On October 7, 2016, President Obama signed an Executive Order lifting virtually all economic sanctions previously in effect against Burma (aka, Myanmar). This executive action signals an opening of economic activity between the United States and Burma. Perhaps more importantly for Burmese business interests, it removes an impediment to banking and financial services that had slowed non-U.S. investment into Myanmar. The action contrasts with remaining unilateral U.S. embargos that continue to impact non-U.S. interests, notably the sanctions on Iran.

Burma had been subject to targeted sanctions that were directed at members of the State Peace and Development Counsel (the “SPDC”) that governed Burma until 2011. This sanctions regime, implemented by Executive Orders issued per authority of the International Emergency Economic Powers Act (“IEEPA”) and the Tom Lantos Block Burmese JADE Act, and administered by the Office of Foreign Assets Control (“OFAC”), broadly prohibited all financial transactions involving members of the SPDC and/or entities they controlled. Given their prominence in the Burmese market, SPDC and the companies they owned or controlled created material compliance challenges for investors looking at the Burmese economy. Banks, predictably conservative in these circumstances, were reluctant to process payments and engage in services otherwise required for non-Burmese investors.

The lifting of the U.S. sanctions will open global financial markets for support of Burmese development. A Treasury Department press release quotes Adam J. Szubin, Acting Under Secretary for Terrorism and Financial Intelligence as noting that “[l]ifting economic and financial sanctions will further support trade and economic growth.” Treasury summarized the broad scope of the Executive action, noting:

• All individuals and entities blocked pursuant to the Burmese Sanctions Regulations (BSR) have been removed from OFAC’s Specially Designated Nationals and Blocked Persons (SDN) List.

• All property and interests in property blocked pursuant to the BSR are unblocked.

• The ban on the importation into the United States of Burmese-origin jadeite and rubies, and any jewelry containing them, has been revoked.

• All OFAC-administered restrictions under the Burma sanctions program regarding banking or financial transactions with Burma are no longer in effect.

• OFAC will remove the BSR from the Code of Federal Regulations.

• Compliance with the State Department’s Responsible Investment Reporting Requirements is no longer required by OFAC’s regulations and is now voluntary.

The lifting of the Burma sanctions is notable for its relative breadth and speed. While there was an iterative process involved (as there always is), the Administration moved fairly quickly. The timeline stands in contrast to more prolonged processes that have marked the relaxation of other unilateral sanctions regimes. The length of time required to lift sanctions depends on multiple factors. As experienced with Burma, Iran and Cuba the draw-down process can result in reluctance on the part of conservative actors, such as international banks, to provide services that may be lawful. A gradual lifting of restrictions invariably results in international banks taking a risk-based approach that errs on the side of not risking violations where the lines are unclear. Burma will no longer face that added cost to development and investment.

Illustrative of the difficulties presented by ambiguities in modified sanctions regimes, coincident with the Burmese action OFAC issued clarification as to Iranian sanctions and the impact of those sanctions on U.S.-dollar denominated transactions. On October 7, 2016, OFAC clarified its responses to “Frequently Asked Questions” (“FAQ”) relating to the Iranian Joint Comprehensive Plan of Action (“JCPOA”). OFAC revised FAQ C.7 that addresses whether non-US. financial institutions can conduct dollar-denominated transactions with Iran. The updated response from OFAC provides that “[f]oreign financial institutions, including foreign-incorporated subsidiaries of U.S. financial institutions, may process transactions denominated in U.S. dollars or maintain U.S. dollar-denominated accounts that involve Iran or persons ordinarily resident in Iran….”

It may be that this guidance gives non-U.S. financial institutions confidence to engage in U.S. dollar-denominated financial transactions with Iran, removing a compliance related impediment to development and investment in Iran by non-U.S. companies. Burmese development, on the other hand, will not be encumbered by the same compliance concerns due to the breadth and clarity of the Executive action lifting Burmese sanctions.

In terms of compliance for companies considering the Burmese market, FinCEN has noted that money-laundering concerns remain and Burmese banks overall have not instituted adequate controls. FinCEN, accordingly, employed a discretionary exception to allow correspondent accounts from U.S. financial institutions, but the concerns remain. Also remaining are the material corruption risks that have marked the Burmese economy.