US terminated remaining sanctions against Myanmar on 7 Oct 2016

On 7th October 2016 – President Obama signed the Executive Order to terminate the remaining economic and financial sanctions against Myanmar that make it very difficult for US banks, financial institutions and companies to do business with Myanmar.

That means the following group of people and entities have been removed from the US Sanction List (aka US SDN List):

  1. Tycoons:
    • Steven Law (Asia World)
    • Tay Za (Htoo Group)
    • Zaw Zaw (Max Myanmar)
    • Khin Shwe (Zaykabar)
    • Myint Htay (Yuzana)
  2. Military owned enterprises:
    • Union of Myanmar Economic Holdings Limited
    • Myanmar Economic Corporation
    • Myawaddy Bank Ltd
    • Innwa Bank Ltd
    • Myanmar Ruby Enterprise Co Ltd
    • Myawaddy Trading

Take note that our list above is not exhaustive. See Appendix below for the complete list of 204 names deleted from the US SDN List.

The US Treasury will remove the “Burma Sanctions Regulations” (BSR) from the Code of Federal Regulations.

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.

Sanction that blocks import of Burmese jade and precious stones into US is lifted.

Denial of entry for aliens into the United States in pursuant to BSR are also suspended.

All property or interests in property that are blocked in pursuant of BSR are unblocked

All US Treasury administered restrictions under the Burma Sanctions program regarding banking or financial transactions with Burma are no longer in effect.

Compliance by US entities or individuals with the US State Department’s Responsible Investment Reporting Requirements is no longer required by OFAC’s regulations and is now voluntary. This pertains to any investment over USD 5 million or any investment in the Burma oil & gas sector.

However, do take note that

  • 89 Myanmar people and entities remains on the SDN List for reasons of narcotics and 2 Koreans residing in Myanmar because of dealings with North Korea
  • Investigation, actions or proceeding that are still outstanding and not concluded against individuals or entities by the US Treasury is not waived
  • US banks and financial institution will still be responsible for doing due diligence on banks and financial institutions that have dealings with Burma banks with regards to Anti-Money Laundering, Corruption and Narcotics-related activities.

In my opinion:

  • It will take the international banks one to two months to update their control system with regards to compliance with the fact that Myanmar as a country is now off the US Sanction list except for specific individuals who are still on the SDN List for narcotics. So the impact may not be immediate.
  • Messier Steven Law, Zaw Zaw, Tay Za, Khin Shwe and Myint Htay (hence forth known as “the 5 tycoons”) are now ordinary citizen who can open a bank account or credit card account with any international bank as they are no longer on the SDN List and can freely travel to the United States.
  • Overtime once the 5 tycoons get used to the fact that they can operate international bank accounts and credit card accounts directly and travel freely – they will slowly restructure their business so that companies that was once operated via proxies are slowly converted into subsidiaries or associated companies that they control directly.
  • This will level the playing fields in Myanmar – as for many foreign investors finding a suitable business partner with clout and track records like the 5 tycoons is difficult previously. For major infrastructure projects in facts these tycoons are valuable as a business partner due to their financial clout, experience and track record.
  • Over time more and more Western listed companies will enter the Myanmar market as previously they were not willing to take the risk of becoming a JV partner to a person on the SDN List as many tycoons on the list operate via proxies.
  • Remittance of US Dollar via the international banking system will be easier as the international banks will not stop a transaction just because it has the word “Myanmar” or “Burma” on it or block access to their e-banking service just because you are accessing their system from Myanmar.
  • The impact on Myanmar over time will be positive as it will make the market more transparent and it will reduce the risk for foreign companies operating in Myanmar via joint venture. It will also be a boost to the service industry such as legal, auditing, consulting and banking as people have less to hide as they do not have to operate through proxies or other type of investment vehicles to hide the fact that they are doing business with people or entities that were previously on the SDN List.
  • Together with the granting of GSP Status for Myanmar export especially textile and garment entering the US – which was announced on 15 Sep 2016 – it will do much to promote manufacturing and investment in Myanmar
  • Of course there will be some losers as those who provide proxy or other cloaking services for people who were previously on the SDN List will find their role diminished over time.

 

Yours truly,

 

Andrew Tan
Managing Director
Consult-Myanmar Co Ltd

Appendix A

To see list of 204 entities and individuals removed from the Burma SDN List click here

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