RANGOON — Although most economic sanctions applied by the United
States against Burma have been suspended, a number of
businesspeople and companies with ties to the former military
regime, or to arms or drug trafficking, remain sanctioned.
The Specially Designated Nationals and Blocked Persons (SDN)
list held by the US Treasury Department’s Office of Foreign
Assets Control (OFAC) keeps a record of who is still
blacklisted. Some Burmese government officials have been removed
from the list since US-Burma relations improved under the
government of President Thein Sein, but many so-called cronies
who worked closely with the military government during years of
isolation remain listed.
Companies with operations in America that want to work in Burma
must therefore be cautious about linking up with the wrong
people, or face prosecution in the United States.
Eric Rose is lead director of Herzfeld Rubin Meyer and Rose, an
American law firm with an office in Rangoon that provides advice
both to US firms working in the country and to locals dealing
with the implications of the SDN list.
Rose answered The Irrawaddy’s questions by email, covering in
his responses US companies’ duties in relation to the SDN list,
a recent case where an exception was required to deal with Air
Bagan owner Tay Za, and efforts by Burmese to have themselves
taken off the list.
Question: Have there been any recent changes to the way
the SDN list is being enforced, in general and specifically
relating to Burma in light of the suspension of other sanctions?
Answer: As you know, the US sanctions have been partially
suspended, but they remain in effect against most SDN-listed
parties. One major exception is the issuance a year ago of OFAC
Burma License 19, which allows financial transactions with four
SDN-listed banks. Nevertheless, there have been indications
that, for the first time, OFAC will consider favorably the
receipt of applications for de-listing from a number of Myanmar
SDNs, and several have already applied. There has been only one
private Myanmar SDN de-listed (other than government officials),
and the list was enlarged with several names last year. Issues
concerning deals with North Korea have been at the core of the
Q: How much due diligence relating to the SDN list are US
companies required to conduct ahead of entering with a local
partner in Burma? If a link to a named individual or company
comes to light later, what must the company do?
A: Any investor in Myanmar has to understand the market
it enters and wisely choose whom to do business with. As Myanmar
is considered a ‘frontier’ market, the foreign investor has to
take the time to learn the market, investigate opportunities and
be present in Myanmar when the right time comes. Due diligence
is an essential aspect of this long-term effort, which should
not cease once a party has conducted the preliminary
investigation. Doing due diligence under these circumstances is
an art form, not a mechanical exercise. An American individual
or company which suddenly finds out that, despite his/its best
due diligence efforts, he/it has failed to uncover relevant
information has several ways to deal with the issue, in
particular in light of the audit, compliance and reporting
requirements it has to comply with.
Q: How can US companies apply to OFAC for an exception to
deal with an SDN-listed party?
A:We have extensive experience in dealing with such
filings for an OFAC license. For example, Air Bagan is an SDN-listed
company. US citizens and businesses are prohibited from dealing
with both SDNs, as well as with any entities 50 percent or more
owned by an SDN. Last year, we secured in record time (five
weeks) a license from OFAC in order to defend the rights of two
passengers who were grievously injured in the crash at Heho
airport…. Subsequently, Air Bagan’s lawyers asked us to also
secure an OFAC license for them, which we did in three weeks.
The process requires a lot of interaction with the US Treasury
Department and the State Department, and a specialized knowledge
of how to handle such license applications.
Q: How does OFAC treat US companies that negotiate with
listed individuals who may be still on—but expected shortly to
be removed from—the SDN list?
A: This is like saying that someone can be half-pregnant.
Not possible, right? Consequently, a US party should refrain
from having any private contact with a SDN-listed party without
an OFAC license. The penalties can be enormous: US$250,000 or
more for an administrative sanction, and, upon conviction, over
$1,000,000 in criminal penalties, plus imprisonment up to 20
years, or both, for those engaging in intentional violations of
the Burmese Sanctions Regulations or Executive Orders concerning
Q: How do listed individuals get off the list? Can good
deeds—like setting up a charitable foundation, for example, as
some cronies have done—go some way to changing the US Treasury’s
A: OFAC will look, first and foremost, at whether the SDN-listed
party has ceased the behavior which caused it to be SDN-listed
in the first place. Additional remedial steps, such as corporate
reorganization, resignation of certain tainted persons from
positions in the SDN-listed party, sales of assets, and other
such steps will be very helpful in aiding the chances of success
of the de-listing application. Charity work, or helping
opposition parties and former political prisoners are helpful,
but not relevant.
99B Myay Nu Street, LAMAI Condo, Suite 6D, Sanchaung Twp., Yangon 11111, Myanmar - Phone: +95 1 230-5935©2015 Herzfeld Rubin Meyer & Rose Law Firm Limited. - Legal Info