On January 26, 2022, the US Departments of State, Treasury, Commerce, Labor, Homeland Security and the Office of the US Trade Representative (“USTR”) issued a joint advisory (the “Advisory”) cautioning businesses, financial institutions, investors, consultants, research service providers, etc. of the heightened risks associated with doing business in Burma/Myanmar, especially wherever the Myanmar military is involved. This is a continuation of US Government’s actions to address the situation in Myanmar. Please see our blog posts here, here, here, and here for the US Government’s prior measures regarding Myanmar.
The Advisory identified several entities and sectors in Myanmar’s economy as carrying the greatest risks: (1) state-owned enterprises, (2) gems and precious metals, (3) real-estate and construction projects, and (4) arms, military equipment, and related activity. The Advisory indicates that these sectors are higher risk because they provide significant economic resources to Myanmar’s military regime; many businesses and individuals associated with these entities and sectors are subject to various restrictions imposed by several countries and international organizations; and businesses and individuals could be exposed to significant legal, financial, and reputational risks when dealing with these entities and sectors.
Below we summarize the major risks and risk mitigation recommendations highlighted in the Advisory.
|Entities or Sectors of Greatest Concern||Risks Identified by the Advisory||Risk Mitigation Recommendations Provided by the Advisory|
|State-Owned Enterprises (“SOEs”)||Corruption (especially in the oil and gas, mining, postal, energy, and|
transportation and logistics sectors);US sanctions risks because numerous Myanmar SOEs have been designated on the list of Specially Designated Nationals (“SDNs”) and Blocked Persons administered by the US Treasury Department’s Office of Foreign Assets Control (e.g., Myanmar Gems Enterprise, Myanmar Timber Enterprise); Forced labor and child labor;Illegal surveillance and internet freedom restrictions; and Other human rights abuses.
|Businesses and individuals dealing with Myanmar SOEs should conduct appropriate due diligence to ensure they are not furthering corruption, child or forced labor, unlawful surveillance practices, or any other serious human rights abuses in Myanmar.|
|Gems and Precious Metals||Money laundering;Corruption;US sanctions risks given the involvement of SDNs in this sector;Forced labor and child labor; Controlled by or have close ties to the Myanmar military; andOther human rights abuses.||Gem, pearl, and precious metal importers should undertake enhanced due diligence to better understand their supply chains and to ensure they are not sourcing from or brokering through military-owned or -operated entities, even if their supply chain does not appear to involve Myanmar on paper.|
|Real Estate and Construction Projects||Money laundering;Arbitrary land seizures and forced evictions; andUS sanctions risks as payments made in connection with the purchase or leasing of the facilities may benefit the Myanmar military.||US businesses maintaining a physical presence in Myanmar should (1) ensure their payments to Myanmar entities do not benefit the Myanmar military; and (2) conduct heightened due diligence to identify, mitigate, and redress issues regarding possible land seizures. Businesses involved in construction and development should avoid using construction materials and other goods produced with forced labor or child labor. All businesses operating in Myanmar should conduct increased due diligence on business partners and report suspicious transactions to relevant authorities.|
|Arms, military equipment, and related activity||Arms trafficking and illegal arms trade; andEnhanced export controls against Myanmar, including “military end use” and “military end user” controls, “military intelligence end use” and “military intelligence end user” controls, and Entity List controls.||US businesses and individuals should screen their business partners to avoid facilitating trade or transactions related to the arms and defense sectors of Myanmar. To reduce US sanctions risks, non-US persons should avoid operating in the defense sector of Myanmar. People engaged in business activities or transactions involving Myanmar should conduct enhanced due diligence to ensure full compliance with US export controls and other laws.|
The Advisory has three annexes that provide useful resources for businesses seeking to develop or enhance compliance programs that address export controls, sanctions, and other risks involving Myanmar. The first two annexes summarize the actions taken and reports issued by the US Government, including the US Departments of Commerce, Homeland Security, Labor, State, and Treasury, and the Office of USTR, in response to the situation in Myanmar. The third annex sets out high-level due diligence best practices for businesses and financial institutions to mitigate risks relating to human rights abuses, US sanctions and export controls, money laundering, human trafficking, and other issues when dealing with Myanmar.