The importance of supply chain due diligence and the risks of modern slavery – OFAC settles North Korean sanctions case with fine

Authors: Kyle Wombolt, Jeremy Birch, Antony Crockett and Emily Purvis.

A recent enforcement action by the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) against US company e.l.f Cosmetics Inc (ELF) highlights the importance of supply chain due diligence in conducting cross border business. The action against ELF reflects a global trend of increased regulatory focus on supply chains in relation to a range of business conduct issues, including corruption, modern slavery, and other human rights violations. To mitigate sanction violation risk, companies should verify the country of origin of goods and services in their supply chains.

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Second Wave of United States Sanctions Against Iran Re-Imposed

Following President Trump’s decision on May 8, 2018 to withdraw the United States from the Joint Comprehensive Plan of Action (“JCPOA”), the US government announced that it would re-impose pre-JCPOA nuclear-related Iran sanctions (both primary and secondary) that were lifted under the JCPOA. As we reported previously, two “wind-down” periods—of 90 and 180 days respectively—commenced from the day of the announcement, during which non-US, non-Iranian companies were encouraged by the US government to withdraw from operations in Iran that would be affected by re-imposed sanctions. OFAC’s guidance discouraged non-US persons from engaging in new activity during the wind down periods, and stated that any such new activity may be a factor in connection with future enforcement action for actions taken after the wind-down period.

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UNITED STATES ANNOUNCES COMPLETE WITHDRAWAL FROM THE JCPOA, AND PROVIDES WINDING-DOWN PERIOD BEFORE SANCTIONS RE-IMPOSITION

On May 8, 2018, President Trump announced that the United States will completely withdraw from the Joint Comprehensive Plan of Action (the “JCPOA“). The JCPOA, signed in July 2015 and implemented on January 16, 2016, lifted most US nuclear related secondary sanctions and certain US primary sanctions targeting Iran. Prior to the JCPOA, the US had also imposed a broad range of “secondary sanctions” – applicable to dealings of non-US persons with sanctioned Iranian parties – in a number of key economic sectors in Iran, including automobile, energy and finance. The President’s announcement today states that all pre-JCPOA nuclear related sanctions will be re-imposed (both primary and secondary), and indicates that the US may impose new and additional sanctions in the future, going beyond the already highly restrictive sanctions regime which preceded the JCPOA. Continue reading

US ANNOUNCES NEW RUSSIA SANCTIONS DESIGNATIONS, RELEASES NEW GUIDANCE

On April 6, 2018, the US Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) announced new designations of seven high-net-worth Russian individuals and 12 companies they own or control, 17 senior Russian government officials, and a state-owned Russian weapons trading company and its subsidiary, a Russian bank. Continue reading

NEW SANCTIONS TARGETING VENEZUELA AND MALI

On 13 November 2017, the EU Council unanimously voted to impose a wide range of targeted sanctions on Venezuela in response to the growing political crisis in the country. Notably, the new EU sanctions go further than current US measures against Venezuela by including an arms embargo, as well as a travel ban and an asset freeze.

Further to a similar regime being imposed on Mali in order to target those seeking to derail the 2015 peace agreement, the UK has laid the legal groundwork for financial sanctions to be imposed once relevant individuals have been identified. Please click here for our full briefing.

US AUTHORITIES ISSUE COMPREHENSIVE IMPLEMENTATION GUIDANCE ON NEW US SANCTIONS LEGISLATION

Following our earlier bulletin, on October 31, 2017, the US Department of State and Department of Treasury’s Office of Foreign Assets Control (“OFAC”) posted comprehensive guidance related to the Countering America’s Adversaries Through Sanctions Act of 2017 (“CAATSA”). The new guidance addresses multiple provisions of CAATSA, mainly the provisions concerning secondary sanctions targeting Russia. The new guidance significantly limits and clarifies the scope of these secondary sanctions.

As detailed in our prior alert, on August 2, 2017, President Trump signed CAATSA into law. The legislation provided several new categories of primary and secondary sanctions relating to Russia, Iran and North Korea.

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TRUMP ADMINISTRATION IMPLEMENTS SECTORAL SANCTIONS TARGETING VENEZUELA

On August 24, 2017, President Trump issued a new Executive Order targeting the current Venezuela regime.  The next day, the US Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) announced the implementation of broad new “sectoral” sanctions applicable to the Government of Venezuela and Venezuelan state-owned entities, including state-owned oil producer  Petroleos de Venezuela, S.A. (PdVSA). While the new Venezuelan sanctions fall well short of an embargo, and are patterned after the limited sectoral sanctions applicable to certain Russian entities, these developments represent a major change in US policy towards Venezuela and are likely to impact a broad range of international companies dealing in debt or other securities of Venezuelan state entities. Please click here for further details.

US to reinstate certain actions against Cuba

On June 16, 2017, President Trump announced a policy framework for the re-imposition of certain US sanctions with respect to Cuba. In particular, the United States' new policy will restore certain restrictions with respect to American investments in the Cuban private sector and the ability to travel outside of pre-arranged groups for American visitors to Cuba. While many of the details will become apparent only as regulations are promulgated implementing President Trump's new policy, the announcement suggests that the Administration will execute only a partial shift from the previous Administration's loosening of Cuba sanctions.

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US further eases sanctions against Cuba

On 14 October 2016, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) again announced significant amendments to the Cuban Assets Control Regulations (CACR) and Export Administration Regulations (EAR). This is the second round of amendments made to the Cuba sanctions regime, following earlier amendments made in March this year.  The move further advances the policy goals announced by President Obama on 17 December 2014 concerning US-Cuba relations.

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