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Callie Lefevre (US)

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Treasury Issues Proposed Regulations Implementing FIRRMA

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On September 17, 2019, the Department of Treasury (“Treasury”) released for public comment two proposed rules (the “Proposed Rules”) implementing the Foreign Investment Risk Review Modernization Act (“FIRRMA”) enacted in August 2018.  FIRRMA expanded the jurisdiction of the Committee on Foreign Investment in the United States (“CFIUS”) and granted CFIUS new tools to regulate foreign investments raising national security concerns.  Our previous analysis of FIRRMA is available here, and our analysis of the “critical technologies” pilot program under FIRRMA implemented by interim regulations issued by Treasury on October 10, 2018, (the “Pilot Program”) is available here.

Treasury will accept comments on the Proposed Rules until October 17, 2019, and the final regulations are to become effective no later than February 13, 2020.  Companies that may be affected by the Proposed Rules are encouraged to comment.  The full text of the Proposed Rules on investments by foreign persons in US businesses can be found here and on real estate transactions here.  We would be pleased to assist our clients with the submission of comments.

Key Changes

US Government Eliminates “U-Turn” Financial Transactions and Restricts Remittances to Cuba

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On September 6, 2019, the US Treasury Department Office of Foreign Assets Control (“OFAC”) announced that it is amending the Cuban Assets Control Regulations (“CACR”) to further financially isolate the Cuban government and implement President Trump’s June 2017 National Security Presidential Memorandum (“NSPM”) Strengthening the Policy of the United States Towards Cuba (the “CACR Amendment”). The CACR Amendment (1) removes the authorization for banks subject to US jurisdiction to process pass-through or “U-turn” transactions, and (2) eliminates or restricts certain types of remittances to Cuba. The CACR Amendment was published in the Federal Register on September 9, 2019, and will take effect on October 9, 2019.

OFAC also published Frequently Asked Questions and a Fact Sheet on the CACR Amendment.

US Government Announces Second Round of Sanctions on Russia for Use of Chemical Weapons

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On August 2, 2019, the US State Department announced targeted sanctions against Russia related to the March 2018 use of a “novichok” nerve agent in an attempt to assassinate UK citizen Sergei Skripal and his daughter Yulia Skripal in the United Kingdom.  This was the second round of sanctions required under the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991 (the “CBW Act”) following the State Department’s determination on November 6, 2018 that Russia had failed to provide reliable assurances that it would not engage in future chemical weapons attacks. The US Government issued the first round of CBW Act sanctions on August 27, 2018. See our blog post on the first round of CBW Act sanctions here.

OFAC Amends Procedures and Requirements for Reports and License Applications Related to Blocked Property, Unblocked Property, and Rejected Transactions

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The US Treasury Department’s Office of Foreign Assets Control (“OFAC”) issued an interim final rule effective June 21, 2019 amending the Reporting, Procedures and Penalties Regulations, 31 CFR Part 501 (the “RPPR Rule”), to add new requirements for reporting blocked or unblocked property and rejected transactions. The new reporting requirements apply to any US person (or person subject to US jurisdiction). Importantly, the rejected transaction reporting requirements, which previously applied to funds transfers rejected by financial institutions, now apply in the context of potentially any business transaction. This change could have significant implications for some companies in terms of compliance responsibilities and the need for related internal controls. The RPPR Rule does not provide much detail on the circumstances that would trigger the new reporting requirements in the context of the enumerated categories of transactions.

OFAC also added certain informational requirements for reports to clarify upfront the details needed to fully identify blocked or unblocked property and rejected transactions, and determine the authority under which they were blocked/unblocked/rejected. In announcing the RPPR Rule, OFAC indicated that in the past, these clarifications could sometimes require multiple time-consuming communications between OFAC and the submitter.

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