Latin America Practice

On February 14, 2019, the Office of Foreign Assets Control (OFAC) announced it had assessed a civil monetary penalty of over $5.5 million dollars against AppliChem GmbH (AppliChem) of Darmstadt, Germany (a company that manufactures chemicals and reagents for the pharmaceutical and chemical industries) for 304 violations of the Cuban Assets Control Regulations, 31 C.F.R. part 515 (CACR). Specifically, OFAC determined that between May 2012 and February 2016, after it had been purchased by a U.S. company and come within the jurisdiction of the U.S. sanctions on Cuba, AppliChem sold chemical reagents to Cuba. 19 C.F.R. § 515.201.

Pedro Szekely

A.The U.S. Company’s Merger and Acquisition Due Diligence Team Successfully Identified the Cuban Sanctions Issue.

On January 1, 2012, Illinois Tool Works, Inc. (ITW), a company based in Glenview, Illinois, acquired AppliChem. In December 2011, during its merger and acquisition due diligence, ITW discovered references to countries subject to U.S. economic and trade sanctions on AppliChem’s website. That same month, ITW told AppliChem it would be required to cease all Cuban transactions after it was acquired. ITW then incorporated AppliChem into its Reagents Division, and allowed AppliChem’s former owners to stay on as manager-employees. On January 12, 2012, the General Manager of ITW’s Reagents Division sent AppliChem’s former owners a memorandum explaining ITW’s guidelines for complying with U.S. sanctions, including the CACR.

B. Willful Evasion by the Non-U.S. Entity and Persons Working for It.

However, despite these warnings, AppliChem continued to complete and collect on existing orders with Cuba under pre-acquisition contracts. Upon discovering AppliChem’s continued Cuban business, ITW’s European legal department sent a third warning to AppliChem’s former owners on April 5, 2012 to immediately cease all sales to Cuba.

In late January, 2016, an anonymous report was made through ITW’s ethics helpline. The call alleged that AppliChem had continued making sales to Cuba through an intermediary company in Berlin, Germany. ITW began a full investigation, which revealed that AppliChem’s former owners had continued AppliChem’s Cuba business by creating a scheme that concealed this business from ITW after having been specifically told by ITW to cease Cuban sales.

Rather than ceasing sales to Cuba as directed by ITW, between February 2012 and April 2012, AppliChem designed and implemented what it called the “Caribbean Procedures” (whereby Cuba was referred to by the code word “Caribbean”), which made sure that no documents mentioning Cuba would be prepared or retained by AppliChem in connection with its continued business with the country. Pursuant to the Caribbean Procedures, AppliChem engaged an external logistics company and an independent hazardous materials consultant to prepare the necessary shipping documents and hazardous materials declarations, which previously had been handled internally.

Once AppliChem implemented the Caribbean Procedures, AppliChem senior management conducted both written and in-person training sessions for AppliChem’s staff, particularly those working in the logistics department, to ensure that Cuba-related sales would be concealed from ITW. The reasons for the implementation of the Caribbean Procedures were “well known to AppliChem staff during this time” and were described by AppliChem staff as an “open secret” at AppliChem. Consequently, between May 2012 and February 2016, AppliChem fulfilled Cuban orders on 304 invoices. The transaction value of the shipments made during this time was €2,833,701 (approximately $3,433,495).

C.  OFAC Investigation and Results

OFAC determined that ITW voluntarily self-disclosed the violations on behalf of AppliChem, and that the violations constituted an egregious case. The statutory maximum civil monetary penalty applicable in this matter was over $20 million dollars. The base civil monetary penalty was over $10 million dollars.

OFAC determined the following to be aggravating factors:

(1) the willful conduct of AppliChem’s management;

(2) the use of written procedures to engage in a pattern of conduct in violation of the CACR;

(3) AppliChem’s sales to Cuba of approximately $3,433,495 in 304 transactions over the course of five years caused significant harm to the sanctions program objective of maintaining a comprehensive embargo on Cuba; and

(4) the size and sophistication of AppliChem, with an average annual revenue of around $23 million between 2012 and 2015, and the fact that it is a subsidiary of ITW, a large international company.

OFAC determined the following to be mitigating factors:

Once ITW discovered ApliChem’s perfidy, it cooperated by filing a thorough voluntary self-disclosure with OFAC, providing prompt responses to requests for information, performing a thorough internal investigation, and signing a tolling agreement on behalf of AppliChem.

This case demonstrates the importance of auditing and verifying foreign subsidiaries. In contrast to previous enforcement actions in which a buyer failed to identify a sanctions exposure, ITW identified the sales and took steps to ensure they ceased. The issue arose because of its new subsidiary’s ability to circumvent those instructions and hide ongoing sales, underscoring the importance of verifying that internal procedures are being followed. Further, U.S. companies with international operations should consider:

(i) implementing risk-based controls, such as regular audits, to ensure subsidiaries are complying with their obligations under OFAC’s sanctions regulations;

(ii) performing follow-up due diligence on acquisitions of foreign persons known to engage in historical transactions with sanctioned persons and jurisdictions; and

(iii) appropriately responding to derogatory information regarding the sanctions compliance efforts of foreign persons subject to the jurisdiction of the United States.

 

 

If you have any questions regarding this penalty decision or any other aspect of U.S. economic sanctions, please do not hesitate to contact our team.

Updates about the current situation in Venezuela have been coming in rapidly. Recently, we wrote about OFAC adding PdVSA to the SDN list. In this podcast, Crowell & Moring’s Cari Stinebower, Eduardo Mathison, and Mariana Pendás provide an overview of recent developments in Venezuela and explain what U.S. companies need to know about how these developments could impact trade.Compudemano

Click on an option below to access the podcast:

Crowell.com | SoundCloud

 

Crowell & Moring’s Latin America Practice helps clients navigate laws, regulations, and issues by jurisdiction; resolve international disputes and litigation; and assist with both domestic and cross-border corporate and M&A transactions. Additionally, we bring cultural and political sophistication within Latin America to our work and represent clients in both English and Spanish, among other languages. The Crowell & Moring Latin America practice is available to counsel on a wide range of issues. Please click here for contacts and additional information.

On February 11, 2019, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) amended two General Licenses (GLs) and revised three Frequently Asked Questions (FAQs) relating to the January 28, 2019 designation of Petróleos de Venezuela, S.A. (PdVSA) and the Government of Venezuela.

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The amended GLs provide further guidance on how to navigate the recently-issued sanctions on PdVSA.

Amended GLs:

General License 3C (“GL3C”): replaces GL3B by (a) extending the deadline to wind down financial contracts “involving, or linked to” so-called “GL3C Bonds” from 12:01 AM on March 3 to 12:01 AM on March 11, 2019, and (b) clarifying that the GL only authorizes U.S. Persons to purchase or invest in GL3C Bonds if such purchases or investments are ordinarily incident and necessary to the divestment or transfer of holding in GL3C Bonds.

General License 9B (“GL9B”): replaces GL9A with similar amendments, including by (a) extending the wind-down period to 12:01 AM on March 11, 2019 from March 3, 2019 and (b) clarifying and re-ordering the conditions and exceptions on the granted authorization.

For more information on GL3B and GL9A, please see our recent post.

Updated FAQs:

FAQ 650: addresses the issue of the expected level of due diligence required for the recently amended GLs. It also states that GL3C and GL9B authorize U.S. persons to facilitate the transfer or divestment of securities or bonds to non-U.S. persons.

FAQ 661: provides further explanation on what GL9B authorizes in terms of the PdVSA securities. It states that if a U.S. person decides to sell or transfer any interests in the PdVSA securities, it must be to a non-U.S. person. It also clarifies that U.S. persons may continue to hold their PdVSA securities while still being subject to certain restrictions on the sale in secondary markets.

FAQ 662: explains that GL3C allows U.S. persons to divest, transfer, or facilitate the divestment or transfer of any of GL3C Bonds to any non-U.S. person. Further, it states that U.S. persons may continue to hold their interests in the GL3C Bonds, but are subject to certain restrictions on the sale of those bonds in the secondary market.  Finally, it notes that while non-U.S. persons may continue to deal with the GL3C Bonds, if the transactions involve a U.S. Person or the U.S. financial system, they must comply with the terms of GL3C.

For more information on the PdVSA sanctions and guidance under any Venezuela-related sanction, please contact the Crowell & Moring team.

Crowell & Moring’s Latin America Practice helps clients navigate laws, regulations, and issues by jurisdiction; resolve international disputes and litigation; and assist with both domestic and cross-border corporate and M&A transactions. Additionally, we bring cultural and political sophistication within Latin America to our work and represent clients in both English and Spanish, among other languages. The Crowell & Moring Latin America practice is available to counsel on a wide range of issues. Please click here for contacts and additional information.

 

On January 31 and February 1, 2019, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) amended two General Licenses (GLs) relating to the January 28, 2019 designation of Petróleos de Venezuela, S.A. (PdVSA), amended two Venezuela-related Frequently Asked Questions (FAQs), and issued thirteen new FAQs.

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The new amendments and additions provide additional guidance for navigating the PdVSA sanctions and clarify, to some extent, the scope of authorization in each of the new GLs.

Amended GLs:

  • General License 3b (“GL3b”): replaces GL3a by authorizing certain transfers and divestment of funds, provided that they must be to a non-U.S. person. Importantly, it adds a new authorization to enable U.S. persons to engage in transactions necessary to facilitating, clearing, and settling trades of holdings in the bonds specified in the Annex, provided that such trades were placed before February 1, 2019, even if the whole trade was not completed prior to the issuance of the GL. Finally, this GL allows until March 3, 2019, transactions that are necessary to the wind down of financial contracts and other agreements (entered into prior to February 1, 2019).
  • General License 9a (“GL9a”): replaces GL9 by amending the term, “PdVSA-related debt” to “PdVSA securities,” and authorizing transactions necessary to facilitating, clearing, and settling trades of holdings in the PdVSA securities that were placed before January 28, 2019. GL9a also allows until March 3, 2019, transactions that are necessary to the wind down of financial contracts and other agreements (entered prior to February 1, 2019) linked to PdVSA securities issued prior to August 25, 2017. Lastly, GL9a updates the List of Bonds (Annex) by adding bonds issued by Petrozuata Finance Inc., Cerro Negro Finance Ltd., and La Electricidad de Caracas.

For more information on the original GL3a and GL9 please see our recent client alert.

Amended FAQs:

In conjunction with the Amended GLs, OFAC issued supplemental guidance in the form of FAQs, as follows:

FAQ 595 was amended to (a) state that GL5 remains in effect despite OFAC’s designation of PdVSA, and (b) include guidance on GL9, which authorizes transactions involving certain PdVSA debt, including the PdVSA 2020 8.5 percent bond.  FAQ 595 states that U.S. persons who are bondholders would be included under this exclusion.​

FAQ 648 defines “maintenance” under GL6 and GL11 to include all transactions that are necessary to continue operations. OFAC further defines the term as including “all transactions and activities ordinarily incident to performing under a contract or agreement in effect prior to the sanctions effective date (in the case of General License 6, January 8, 2019, and in the case of General License 11, January 28, 2019).” It will be key for companies to demonstrate in their transaction history that the transactions it will engage in are consistent and recurring from previous transactions. This FAQ also states that GL6 and GL11 could include renewing contracts if they are ordinarily incident and necessary to contracts in effect prior to the applicable sanctions effective date. However, this FAQ does highlight that U.S. financial institutions may not process transactions that will benefit PdVSA or any entity they possess 50% or more ownership.

NEW FAQs:

The new FAQs provide guidance on the seven newly issued GLs as well as explain the changes and authorizations in the amended GLs:

  • Address the expected level of due diligence necessary associated with the transfer of debt under GL9a;
  • Address bonds issued by PdVSA or any entity in which it owns, directly or indirectly, a 50% or greater interest;
  • Do not allow funds to be bought, sold, or engaged with any entity that appears in OFAC’s List of Specially Designated Nationals and Blocked Persons (SDN List);
  • Authorize, with certain exceptions, U.S. person employees of non-U.S. entities located in a country other than the United States or Venezuela to engage in transactions and activities prohibited by E.O. 13850 that are ordinarily incident and necessary to the maintenance or wind down of operations, contracts, or other agreements involving PdVSA or entities owned, directly or indirectly, 50% or more by PdVSA that were in effect prior to January 28, 2019;
  • State that U.S. persons are allowed to purchase petroleum products from PdVSA as long as funds owed to PdVSA are placed in a blocked, interest-bearing account located in the United States;
  • State that U.S. persons in Venezuela are allowed to purchase gasoline products from PdVSA as long as it is done in a blocked, interest-bearing account located in the United States;
  • Address cash transactions with PdVSA;
  • Address exporting issues, while noting that the GLs do not generally extend to cover transactions with ALBA de Nicaragua (ALBANISA), meaning U.S. persons are generally prohibited from engaging in most transactions with ALBANISA today; and
  • Explain that the path to sanctions relief for PdVSA is through a bona fide transfer of control of the company to Interim President Juan Guaidó or a subsequent, democratically elected government.

 

For more information on the PdVSA sanctions and guidance under any Venezuela-related sanction, please contact the Crowell & Moring team.

 

Crowell & Moring’s Latin America Practice helps clients navigate laws, regulations, and issues by jurisdiction; resolve international disputes and litigation; and assist with both domestic and cross-border corporate and M&A transactions. Additionally, we bring cultural and political sophistication within Latin America to our work and represent clients in both English and Spanish, among other languages. The Crowell & Moring Latin America practice is available to counsel on a wide range of issues. Please click here for contacts and additional information.

On January 28, 2019, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated Petróleos de Venezuela, S.A. (PdVSA) pursuant to Executive Order (E.O.) 13850 – “Blocking Property of Additional Persons Contributing to the Situation in Venezuela”. Further, OFAC amended General License 3, issued eight (8) new General Licenses, and published a new Frequently Asked Question (FAQ) on the new E.O. – “Taking Additional Steps to Address the National Emergency with Respect to Venezuela.”  Additional FAQs are anticipated.

by Anyul Rivas

The sanctions designation and the corresponding general licenses appear modeled after sanctions programs designed to protect and preserve a jurisdiction’s assets from kleptocratic or corrupt regimes for the next duly elected Administration – in this case, Interim President Juan Guaidó.  Treasury Secretary Mnuchin’s statement illustrates this point:

“T[he] designation of PdVSA will help prevent further diverting of Venezuela’s assets by Maduro and preserve these assets for the people of Venezuela.  The path to sanctions relief for PdVSA is through the expeditious transfer of control to the Interim President or a subsequent, democratically elected government.”

Similar programs include the Kuwait sanctions program and the current remaining sanctions in Iraq and Libya.   As a result, the sanctions on PdVSA are accompanied by general licenses allowing U.S. Persons (individuals and entities) to wind down or maintain certain transactions—in some instances, by mandating that payments flow into interest bearing blocked (or “frozen”) accounts.

For more information, please see Crowell’s Client Alert.

Crowell & Moring’s Latin America Practice helps clients navigate laws, regulations, and issues by jurisdiction; resolve international disputes and litigation; and assist with both domestic and cross-border corporate and M&A transactions. Additionally, we bring cultural and political sophistication within Latin America to our work and represent clients in both English and Spanish, among other languages. The Crowell & Moring Latin America practice is available to counsel on a wide range of issues. Please click here for contacts and additional information.

 

 

Photo by Thomas A on Flickr

On January 16, 2019, the Trump administration signaled a possible major shift in its policy toward Cuba by announcing it was considering allowing the suspension of Title III of the Helms-Burton Act to lapse, thereby opening the floodgates to litigation over property confiscated by Fidel Castro and the Cuban government 60 years ago.

History of the Act

The Helms-Burton Act, formally titled the Cuban Liberty and Democratic Solidary Act (a/k/a the Libertad Act), was signed into law in 1996 with the goal of increasing pressure on Cuba for peaceful democratic change. The Act codified the United States embargo in place at the time on trade and financial transactions with Cuba and required the President to produce a plan for providing economic assistance to a transition government. Additionally, the Act aimed to punish non-U.S. companies doing business in Cuba. Title III created a private cause of action authorizing U.S. nationals to file suit in U.S. courts against persons or companies that may be trafficking in and profiting from properties confiscated by the Cuban government following the 1959 socialist revolution. U.S. claimants that had their claims certified by the Foreign Claims Settlement Claims Commission may also be able to seek treble damages for their claims.

The Helms-Burton Act was not well received in the international community, however. Both the European Union and Canada quickly announced their opposition, arguing that the provisions violated international trade treaties by punishing foreign companies for doing business outside of the U.S. The EU went so far as to bring a case at the World Trade Organization. At the time, the U.S. threatened to invoke the “national security exception” that is contained in the WTO treaty texts, but following negotiations between the U.S. and the EU, the suit was dropped in 1998.

Although Title III could have kept many lawyers busy throughout the U.S., Cuba, and beyond, the provision never actually took effect. The Act granted the President authority to suspend the lawsuit provision for consecutive six month periods if necessary to expedite a transition to democracy in Cuba and if doing so was in the national interest. Every president since President Clinton has relied on and exercised this suspension authority. In 2013, President Obama delegated the power to suspend the provision to his Secretary of State, who then continued to suspend the provision each time it came up.

Rumblings of Change

The Trump administration first had to weigh in on the provision in July 2017. Then Secretary of State Rex Tillerson delegated the decision to his Under Secretary who in turn suspended Title III. In recent months though, the administration has hinted that it may break from more than 20 years of tradition and allow lawsuits to be brought under Title III. In November 2018, White House National Security Adviser John Bolton remarked that the administration planned to give the provision “serious review.” In the most definitive move yet, earlier this month the administration suspended Title III for only 45 days until March 18, 2019 and urged any person doing business in Cuba to consider whether they were “abetting this dictatorship” by trafficking in confiscated property.

What To Expect

Although no official changes have been made, the Trump administration has vowed to be tougher on Cuba. Invoking Title III would permit Americans with claims to confiscated property in Cuba to attempt to sue companies whose business in and with Cuba today are connected to these properties, creating a potential risk for companies that do business in Cuba and which may also be subject to the jurisdiction of courts in the U.S.

So what does this mean for potential claimants and companies doing business in Cuba? It really depends on their situation. For the last 60+ years, people have believed that change in Cuba and/or change in U.S. policy towards Cuba was potentially imminent. And since Helms-Burton was enacted and came into (as of now still suspended) force, there have been some changes in Cuba and some changes in U.S. policy toward the island that is located only 90 miles away. Nevertheless, 60 years later, the embargo persists and claimants whose property was confiscated by the Cuban Government remain uncompensated.

Rumors that the suspension of Title III might end circulate every few years, but usually not so publicly and never from such highly placed sources. Could this time be different? – The answer is yes.

If you have or believe you may have claims to property confiscated by the Cuban Government on or after January 1, 1959, should you start dusting off old documents and trying to determine who, if anyone, may be trafficking in property in which you may have a claim?

If you are a company doing business in or with Cuba, or with Cuban products (such as nickel, timber, sugar, etc.), should you examine whether you are potentially subject to civil jurisdiction in the U.S. such that you could be sued as a defendant under Title III of Helms-Burton?

If you are the EU, should you start dusting off the old WTO complaint against the U.S.? And what might that mean if the Trump administration invokes the national security clause?

If you are Cuba and worried that such threats might stifle further foreign investment, should you “come to the table” to try to make a deal with the Trump administration?

The answer to all of these questions is of course – it depends. It depends on what you think the Trump Administration might do. It depends on whether you think the Trump Administration might be willing to break with decades of tradition. It depends on the magnitude of your potential claims and exposure. It also depends on whether there is anything that you might be able to do about it.

Are these answers satisfying and/or do they bring increased certainty to your everyday or business relations concerning Cuba? The answer is of course no. But for the last 60+ years, U.S. relations with Cuba have been impacted both because of and despite that uncertainty.

If you would like to discuss your particular situation with regard to potential claims as either a potential plaintiff or defendant under Title III, please reach out to your regular Crowell & Moring attorney or one of the POCs listed on this post.

 

 

 

 

 

 

 

On December 20, 2018, President Trump signed into law the Nicaraguan Investment Conditionality Act (NICA Act). The sanctions listed in the NICA Act are additional and would be complementary to the current sanctions that have already been imposed on Nicaragua by the US Office of Foreign Assets Control (OFAC). The NICA Act aims to block any loan that could be issued by international financial institutions that could benefit the current Government of Nicaragua and will only allow international loans once the Department of State determines that the Government of Nicaragua is taking the appropriates steps towards democracy, corruption-free elections and institutions, strengthening the rule of law, respecting the freedom of the press and individuals and entities with opposing views, and combating corruption.

The NICA Act requires U.S. members of the various international financial institutions (IFIs) such as the World Bank and Inter-American Bank to use their “voice, vote and influence” to oppose the extension of loans and financial or technical assistance for projects related to Nicaragua. The NICA Act complements the current sanctions that were recently issued by the most recent Executive Order (E.O.) 13851, “Blocking Property of Certain Persons Contributing to the Situation in Nicaragua”, which gives the President the authority to designate asset-blocking sanctions and visa-rejections to any current or former officials (since 2007) of the Government of Nicaragua or any person acting on behalf of the Nicaraguan Government engaging in human rights abuse or corruption.

These new sanctions are already affecting Nicaragua, even if indirectly. According to published reports in Nicaragua, major U.S. banks including but not limited to Wells Fargo and Bank of America that have operated as correspondent banks for Nicaraguan financial institutions have notified their Nicaraguan correspondent banks that that they will be closing their accounts and ceasing their operations in and with Nicaragua. These banks are reportedly taking these steps as a result of the higher risks recently associated with the country.

These new sanctions imposed by the United States (described below) may lead other businesses to also cease or diminish their commercial relations with Nicaragua. At a minimum, Nicaragua is “high risk” for business transactions.

Executive Order 13851 Announced on November 27, 2018

On November 27, President Trump issued Executive Order (E.O) 13851, “Blocking Property of Certain Persons Contributing to the Situation in Nicaragua”. The E.O. establishes criteria for blocking property and interests of property that are or hereafter come within the possession or control of any U.S. person (including U.S. persons such as foreign branches located outside the United States) of persons determined by OFAC to be responsible for or complicit in—inter alia—serious human rights abuse or corruption in Nicaragua, as well as actions or policies that undermine democratic processes or institutions or that threaten the peace, security, or stability of Nicaragua.

Consistent with other Orders promulgated pursuant to the International Emergency Economic Powers Act (“IEEPA”), the new E.O. specifically prohibits:

  1. Receiving and contributing funds, goods, or services by or to benefit any person designated by the E.O.;
  2. Any transaction that evades or avoids, has the purpose of evading or avoiding, causes a violation of, or attempts to violate any of the prohibitions set in this E.O.Pursuant to this E.O., OFAC added two individuals associated with the Government of Nicaragua to its Specially Designated Nationals (SDN) List:

Pursuant to this E.O., OFAC added two individuals associated with the Government of Nicaragua to its Specially Designated Nationals (SDN) List:

  • Rosario Murillo de Ortega (also known as “La Chayo”) – Vice-President and First Lady of Nicaragua.
  • Nestor Moncada Lau (also known as “Chema”) – National Security Advisor and private Secretary of President Daniel Ortega

Global Magnitsky Sanctions Issued on July 5th, 2018

These recently issued sanctions build upon the previously announced Global Magnitsky Sanctions designations of the following three individuals who were identified for their close relationships to the Nicaraguan regime for human rights abuses and acts of corruption:

  • Francisco Javier Diaz Madriz – Current Acting Director General of the National Police (was a commissioner at the time these sanctions were issued).
  • Fidel Antonio Moreno Briones – Leader of the government-controlled Sandinista Youth.
  • Jose Francisco Lopez Centeno – Vice-President of ALBANISA (51% owned by Venezuela’s state-owned PDVSA), and President of Petronic (Nicaragua’s state-owned oil company).

The E.O. also authorizes future designations of any person that has been an official of the government of Nicaragua since January 10, 2007 and is determined to have engaged or attempted to engage in:

 

  • Serious human rights abuse in Nicaragua;
  • Actions or policies that undermine democratic processes or institutions in Nicaragua;
  • Actions or policies that threaten the peace, security, or stability of Nicaragua;
  • Any transaction or series of transactions involving deceptive practices or corruption by, on behalf of, or otherwise related to the Government of Nicaragua, such as the misappropriation of public assets or expropriation of private assets for personal gain or political purposes, corruption related to government contracts, or bribery.

The E.O. defines the term “Government of Nicaragua” as any political subdivision, agency, or instrumentality thereof, including the Central Bank of Nicaragua, and any person owned or controlled by, or acting for or on behalf of, the Government of Nicaragua. This definition bears a resemblance to recent sanctions targeting Venezuela – but without the general licenses.

Companies doing business in Nicaragua must exercise caution when engaging in any transactions with any entity that may be owned (50% or more) by any of the newly sanctioned Nicaraguan officials, as the link to these individuals may not be obvious. Consistent with past approaches, it appears that an individual high risk for corruption risk is also high risk for sanctions exposure. Compliance programs for businesses continuing ties to Nicaragua should continue to include robust beneficial ownership due diligence, supply chain transparency, record keeping, and, potentially, audits of counter parties to ensure the same high standards apply throughout the transaction chain.

 

 

Crowell & Moring will continue to monitor the situation in Nicaragua, including any potential effects of any upcoming sanction(s) or legislation.

Crowell & Moring LLP is pleased to announce that Mariana Pendás, in the firm’s International Trade Group, has been recognized by Latinvex as one of Latin America’s “Rising Legal Stars.” The list honors 50 lawyers from 38 international law firms doing business in Latin America. Selections were made based on scope and prominence of work and future potential.

Pendás, a dual-qualified lawyer in Spain and New York, and admitted to practice in Brussels under the E-list, focuses her practice on compliance with U.S. and EU economic sanctions, anti-money laundering laws and regulations, export controls, anti-corruption/anti-bribery laws and regulations, international arbitration, and dispute resolution. Latinvex highlighted her experience assisting U.S. clients on U.S. sanctions relating to different programs such as U.S. Venezuela-related sanctions and counter narcotics trafficking sanctions.

About Crowell & Moring’s Latin American Practice

Crowell & Moring represents clients in Latin America and the Caribbean on issues including international arbitration, corporate, finance, international trade, and policy issues. The firm regularly advises clients on issues under international and regional trade conventions, such as the North American Free Trade Agreement (NAFTA), the Central America-Dominican Republic-U.S. Free Trade Agreement (CAFTA-DR), as well as bilateral free trade agreements between the United States and Colombia, Panama, and other countries. The firm also advises on anti-money laundering and sanctions issues across Latin America.

 

Latinvex publishes daily news and weekly analysis on Latin America business; its coverage extends to the region’s legal sector, including rankings of law firms and individual lawyers. (No aspect of this advertisement has been approved by the Bars of, or any courts in, the jurisdictions in which the lawyers are admitted to practice).

On July 19, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued Venezuela General License 5.

General License 5 authorizes U.S. persons to engage in all transactions related to, the provision of financing for, and other dealings in the Petróleos de Venezuela SA 2020 8.5 Percent Bond that would be prohibited by Subsection 1(a)(iii) of  Executive Order 13835 of May 21, 2018 (“Prohibiting Certain Additional Transactions With Respect to Venezuela”) (E.O. 13835). In practice, General License 5 expands the previously issued General License No.3. by adding a new bond to the list of previously authorized bonds.

OFAC also published two new Frequently Asked Questions (FAQs).One explains why OFAC is issuing General License 5. The other answers the question of whether E.O. 13835 prohibits a U.S. person with a legal judgment against the Government of Venezuela from attaching and executing against Venezuelan government assets.

 

 

On May 21, President Trump issued a new Executive Order (E.O.) “Prohibiting Certain Additional Transactions with Respect to Venezuela.” The new E.O. targets the Venezuelan Government’s ability to factor receivables and liquidate equity interest in exchange for cash.

The E.O. prohibits U.S. persons or persons within the United States from all transactions related to, or providing financing for, and other dealings—including evading, avoiding or conspiracy transactions—in:

  • The purchase of any debt owed to the GoV, including accounts receivable;
  • Any debt owed to the GoV that is pledged as collateral after the effective date of the E.O. (i.e., May 21, 2018); and
  • The sale, transfer, assignment, or pledging as collateral by the GoV of any equity interest in an entity in which the GoV has at least 50% interest.

Consistent with previous sanctions, the E.O. also defines the term “Government of Venezuela” (GoV) as any political subdivision, agency, or instrumentality thereof, including the Central Bank of Venezuela, and Petróleos de Venezuela (PDVSA), as well as any person owned or controlled by, or acting for or on behalf of, the GoV.

The new measure further tightens already existing financial sanctions against the GoV in effect since August 2017. In particular, the new E.O. is expected to directly restrict PDVSA’s ability to engage in accounts receivable financing, which may accelerate the oil company’s liquidity struggles.

For more details on the E.O. issued on August 24, 2017, see Crowell & Moring’s Client Alert.