On September 7, 2018, Congresswoman Mia Love (R-UT) introduced in the House of Representatives H.R. 6751, the Banking Transparency for Sanctioned Persons Act of 2018 to “increase transparency with respect to financial services benefitting state sponsors of terrorism, human rights abusers, and corrupt officials.” This update discusses the Banking Transparency Act’s provisions and what it conveys about the current U.S. legal climate around corruption and human rights sanctions, Congress’ increasingly activist sanctions posture, and the risk management and compliance inferences that U.S. and foreign financial institutions should draw from the Banking Transparency Bill when viewed in context.
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In International Business, Sweat the “Small” Stuff
Business transactions necessarily become more complex when they involve two or more countries. Among other tasks, it is necessary to understand the content and applicability of foreign laws, retain local counsel, address conflict of law issues, and make (hopefully strategically, rather than as an afterthought) governing law and dispute resolution selections. These more obvious, foundational, and substantively significant tasks tend to get the most and earliest attention from deal teams, and rightly so. But the focus on more substance aspects of international transactions should not be exclusive. Often, tasks that are regarded secondary and more administrative in nature—such as registering a security interest, obtaining a power of attorney, notarizing a transaction document in accordance with local standard, or obtaining government approvals bearing required seals—tend to get little to no attention, particularly at the outset of international transactions. Ignoring, or failing to plan early for these tasks early is a mistake. Such steps, which often are needed to effectuate a transaction legally and practically, are critical. Delays in completing these steps can be costly, in legal, financial, and relationship terms.
World Wide Web of #Tech Supply Chain Risk
Some Congress members are lobbying the Administration to impose human rights sanctions on Chinese officials and companies responsible for or complicit in abuses against China’s Uighur Muslim minority and other minorities. Two companies named, Dahua Technology and Hikvision, are very large, China-based global firms that produce surveillance products and systems. The bottom line is that the tech industry should take note of the development (even if no sanctions are imposed), as it foreshadows the legal and reputation risk issues they will, without doubt, face in connection with tech-enabled abuses, privacy encroachments, and other conduct by consumers of tech products and services.
Critical Minerals: Where National Security, Trade and Environmental Laws Will Meet
Against the Trump Administration’s ideological backdrop, a range of conventional and unconventional trade, economic and other measures have been and likely will continue to be taken on “national security” grounds, including domestically. These include measures to increase domestic production of “critical minerals” (among them rare earth elements)–essential to the production of consumer electronics, electric vehicles, defense articles, medical devices, and other manufactured articles. Such actions can be seen on the horizon, if one connects the dots between national security authorities under trade laws, the Administration’s stated goals and actions favoring increased domestic mining of critical minerals, and environmental laws that contain national security/national defense exceptions and are viewed by the Administration and extractives industry interests as prohibitive to domestic production of critical minerals and commercially viable terms.
Global Magnitsky: The Swiss Army Knife of Sanctions
The Global Magnitsky Sanctions apply worldwide, without any requirement of a jurisdictional nexus with the United States. They define corruption broadly enough to capture a wide range of conduct and persons. The sanctions target “serious human rights abuse,” but do not define the term. Moreover, the sanctions are readily deployable. No tailored legislation, executive order, or other administrative process—other than a sanctions determination by the Secretary of Treasury in consultation with the Secretary of State—is required to impose sanctions anywhere, anytime. Given their global reach, substantive breadth, and wide applicability, the Global Magnitsky Sanctions have distinct utility value as they can be readily employed for multiple legal, policy and strategic objectives. They are the Swiss Army Knife of sanctions. To date, 78 individuals and entities have been sanctioned for corruption and human rights abuses. The most recent of these sanctions actions, against Turkey, has triggered speculation as to its motives and objectives. This is discussed below, as are some of the provisions that suggest the Global Magnitsky Sanctions were formulated for sweeping applicability and enforcement latitude.
After Cobalt Heist, Review Minerals Transit, Storage and Insurance Practices
At this point, one or few reported new incidents of cobalt (or other critical minerals) thefts/security risks are insufficient to make any reasonable predictions as to what action would be reasonable. However, news of such incidents should be closely monitored by suppliers/exporters, buyers/importers, finance intermediaries, and logistics services providers. Related storage, transit and insurance practices and terms should be noted for review if and when circumstances appear to warrant such action.
Afghanistan’s Minerals and Mining Sector: Try a Localized Approach to Law and Regulation
Thinking beyond the parameters of standard “international development” and industry playbooks, the lack of progress (or, in some cases, regression) in developing Afghanistan’s mining sector should induce interested government, industry and nongovernmental actors to consider if and how laws, policies and technical assistance can be formulated, modified and implemented in ways that might enhance their effectiveness in practice, rather than just on paper. Afghanistan, as is well known, is a Muslim majority nation in which Islamic law (as locally interpreted and implemented formally and informally) plays a significant role. Islamic law (Shari’ah), provides rules and precedents applicable not only to family matters and ritual worship, but also to business transactions, public governance, market regulation, and limitations on government dominion over private property. in these areas, and others, Islamic law and historical practices provide rules and precedents applicable to the regulation, administration and conduct of mining and other extractives businesses. These laws and precedents are just as robust, and more so in some cases, as international and foreign laws and standards.
Russia Summit Could Spur Congressional Activism on Sanctions, Trade
The meeting in Helsinki between the U.S. and Russian presidents has (as presumably everyone knows) sparked strong reactions in the United States, particularly in response to the U.S. President’s performance. Beyond the politics of the moment and its aftermath, the Helsinki meeting could have legal consequences, should Congress move to insert itself, beyond its standard law-making and oversight role, in sanctions and trade matters. And not just with respect to Russia. There are a number of ways that Congress can play a greater role in sanctions and trade. Such Congressional involvement, if it materializes, would likely be designed to constrain the President, such as by restricting his ability to lift, not impose or modify sanctions through Executive action.
Personal Remittances and Proceeds of Inheritances from Iran After U.S. Withdrawal from Iran Deal
For U.S. persons seeking to engage in permitted noncommercial, personal remittance or inheritance-related transactions, the higher risk sensitivity of some third country (and U.S.-based) financial institutions may complicate (or thwart in some cases), legal transactions. In light of this, persons seeking to engage in such legal transactions in the post-U.S. JCPOA withdrawal environment should exercise extra care in initiating and executing legal transfers with third country financial institutions.
United States Sanctions Malaysia Agent of Iranian Airline
The Treasury Department’s Office of Foreign Assets Control (OFAC) today sanctioned Malaysia-based Mahan Travel and Tourism Sdn Bhd (“Mahan Travel”) pursuant to Executive Order 13,224. Rather then information should be taken as a prompt to other travel agencies or vendors that directly or indirectly “act for or on behalf of Mahan Air” to disassociate from the airline. Such other travel agencies or vendors should, at minimum, review and understand today’s Mahan Travel action, assess their sanctions and related risk (legal, commercial, etc.) and take defensive compliance steps that are appropriate to their sanctions/legal exposure and commercial position. The broader takeaway from today’s OFAC action against Mahan Travel is that it reinforces the fact that U.S. sanctions and other laws are global in reach. Non-U.S. parties should take note of their potential exposure to U.S. sanctions or other legal enforcement actions.
U.S. Anti-Corruption Enforcement in Africa’s Extractives Industry Creates Legal and Supply Chain Risk for Mining, Tech and Others
The U.S. arm of Glencore, the global commodities trading and mining giant, has been served a subpoena by the U.S. Department of Justice, according to news accounts. The DOJ’s subpoena reportedly seeks documents and information pertaining Glencore’s business in the Democratic Republic of Congo (DRC), Nigeria and Venezuela to assess potential violations of U.S. anti-money laundering laws and the Foreign Corrupt Practices Act (FCPA), the principal U.S. law essentially prohibiting the bribery of foreign officials for business gain by U.S. companies and others subject to United States’ jurisdiction (broadly construed and applied).The Glencore subpoena may not be a one-off and it should be viewed– at least for risk assessment and compliance improvement purposes– as potentially part of a larger U.S. strategy to proactively target corruption and, by extension, money laundering, in Africa and Africa’s extractives industries. (The wider context is that the Trump Administration views U.S. anti-corruption, anti-money laundering and sanctions laws and their enforcement as “tools of economic diplomacy”, including to advance trade and other policy objectives).
U.S. Multinational Companies and Dual Citizens Have Full Sanctions Exposure Under OFAC Global Magnitsky Sanctions Regs
U.S. multinational companies/entities as well as dual citizens/nationals should understand their heightened sanctions exposure under the Global Magnitsky Act, EO 13,818 and the GloMag Regulations. Multinational companies/entities would be well-advised to update their risk-based compliance programs and educate their relevant personnel to make compliance more likely, including by avoiding inadvertent violations of the Global Magnitsky Act, EO 13,818 and the GloMag Regs.
Global Magnitsky Sanctions “a Central Tool of U.S. Foreign Policy”
In a May 8 letter to Congress, obtained by the FT, the [U.S.] [S]tate [D]epartment said the Global Magnitsky sanctions program had become ‘a central tool of United States foreign policy.’” If the FT’s account of the letter is correct, the statement is essential to understanding how the Trump Administration (or segments of it) views and intends to deploy the Global Magnitsky Sanctions not only for legal enforcement purposes, but also to achieve foreign policy objectives.
ZTE: Was the Export Ban the Right Penalty?
The sentiments expressed by Senator Rubio and others reflect commercial, competition, policy, and strategic concerns held by business, policy makers, defense and national security officials, and others about China and Chinese firms like ZTE and Huawei. But when raised in the context of and as a justification for a specific legal enforcement action, the sentiments blur the lines between what should primarily be an enforcement based on facts and applicable laws, rather than an instrument for advancing wider policy objectives that are not specifically advanced by the laws applicable to the conduct for which ZTE was penalized. And, while Secretary Ross’ stated rationale to impose the harsher penalty to change ZTE’s behavior may have been sound, the recommendation of the career professionals with expertise in sanctions and export controls enforcement should, perhaps, have carried the day. Secretary Ross’ description of the process leading to the export ban and the mess that has followed it give more reason to ask whether, in the first place, the export ban was the appropriate remedy as a matter of applicable laws and the objectives served by them.
Hdeel Abdelhady Re-appointed Senior Adviser to American Bar Assn Middle East Committee
MassPoint Legal and Strategy Advisory is pleased to announce that Hdeel Abdelhady has been re-appointed to an additional one-year term as a Senior Adviser to the American Bar Association Middle East Committee, part of the ABA Section of International Law. A long-time member and leader of the ABA, Ms. Abdelhady will commence her 2018-2019 term in August 2018. Ms. Abdelhady, who was a Co-Chair of the Middle East Committee for three years until 2017, currently serves as a Senior Adviser to the Committee. In addition, Ms. Abdelhady is the ABA’s Liaison to the Dubai International Financial Centre Courts (DIFC Courts) and serves on the Board of the ABA Rule of Law Initiative (ROLI) Middle East and North Africa Council (ROLI MENA Council).
The Value of Integrating News Awareness into Corporate Compliance and Risk Management
The case of Michael Cohen, “personal lawyer” to the U.S. President, continues to yield rich legal, compliance and risk management lessons for a growing group that includes U.S. and foreign companies, banks, lobbyists, government officials, and lawyers. Recent developments in the Cohen matter highlight how news awareness can enhance compliance and risk management for companies and others. Unlike AT&T and Novartis, most companies will not find themselves entangled in headline news of national importance, but enough of them are likely to get caught flat-footed by news about them or their business partners and peers (such as in the same industry, where news of one company’s bad behavior can lead law enforcement authorities to scrutinize peer companies in industry sweeps).
Decoding Trump on Trade: Links Between Economic/Trade Issues and Military Security
Other of Mr. Trump’s statements, including dating back decades, hint that he views trade as “unfair” when other nations fail to compensate the United States for providing the secure conditions under which they trade and prosper. In 1987, Citizen Trump took out full page ads in three major newspapers criticizing U.S. “foreign defense policy” for its lack of “backbone.” Why, asked Mr. Trump, were foreign nations like Japan “not paying the United States for the human lives and billions of dollars we are losing to protect their interests?” In a 1988 interview with Oprah Winfrey, Mr. Trump wondered why Kuwait, “where the poorest people live like kings,” was not paying the United States “25 percent of what they’re making” from oil sales when “we make it possible for them to sell their oil.” More recently, to extract trade concessions, the President reminded South Korea of its reliance on the United States for its security.
U.S. Law as Trade War Weapon
The details of the ZTE case merit study. But the case has broader legal and policy meaning as it puts into focus the Trump Administration’s apparent strategy to use U.S. sanctions, along with anti-corruption and anti-money laundering laws, as trade war weapons against economic rivals like China. Commerce Secretary Wilbur Ross foreshadowed the Administration’s legal strategy on March 7, 2017, when he first announced the ZTE enforcement. “With this action,” Ross stated, “we are putting the world on notice. Improper trade games are over with . . . Under President Trump’s leadership, we will be aggressively enforcing strong trade policies with the dual purpose of protecting American national security and protecting American workers.” With the release of the U.S. National Security Strategy (NSS) in December 2017, the Trump Administration made plain what Secretary Ross intimated in his ZTE statements. Peculiarly, the NSS characterizes U.S. “sanctions, anti-money laundering and anti-corruption measures, and enforcement actions” as “economic tools” and “tools of economic diplomacy” that “can be important parts of broader strategies to deter, coerce, and constrain adversaries.”
U.S.-China Trade and Tech War on Three Fronts
Much of the talk of trade war between the United States and China, and perhaps other countries, has focused on traditional trade measures and counter-measures like tariffs that strike at the core of international trade: most basically, the movement of goods and services across international borders. But there are two additional fronts of a U.S.-China trade war (thus far): intellectual property and the use of U.S. sanctions and other laws to “coerce and deter” economic rivals like China.
House Bill “Blocks Bailout” of ZTE After Export Ban
On May 17, the House Appropriations Committee unanimously approved a measure to block the Commerce Department from using appropriated funds to alter the export ban (i.e., the “denial order”) that the agency activated against ZTE on April 15, 2018. The ZTE measure was approved as an amendment to the fiscal year 2019 bill funding the Departments of Commerce and Justice, Science, and Related Agencies (“Commerce Appropriations Bill”), which was approved by the Appropriations Committee on May 17.
Hdeel Abdelhady Discussed the Michael Cohen Matter on MSNBC
Hdeel Abdelhady joined MSNBC’s Ari Melber on May 9 to discuss developments in the Michael Cohen case, including Michael Avenatti’s report purporting to contain details of Cohen’s transactions with Novartis, AT&T, Viktor Vekselberg and others. Watch the segment here: MassPoint’s Hdeel Abdelhady on The Beat With Ari Melber
Trump Administration Supercharged Global Magnitsky Corruption and Human Rights Sanctions
Beyond the parameters of the Global Magnitsky Act, EO 13818 markedly enlarges the range of sanctionable conduct and persons. The differences between the language of EO 13818 and the Global Magnitsky Act are substantive and significant. In several instances, EO 13818 expands sanctions by omitting the Act’s qualifying language, adding new bases for sanctions, and/or leaving key terms undefined. Key instances of EO 13818’s broad and/or uncertain language are discussed below.
Iran Sanctions Update: U.S. Withdrawal From JCPOA
The United States today unilaterally withdrew from the Iran Nuclear Deal (the Joint Comprehensive Plan of Action (JCPOA)). The U.S. Treasury Department and the White House have announced that those sanctions that were lifted as part of the JCPOA framework will, as expected, be re-imposed. The Office of Foreign Assets Control at Treasury (OFAC) announced today that it will institute 90-day and 180-day “wind down” periods, after which previously lifted U.S. sanctions will again take effect. For example: Starting August 7, 2018, the import to the United States of Iranian carpets and certain foodstuffs will be prohibited, as will the export and re-export to Iran of commercial passenger aircraft and related parts and services. Starting on November 5, 2018, foreign financial institutions will be subject to U.S. sanctions for transactions with the Iran Central Bank and designated Iranian financial institutions.
Trump Administration Targets Chinese Dominance, Corruption in Africa
Notably, in the two pages of the NSS that are devoted to the National Security Strategy in the Africa context, none of Africa’s 54 nations are mentioned, but China is named twice. The NSS notes with concern China’s “expanding . . . economic military presence in Africa, growing from a small investor in the continent two decades ago into Africa’s largest trading partner today.” China’s methods and influence in Africa are described unflatteringly. “Some Chinese practices,” the NSS states bluntly, “undermine Africa’s long-term development by corrupting elites, dominating extractive industries, and locking countries into unsustainable and opaque debts and commitments.”
The President’s “Personal Lawyer,” a “Hush” Payment, and a Bank Suspicious Activity Report
Following reports this week that the FBI executed search warrants at Cohen’s law offices, hotel room and home and seized “business records, emails and documents related to several topics, including a payment to” Stormy Daniels, the Wall Street Journal revisited the Cohen-linked Suspicious Activity Report, writing that First Republic Bank had “conducted its own investigation” of the Stormy Daniels transaction “after receiving the subpoena from the authorities.”
From a legal perspective, these and similar news reports are striking for the legal question that they raise: How did the existence of the Suspicious Activity Report become public? By law, banks and certain other financial institutions are required to have in place systems to detect and deter money laundering, terrorism financing and other financial crime. Banks and certain other financial institutions are required by law to file Suspicious Activity Reports with respect to certain criminal violations or where a transaction appears to have no lawful purpose, is inconsistent with a customer’s ordinary behavior and/or is in other ways suspicious (as indicated in a relevant section of the FFIEC Bank Secrecy Act manual below).
MassPoint PLLC Launches Dedicated Magnitsky Law and Sanctions Website
MassPoint Legal and Strategy Advisory PLLC (“MassPoint”), the boutique Washington, D.C. law and strategy firm, is pleased to announce the launch of a dedicated website, Magnitsky Laws and Sanctions.
The adoption by the United States of the Global Magnitsky Sanctions is a significant legal and policy development, both domestically and internationally. The Global Magnitsky Sanctions target certain corruption and human rights abuses worldwide. While just one of a number of U.S. sanctions programs, the Global Magnitsky Sanctions are, in scope and substance, extraordinary in an number of ways. As explained in an earlier MassPoint PLLC article on the Global Magnitsky Sanctions, “the United States’ Global Magnitsky Act and sanctions program are singular in their force. Other countries have adopted versions of a Magnitsky Act . . . but none of these other Magnitsky frameworks rival the potential sweep and impact of the United States’ Magnitsky framework.” The objective of MassPoint PLLC’s Magnitsky Laws and Sanctions website is to provide analyses and updates on the Global Magnitsky Sanctions and related foreign and international developments and issues.
FinCEN Guidance on Customer Due Diligence (CDD) Rule 2018
The Financial Crimes Enforcement Network (FinCEN) on April 3, 2018 published guidance on the Customer Due Diligence Requirements for Financial Institutions rule (the “CDD Rule) that will come into effect on May 11, 2018. FinCEN’s CDD Guidance, in the form of frequently asked questions, is comprised of 36 questions and answers covering a range of issues, from the scope of due diligence up the ownership chain of legal entities to due diligence requirements applicable (or not) to foreign banks.
U.S. Multinationals, Dual Citizens May Have Greater Magnitsky Sanctions Exposure
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.
United States Directly Sanctions Foreign Government Officials for Corruption
Insofar as the Global Magnitsky Sanctions directly penalize foreign government officials for corrupt acts, they are a departure from prevailing anti-corruption laws and standards that typically target, within jurisdictional limits, private parties who bribe foreign government officials. For example, the U.S. Foreign Corrupt Practices Act (FCPA), which prohibits the bribery of foreign officials to gain business advantage, applies to private parties who bribe or attempt to bribe foreign government officials and are within the legal jurisdiction of the United States by virtue of their U.S. nationality, presence in the United States, or links between their corrupt acts and conspiracies overseas and the territory of the United States.[5] Even expansive readings of the FCPA have claimed—with varying degrees of persuasiveness—the existence of some jurisdictional nexus to the United States.
From Sergei Magnitsky to Global Magnitsky: United States Asserts Universal Jurisdiction Over Corruption and Human Rights Abuses
As the above description indicates, the Sergei Magnitsky Act targets persons and places tied to specific events that occurred in one country. Moreover, the Sergei Magnitsky Act can be read to have been adopted or operate as an alternative or last recourse for justice and accountability, following Congress’ findings that there was a denial of “any justice or legal remedies” to Mr. Magnitsky by “all state bodies of the Russian Federation” and “impunity since his death of state officials.” In contrast, the Global Magnitsky Act contains no analogous Congressional findings, nor does it expressly state or imply that it is a last or alternative resort where adequate legal processes to adjudicate corruption or human rights abuses are unavailable in foreign countries where relevant events took place or parties are located, or before foreign tribunals to which relevant states have submitted to jurisdiction. Instead, the Global Magnitsky Act’s default position is the applicability of U.S. sanctions (supported by “credible evidence”) without the requirement of a jurisdictional nexus with the United States. Accordingly, the Global Magnitsky Act asserts U.S. universal jurisdiction over the corrupt acts and human rights abuses it targets. EO 13818 goes much further.
U.S. 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.
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.
Wolfsberg Group Revised Correspondent Banking Due Diligence Questionnaire (2018)
The Wolfsberg Group first announced the release of the CBDDQ in 2017. However, the Group did not make the CBDDQ widely available. After initially announcing the CBDDQ, the Wolfsberg Group held back after deciding that the CBDDQ should be published more widely “once an additional set of materials has been completed . . . in order to limit the ability of third parties to interpret what it is that the Group intended with the DDQ and who it was directed to.”
Hdeel Abdelhady to Speak on Islamic Finance at Harvard Law School
MassPoint’s Founder and Principal, Hdeel Abdelhady, will speak at a program on Islamic Finance at Harvard Law School. Ms. Abdelhady, who has acted as legal counsel to financial institutions, companies, and non-profit organizations on Islamic Finance, banking, and governance matters, teaches a course in Transactional Islamic Law at The George Washington University Law School in Washington, D.C. The program, entitled “Islamic Finance: Principles and Strategies,” will take place on March 6, 2018 at the Harvard Law School in Cambridge, Massachusetts. Program information is available via Harvard Law School.
Ukraine/Russia Sanctions: OFAC Authorizes Derivatives Linked to 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 CAASTA. 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.
MassPoint Named “Corporate Law Firm of the Year” USA in Finance Monthly Global Awards 2017
MassPoint Legal and Strategy Advisory PLLC (“MassPoint PLLC“), a boutique Washington. D.C. law and strategy firm, was named 2017 Finance Monthly’s Global Awards “Corporate Law Firm of the Year” for the United States.Finance Monthly is a “global publication delivering news, comment and analysis to those at the centre of the corporate sector.” “The Finance Monthly Global Awards recognise and commend financial organisations and advisors worldwide who have performed in the highest level possible and celebrate the success, innovation and quality of firms working in, and with, the financial and legal sectors across the globe.”
Hdeel Abdelhady to Speak on Managing Money Laundering, Trade Sanctions, and Corruption Risks
MassPoint’s Founder and Principal, Hdeel Abdelhady, will speak at a program on managing money laundering, trade sanctions, and corruption risks in business. The program, entitled “Know Your Business Partners: A Must to Managing Money Laundering, Trade Sanctions, and Corruption Risks,” will take place on November 17, 2017 in Washington, D.C. at the American Bar Association Business Law Section’s Fall 2017 Meeting.
Wolfsberg Group Updates Correspondent Banking Due Diligence Questionnaire
The Wolfsberg Group, a group of thirteen global banks, on October 15, 2017 announced its issuance of a “comprehensively” updated Correspondent Banking Due Diligence Questionnaire (the “CBDDQ”). The CBDDQ responds to FATF Recommendation 13 on Correspondent Banking and is the international correspondent banking standard on which the Wolfsberg Group members have “settled“, “committed to being early adopters of,” and plan to support “with FAQ’s and additional awareness raising materials.”
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.
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.
Hdeel Abdelhady Discussed the NYDFS Habib Bank Enforcement Action
MassPoint’s Founder and Principal, Hdeel Abdelhady, discussed the legal significance and potential commercial implications of the NYDFS’ enforcement action against Habib Bank at a time of correspondent banking derisking.
Dana Gas Sukuk Governing Law and Jurisdiction
This post discusses these issues in Dana Gas sukuk matter and offers some observations and lessons that can be drawn from the governing law and forum selection questions raised by the Dana Gas sukuk matter. As this post entails post hoc discussion of the Dana Gas sukuk offering based on publicly available information, there is an element (or more) of Monday morning quarterbacking, and this should be borne in mind. Nevertheless, the general observations and potential lessons—which are not unique to the Dana Gas sukuk or Islamic transactions—should be read for their generality.
Dana Gas Deems its Own Sukuk Unlawful: Parsing the Dana Gas Statement
Dana Gas PJSC, the Sharjah, UAE-based gas producer, has unilaterally declared “unlawful” sukuk[2] instruments issued by the company in 2013 [3] (through, as issuer, Dana Gas Sukuk Limited, a Jersey public company with limited liability). This post discusses some of the Shari’ah, UAE law, and factual issues triggered by the Dana Gas statement on the unlawfulness of its sukuk.
Dana Gas Declares its Own Sukuk “Unlawful”: Revisiting The Investment Dar Case
Dana Gas’ move to halt its obligations under the sukuk terms on the grounds that the instruments are unlawful under Islamic law triggers many issues for discussion, including: (1) the legal and tactical soundness of its actions, (2) implications for the sukuk market and Islamic finance generally, and (3) the real and perceived quality of Shari’ah governance (both with respect to the sukuk at issue and sukuk and Islamic finance generally). This is not the first time that an Islamic instrument has been deemed unlawful by the originating party in an effort to avoid payment obligations. Years ago, an Islamic financial institution,The Investment Dar, asserted in an English court that a wakalah investment product that it offered and managed was not Shari’ah compliant and therefore unenforceable.
U.S. Senators Raise National Security Concerns About Foreign Investment in U.S. Real Estate
On May 17, 2017, U.S. Senators Ron Wyden (D-OR), Claire McCaskill (D-MO), and Sherrod Brown (D-OH)—respectively ranking members of the Senate Finance; Homeland Security and Government Affairs; and Banking, Housing, and Urban Affairs Committees of the U.S. Senate—asked the Government Accountability Office (GAO) to review the approach taken by the Committee on Foreign Investment in the United States (CFIUS) to foreign investment in U.S. real estate and to “assess whether and how CFIUS addresses the full range of national security challenges such transactions may pose.” (The Senators’ letter to the GAO is below). Specifically, the Senators have asked the GAO to examine a number of issues aimed at assessing the extent to which applicable regulations and the CFIUS process capture real estate transactions, the percentage of foreign acquisitions of U.S. real estate that have “filed” for CFIUS review, and the information and processes used by CFIUS to assess national security issues raised by foreign acquisitions of U.S. real estate.
China’s One Belt One Road Could Disrupt U.S. Legal Dominance
The OBOR, even if partially successful, would, as many analysts and commentators have noted, alter the global trade landscape, if not “shake up” the global economic order in place since the end of World War II. Less discussed (except, for example, in this 2015 MassPoint Occasional Note) is one likely secondary effect of the OBOR and other trade and finance initiatives that are not centered on the U.S. dollar or the Bretton Woods system: the likely curtailment of the global reach of U.S. law.
Hdeel Abdelhady to Speak on Emerging Markets Social Impact Investment at NYU Law’s Grunin Center
MassPoint News
Hdeel Abdelhady is due to speak about planning for and managing uncertainty in social impact investment, particularly in emerging markets. Ms. Abdelhady, who is MassPoint’s Founder and Principal, has 15 years of experience in transactions, disputes, and regulatory matters in and involving emerging and developing markets in Africa, Asia, the Middle East, and Latin America.
Hdeel Abdelhady Appointed ABA Liaison to Dubai International Financial Centre Courts (DIFC Courts)
Hdeel Abdelhady has been appointed to serve as the American Bar Association (ABA) Section of International Law’s Liaison to the Dubai International Financial Centre Courts (DIFC Courts). Ms. Abdelhady, who is MassPoint’s Founder and Principal, has lived and worked in Dubai and previously worked in the DIFC and collaborated with DIFC entities. Ms. Abdelhady currently serves as a Co-Chair of the ABA Section of International Law’s Middle East Committee, which she has led for three years as a Co-Chair. She also serves on the Board of the American Bar Association Rule of Law Initiative’s Middle East and North Africa Council and as the ABA Section of International Law’s Liaison to the Organisation for Economic Co-operation and Development (OECD).
After Election 2016: 5 Legal and Business Issues to Watch in 2017
The dismantling of Obama-era laws and regulations, broader deregulation, and economic and political nationalism were and remain themes of the 2016 U.S. Election and presidential transition period. Donald Trump and members of the incoming Republican-controlled Congress have singled out for repeal or significant modification the Affordable Care Act (aka “Obamacare”) and the Dodd-Frank Wall Street Reform and Consumer Protection Act, along with trade, immigration, foreign affairs, and environmental laws, regulations, and policies. If taken, these actions will not only effect legal changes in specific areas, they will create legal and policy voids that may be filled by U.S. states and localities, foreign governments and multilateral and non-governmental organizations, and the private sector. Five legal and business issues and dynamics to watch in 2017 are highlighted here.
Do State Regulators Have Authority to Enforce OFAC Sanctions?
The enforcement of OFAC-administered sanctions by a state agency—even against banks by a banking regulator operating in a dual banking system—raises fundamental constitutional and other legal questions. Chief among them is the overarching question of whether U.S. states have authority to directly or effectively enforce OFAC-administered sanctions, particularly independently and prior to enforcement by competent federal authorities—namely OFAC. This question and some of the legal issues and policy and practical considerations appertaining to it are discussed in detail in a forthcoming publication. This document provides a summary preview of some of the key legal issues discussed in that publication. Additional summary previews may be provided separately.
New Rules of Business Conduct Regulation Require Fresh Risk and Compliance Thinking
Traditionally businesses have looked to contractual terms, industry groups, legislatures, regulators and other conventional authorities to identify and manage commercial, legal, and compliance requirements and risks. In today’s interconnected, information rich, and reputation-conscious business world, this model is outdated and insufficient. It creates blind spots that can expose businesses to commercial, legal, and compliance risks from sources that traditional models ignore, misunderstand, or underestimate. In the same ways that the internet and social media have enabled non- “establishment” actors to communicate and amplify political messages, these and other tools of the information/new media age have enabled non-traditional actors to effectively influence business conduct standards. As a result, constituencies and issues that not so long ago were marginal or viewed as niche or inconsequential are now relevant, and for some businesses and industries they are integral.
Who’s Who Legal Recognizes Hdeel Abdelhady for Corporate: M&A and Governance
May 2016
Who’s Who Legal has recognized Hdeel Abdelhady for Corporate: M&A and Governance, in its 2016 listing of the world’s leading lawyers. Who’s Who Legal is a global listing of top lawyers who are selected for inclusion by surveying private practitioners, general counsel, and other in-house counsel in all the major jurisdictions. Only those attorneys who receive the greatest number of recommendations are selected.
Hdeel Abdelhady is MassPoint’s Founder and Principal.
Nile Water Dispute: Egypt, Ethiopia and The Grand Renaissance Dam
Hdeel Abdelhady was a guest on WVON Radio Chicago’s African Diaspora Today. She and fellow guest Dr. John Mbaku of the Brookings Institution took part in an engaging discussion of the Grand Ethiopian Renaissance Dam, the Egyptian and Ethiopian positions, and related issues.
Egypt Needs a Mindset Revolution
Ultimately, the success of Egypt’s political transition will be measured not at the ballot box, but at the breadlines. Egypt needs a national economic vision to transform its political aspirations into reality. But first the country must undergo a national mindset revolution.
Egyptians must ask themselves and their leaders the clichéd question: where do they see themselves in the next five, 15, or 50 years? Will Egypt remain a foreign aid recipient whose fortunes twist in unpredictable political winds? Will its economic path continue to be paved with off-the-rack structural adjustments thought up in the halls of the World Bank and International Monetary Fund? Will Egyptians continue to accept — and expect — economic mediocrity?
The answers, and Egypt’s future, will depend on the health of the national mindset.
Egypt Needs a Mindset Revolution (to transition economically)
Egypt needs a mindset revolution
By Hdeel Abdelhady (Ahram Weekly, October 6-16 2011 edition)
In the aftermath of Egypt’s political earthquake, the army, interim civilian government, political parties, and other contenders have jostled for political position. All the while, Egypt’s economy has languished, exacerbating the poor social and economic conditions that catalysed the popular uprising.
Egypt’s interim leadership has scrambled to meet immediate funding needs with financial aid from the West and the Arabian Gulf. But none of Egypt’s current or aspiring leaders has put forward a development plan worthy of popular aspirations for freedom, dignity and social justice.
Ultimately, the success of Egypt’s political transition will be measured not at the ballot box, but at the breadlines. Egypt needs a national economic vision to transform its political aspirations into reality. But first the country must undergo a national mindset revolution.
Egyptians must ask themselves and their leaders the clichéd question: where do they see themselves in the next five, 15, or 50 years? Will Egypt remain a foreign aid recipient whose fortunes twist in unpredictable political winds? Will its economic path continue to be paved with off-the-rack structural adjustments thought up in the halls of the World Bank and International Monetary Fund? Will Egyptians continue to accept — and expect — economic mediocrity?
The answers, and Egypt’s future, will depend on the health of the national mindset.
Egypt suffers from a mindset malady that has stunted its economic growth and development. Years of corrupt and ineffectual rule have led the country to regress decades, disenfranchised the majority and deflated national self- esteem. In the national psyche, economic hardship is as Egyptian as the Nile, the Pyramids and falafel. The theme is well documented by inexhaustible Egyptian television and film portrayals of families dutifully struggling to make ends meet.
The cure for Egypt’s malaise is an alternative narrative for the future, starting with a truly national economic vision that breaks with the passive, self- limiting and unambitious mentality of the past and present.
Egypt is crippled by a decades-long pattern of passivity and reliance on externally sourced financing and economic policies. In the 1970s, the government adopted an economic “openness” policy ( infitah in Arabic). Its central objective was to break the state’s economic monopoly, through privatisation and externally-mandated austerity measures. Introduced by president Anwar El-Sadat, the infitah policy was part of a turn away from the Soviet Union and towards the West, largely in response to the USSR’s fecklessness in the lead up to the 1973 War.
As continued under president Hosni Mubarak (albeit inconsistently and under different headings), the infitah policy effectively set Egypt on a path of reliance on conditional financial aid, with abysmal results on the ground. Illiteracy skyrocketed, infrastructure deteriorated, the poverty rate climbed and high unemployment levels became the norm.
Rather than openness, infitah ushered in an era of closed-mindedness, with the government attached to unipolar economic policies that were subordinate to its unipolar international politics. Egypt became maladjusted in an increasingly multipolar global economy, and regressed as its contemporaries in the global South thrived. The outcome was ironic for a founding member of the Non-Aligned Movement, a group of developing nations that, in theory, rejected the bipolar paradigm of the Cold War.
If Egypt is to meet its economic potential, the pattern of passivity, unipolarity and external dependence must be broken. One need only look to “Third World” success stories, such as Brazil, India, China and the Asian Tigers, to see that economic advancement is born of an ambitious national vision and sustained by local will.
Closer to home, Dubai is a testament to the transformative power of a homegrown vision and leadership. Egypt must look within for solutions. And its economic policies must be calibrated for a world in which, alongside North America and Europe, markets in Asia, Latin America, the Middle East and Africa play significant roles.
Egyptians must also adjust the lens through which they see their economic potential. For years, many have compared Egypt’s economic fortunes to those of its rich oil and gas neighbours in the Middle East. This is understandable as for many Egyptians, a labour contract in the Gulf has long been a coveted economic opportunity. But the comparison breeds resignation. It assumes wrongly that the oil and gas exporting model is the only alternative to economic mediocrity in the Middle East. Egypt’s economy is not natural-resource based. But neither are the world’s largest and most innovative economies.
Egypt has the geographic, cultural, human and other resources to join the ranks of prosperous economies based on the production of goods and services, innovation and strategic investment.
Flanked by the Red and Mediterranean seas, anchored by the Nile, and central between Africa, Asia and Europe, Egypt is physically well placed to be a strategic trading hub and production base. The Suez Canal and Egypt’s ports are clear manifestations of Egypt’s geographic value. Geography is an invaluable platform for growth across industries, sectors and markets.
Egypt’s cultural resources — historic, media and entertainment and tourism — are well known. But they have yet to be developed to full capacity. Instead, the country has pursued a largely one-dimensional cultural tourism model. Egypt has failed to seize growth opportunities afforded by advances in technology, travel and tourism, and culture and travel-related goods and services markets. A 21st- century plan is needed to leverage Egypt’s unparalleled cultural offerings, and the country’s tech-savvy youth might have something to say about incorporating technology to expand the culture sector.
Egypt’s population is its most valuable asset. The most populous Arab nation and the second most populous in Africa, Egypt possesses the human resources necessary for economic growth. Here again, the lens through which Egypt’s population is viewed must be wiped of the cynical haze of the past. For years, Egypt’s government treated population growth as a burden, and failed to cultivate its citizens for meaningful participation.
The highest priority of Egypt’s future leadership should be to position the people as producers, rather than just consumers of foreign goods and services. A truly national development strategy is needed to integrate the majority of Egyptians into political and economic life.
All of Egypt’s governorates, not just Cairo, and all its people have important roles to play in development. This includes the least educated and trained, women, farmers and rural populations. Through targeted small and medium enterprise financing, women’s economic empowerment, agricultural initiatives, education and vocational training, the talents of disenfranchised citizens can be mobilised for growth. Inclusiveness is in the national interest.
As Egyptians consider their political options, they should bear in mind that past failures to utilise the country’s resources for development have caused greater damage than instances of corrupt misappropriation of state assets, for which high-profile figures are being prosecuted. Remedies for policy failures will not come from the courts, but from the people.
Egyptians will soon possess a valuable currency — the vote. They should use this to say resoundingly that voluntary economic underachievement is no longer acceptable. Candidates and political parties that seek political office or influence must put forward credible economic and development plans that advance the national interest, rather than their own insular political agendas. There is too much at stake to reward political aspirants for rhetoric, goodwill, or past public service. The vote is not deferred compensation for past good deeds, but an investment in the future.
In the interim period, the duration of which is yet undetermined, the interim civilian government should facilitate a national dialogue about the country’s economic future. Civil society, professional syndicates, labour unions and grassroots activists have a role to play in prioritising national development. Inclusive national dialogue will not happen on Twitter or Facebook alone. Traditional methods of organising are critically needed now.
The spoils of Egypt’s popular uprising will have to be tangible for the countless millions of Egyptians who supported (or did not oppose) change. The act of voting in free and fair elections will be illusory so long as mass queues for government-subsidised bread remain ubiquitous in Egyptian life.
Government passivity, popular complacency, and political insularity will not beget economic growth and development. Egypt needs a national mindset revolution to meaningfully transition.
* The writer is a Washington DC based lawyer who focuses on international and emerging markets investment, including in the Middle East and Africa.
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