OFAC Sanctions Paraguayan Tobacco Firm Ties to Sanctioned Ex-President
The Treasury’s Office of Foreign Assets Control (OFAC) re-imposed sanctions on Paraguayan tobacco company Tabacalera del Este S.A. (Tabesa) for “providing financial support to” Paraguay’s former president, Horacio Manuel Cartes Jara (Cartes). Cartes was sanctioned in January 2023 for involvement in corruption. Both designations are under the Global Magnitsky human rights and anti-corruption sanctions program.
Tabesa was previously sanctioned under Global Magnitsky because Cartes owned more than 50% of the company. Later, Cartes sold his shares in Tabesa, seemingly removing the original factual and legal reasons for the sanctions.
According to OFAC, despite the prior sale of Cartes’ shares, Tabesa “has made—and plans to continue making—payments worth millions of dollars to Cartes.” In response, OFAC re-designated Tabesa under Global Magnitsky for “having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of Cartes, a person whose property and interests in property are blocked pursuant to E.O. 13818.”
It is not clear from OFAC’s announcement if OFAC determined that Cartes’ sale of his shares in Tabesa was a sham sale, or otherwise a transaction intended to appear to have severed his ownership or other financial interests in the company. Nevertheless, the facts — albeit not detailed — raise a question as to whether divestitures of 50% or more ownership stakes in companies by sanctioned persons may, if not true divestitures, would be questioned in the enforcement of other sanctions programs that unlike Global Magnitsky do not in the underlying Executive Order authorize sanctions for giving financial or other material support to a blocked (sanctioned) party.
OFAC General License 7, in place before today’s action, continues to apply to Tabesa. This license authorizes transactions “ordinary incident and necessary” to a 1998 tobacco master settlement agreement between certain tobacco companies and U.S. states and territories.
The Global Magnitsky sanctions program is unique because it does not require a jurisdictional nexus to the United States. Executive Order 13818 substantially expands the Global Magnitsky Human Rights Accountability Act, relying on the International Emergency Economic Powers Act (IEEPA), which is the statutory authority for most current sanctions programs.
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