanctions (and other U.S. sanctions programs) are powerful, as they effectively cut off sanctioned persons from the U.S. financial system and, substantially, U.S. dollar transactions. Given the size and centrality of the U.S. financial system to international commerce and payments, persons without access to U.S. banks and other constituent parts of the U.S. financial system are largely shut out of the international financial system (this assumes, of course, effective enforcement and compliance by U.S. authorities, banks and international financial system participants). Put in context, the United States’ Global Magnitsky Act and sanctions program are singular in their force. Other countries have adopted versions of a Magnitsky Act (including Canada, which has imposed sanctions under its law), but none of these other Magnitsky frameworks rival the potential sweep and impact of the United States’ Magnitsky framework.

Anti-Corruption

Global Magnitsky Sanctions Are a Powerful Weapon Against Corruption and Human Rights Abuse

EO 13818 directly targets foreign government officials and private parties who commit or enable human rights abuses and certain corrupt acts. The Order also employs extraordinary theories of liability. For example, EO 13818 holds current and former “leaders” of foreign entities (government and private) strictly and vicariously liable—and thus sanctionable—for the corrupt acts, during a leader’s tenure, of their entities. The Order also imputes the sanctioned status of a blocked private or government entity to its current or former “leaders,” if the entity was blocked “as a result of activities related to the leader’s or official’s tenure.” Additionally, EO 13818 treats as a corrupt act the transfer or facilitation of the transfer of corrupt proceeds by current or former foreign government officials and “persons acting for or on their behalf.” These three bases for liability, among others, are unique to EO 13818—they are not provided for by the Global Magnitsky Act.

Hdeel Abdelhady Articles

Hostility Toward Iran Nuclear Deal May Have Chilling Effect on Legal Transactions Under U.S. Sanctions

The prospect of increasingly hostile policy and legal actions toward Iran may be enough to thwart or make more difficult Iran-related transactions that are (and might remain) legal. Parties planning to engage in such legal Iran-related transactions should take note and, if appropriate, action ahead of any changes in law or adjustments in Iran-related risk-assessments by banks and individual and commercial parties.

Hdeel Abdelhady Articles

Ukraine/Russia Sanctions: Prohibited Debt and Equity Under OFAC Directives 1, 2 or 3

As discussed in an earlier MassPoint Business Update on OFAC Directive 1, it was expected that OFAC would issue, by November 28, 2017, a general license authorizing derivative transactions in prohibited debt and equity (see table below), consistent with the debt maturity limitations imposed by CAATSA. General License 1B does not authorize primary transactions by U.S. persons (wherever located) or in the United States in assets subject to the prohibitions of Directives 1, 2, or 3.

Russia Sanctions

OFAC DIRECTIVE 1 AS AMENDED SEPTEMBER 29, 2017

As required by the Countering Russian Influence in Europe and Eurasia Act of 2017 (CRIEEA), the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) on September 29, 2017 amended and reissued OFAC Directive 1 (Directive 1). As amended, Directive 1 continues to prohibit certain “new” debt, equity, and related transactions involving entities subject to U.S. Sectoral Sanctions targeting Russia’s financial services sector. This Business Update discusses the background to and mechanics of Directive 1 as amended and reissued.

Anti-Corruption

Banks, Credit Unions and Other Financial Insitutions as Deputized Law Enforcement

The logic and law enforcement value of imposing anti-financial crime obligations on financial intermediaries are clear. Nevertheless, a reassessment is now appropriate, particularly given (1) increasing legal and regulatory demands on financial intermediaries; (2) the exclusion, through “derisking,” from the financial system of small and medium businesses (SMEs), nonprofit organizations, money services businesses (MSBs), and correspondent relationship-dependent banks; and, (3) overarching questions as to whether the financial and administrative costs of compliance within the current legal framework—generally or at specific points—yield commensurate law enforcement benefits without unduly harming the legitimate interests of individuals, businesses and other financial system stakeholders.

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