Deutsche Bank AFC/ Sanctions. TECC London 2015 W2 - Sanctions April 23, 2015

Transcription

1 AFC/ Sanctions TECC Lonn 2015 W2 - Sanctions April 23, 2015

2 Agenda 1 2 Sanctions Update Frame within the Frameworks a b c The need for a policy Discussion topics related to Sectoral Sanctions Other discussion topics 1

3 Types of Sanctions Overview Financial Embargos Diplomatic Restrictions Sanctions can consist of: Trade Embargos Weapons Dual-Use Embargos Travel Bans 2

4 Types of Sanctions Overview Sanctions are penalties or other means of enforcement used to provide incentives for obedience with the law, or with rules, regulations and just with policy objectives targeted against Persons, Organizations, Entities (including ships) Goods (e.g. arms, dual use goods, diamonds, internal repression, oil developing equipment) Countries (no such sanctions imposed by the EU) Embargos/Sanctions are such measures imposed by a Government. Embargos can also be imposed by a group of states (for example, UN or EU) The aim of an embargo is usually to isolate the designated party from (parts of) a market and, in the case of countries, put the designated Government or regime directly or indirectly into a difficult internal situation given that the effects of the embargo often has a negative effect on its economy. 3

5 The EU and the US have imposed sanctions against persons related to events in the Ukraine and the Crimea Targeted Entities Jurisdiction Sanctions imposed by the U.S. generally apply to U.S. Persons: U.S. citizens as well as permanent residents and green card holders (wheverer they are) and individuals and legal entities (and their foreing branches) physically present in or organized under the law of the U.S. have to apply sanctions, but also those who act or cause activity within the U.S. Since the execution of USD generally entails the involvement of U.S. banks (and thus U.S. Persons) all transaction denominated in USD should be considered subject to U.S. Sanctions. Sanctions imposed by the EU, inter alia, generally apply to the nationals of member states of the EU. Deutsche Bank Group, by policy, must adhere to EU Sanctions, regardless of where and through which legal entity it acts or is miciled. 4

6 U.S. Sanctions related to Russia/Ukraine Executive Orders Overview and Target Ukrainian and Russian government officials deemed responsible for undermining the sovereignty of Ukraine. Entails conventional US blocking of entities and individuals added to the Specially Designated Nationals and Blocked Persons list ( OFAC list ). Notable entries include: Arkady and Boris Rotenberg, Bank Rossiya, Gennady Timchenko, Chernomorneftegaz, SMP Bank, Sobinbank, etc (plus Directives 1 4) Sectoral sanctions target entities belonging to certain sectors of the Russian economy such as financial services, energy, metals and mining, engineering, and defense and related materiel. The U.S. government uses this authority to implement narrowly tailored sanctions targeting the provision of debt to and dealings in equity of large Russian companies, many owned by the state or by individuals with close ties to Russian officials, currently in the financial services, energy or defense sectors Prohibits new investment, importation or exportation, directly or indirectly, of any goods services or technology to or from the Crimea region. Simply, all transactions involving Crimea must be rejected 5

7 U.S. Sanctions related to Russia/Ukraine Directives (EO 13662) Overview Directive 1 prohibits U.S. Persons dealing in new debt of longer than 30 days maturity or new equity Targets Russian financial institutions Bank of Moscow, Vnesheconombank, VTB Bank, Gazprombank, Sberbank, Russian Agricultural Bank Directive 2 prohibits U.S. Persons dealing in new debt of longer than 90 days maturity Targets Russian energy sector Transneft, Novatek, Gazprom Neft, and Rosneft Directive 3 prohibits U.S. Persons dealing in new debt of longer than 30 days maturity Targets Russian defense sector Rostec Directive 4 prohibits U.S. Persons provision, exportation, or re-exportation, directly or indirectly, of goods, services (except for financial services), or technology in support of exploration or production for deepwater, Arctic offshore, or shale projects that have the potential to produce oil Further targets Russian energy sector Gazprom, Lukoil, Gazprom Neft, Rosneft, and Surgutneftegas 6

8 I EU Sanctions related to Russia/Ukraine Basis(VO) Objective Measures Examples 208/2014 March 05, 2014 Consolidating rule of law and respect for human rights in Ukraine Obligation to freeze assets Prohibition to make funds available Yanukovych, Viktor Yanukovych, Oleksandr Zakharchenko, Vitalii 269/2014 March 17, /2014 Sept. 08, /2014 Sovereignty and territorial Integrity of Ukraine, recall of Russian troops Obligation to freeze assets Prohibition to make funds available Aksyonov, Sergey Konstantinov, Vladimir 692/2014 June 23, /2014 Dec. 18, 2014 Non-acceptance of the Annexation of Crimea Prohibition to Ex- and Import Prohibition to provide trade financial services directly or indirectly Limitation on tourism 833/2014 Restrictions for capital market July 31, 2014 transactions 960/2014 Enhance costs for the Transferable securities, money market Sept. Source: 08, Credit 2014 and Reputational Risk Directives (see extract instruments, for CRRD #1 loans and credit, 1290/2014 in Appendix A1) Exception: Ex-+ Import EU/3rd country Dec. 04, 2014 Maturity up to 30 (90) days Commission Guidance Dec.16, 2014 activities Russia s undermining the territorial integrity and sovereignty of Ukraine; support a peaceful solution of the crisis new Issued by / granted to sanctioned entities Prohibition to export dual-use, weapons, key equipment for oil exploration, -services Sberbank, VTB Bank, Gazprombank, VEB, Rosselkhozbank ( securities, money market instruments, loans/credit) Oboronprom, United Aircraft, Uralvagonzavod, (12.09.) Rosneft, Transneft, Gazprom Neft (12.09) Pipes for exploration Casing for the exploration of oil 7

9 Changing Sanctions Regimes Iran and the P5 + 1 Talks Temporary Sanctions Relief Extended Until June 30, 2015 means very little for U.S. Financial Institutions: Relief for correspondent or payable-through account sanctions non-u.s. financial institutions can facilitate transactions for Exports of petrochemical products from Iran; The sale, supply, or transfer to Iran of significant goods or services used in connection with the automotive sector of Iran The purchase or acquisition of precious metals to or from Iran; Specifically licensed aviation safety related goods and services Exports of petroleum and petroleum products from Iran to China, India, Japan, the Republic of Korea, Taiwan, or Turkey, and associated insurance and transportation services. The parameters announced on April 2, 2015 for a Comprehensive Plan of Action (JCPOA) by the P5+1 and Iran not immediately relieve, suspend or terminate any sanctions on Iran. The only sanctions relief in force is the relief provided pursuant to the Joint Plan of Action (JPOA) reached on November 24, 2013 and extended through June 30, As of today and until a JCPOA is concluded, other than the sanctions relief provided under the JPOA, all U.S. sanctions remain in place and will continue to be vigorously enforced. 8

10 Changing and evolving Sanctions Regimes Cuba, Myanmar & Venezuela Cuba After more than 60 years the U.S. wishes to expand diplomatic relations U.S. will reestablish an embassy in Havana, and high-ranking officials will visit Cuba U.S. Dept. of Treasury and of Commerce implemented on Jan 15, 2015 changes to the Cuba Sanctions, esp. 31 CFR Part 515 Myanmar 12 categories of authorized travel (family visits, journalistic activities etc.) Certain travel and carrier services, certain insurances, limited import of goods into the U.S. Certain telecommunication services, certain limited financial services Improving living conditions, supporting independent economic activity, strengthening small business. Most financial transactions are permissible under both U.S. and EU sanctions regimes. Transactions involving the security or defense industries are not permissible There is a targeted program by OFAC in place; per April 11, 2015, 121 SDNs are still designated. Venezuela PDVSA, sanctioned under CISADA by the U.S. State Dept. on May 24, 2011: prohibit competing for procurement contracts, from securing financing from the U.S. Export-Import and from obtaining U.S. export licenses; not apply to PDVSA subsidiaries; not prohibit the export of crude oil to the U.S. Seven SDNs listed under EO on Mar 09,

11 Revised Guidance on entities owned by persons whose property and interests in property are blocked Ownership New 50% Rule August 13, 2014 (OFAC) any entity owned in the aggregate, directly or indirectly, 50 percent or more by one or more blocked persons is itself considered to be a blocked person. The property and interests in property of such an entity are blocked regardless of whether the entity itself is listed in the annex to an Executive order or otherwise placed on OFAC s list of Specially Designated Nationals. Provides clear bright line rule by removing previous control factor. However, the new rule combined with sectoral identification of very large multinationals has caused banks to perform in depth investigations to identify subsidiaries of SSI entities. Major U.S. correspondent banks have identified 1500 to over 3000 sectorally sanctionable subsidiaries, and the lists continue to grow. 14 SSI entities = over 3,000 new names to screen. Sanctions only go wnstream, NOT to parent or sibling 10

12 Agenda 1 2 Sanctions Update Frame within the Frameworks a b c The need for a policy Topics related to Sectoral Sanctions Other sanctions-related topics 11

13 Frame within the Frameworks The need for a policy Problem and Solution Difficulty in determining regulatory boundaries Overlap of several sanctions regimes complicate situation Compels to position yourself Helps to straighten and clarify the rules Stakeholders expectations Legitimizing effects Reference for decisions 12

14 Frame within the Frameworks Topics related to Sectoral Sanctions Positions: Do or not 50%+-rule, aggregate: apt OFAC-approach outside of U.S. jurisdiction? Trade Finance Exception: Make use of exception in view of U.S. approach? Currency Exchange Clauses: Expecting further unilateral sanctions, smooth wind-wn EU established subsidiaries: Extend effects of further reaching OFAC sanctions to within EU Entities sanctioned unilaterally only: Extend effects to areas outside of jurisdiction (Novatek etc.) Establishing new client relationships: Special processes for or rejection of the aption of sectorally sanctioned parties Terminating existing client relationships: Terminate relationships regardless of permissibility of transactions Capping existing client relationships: Conduct business only within the frame of historic business 50%+-rule TF Exception CurExCl s EU sub s Unilateral san. extension New Client relat. Termination Capping 13

15 Frame within the Frameworks Other Sanctions-related topics Trade Finance: Require sanctions clauses? Trade Finance: Accept/confirm sanctions clauses? Currency Exchange Clauses: Expecting unilateral, (in the case of Iran) snap-backed sanctions Require rep s, warranties, undertakings in loan/credit facilities Require rep s, warranties, undertakings in bond issuance facilities Business relationships with prospective clients having revenues from problematic countries Sanctions screening of employees Positions: Do or not TF, require clauses TF, accept, confirm CurExCl s Loan/credit fac. Bond issuance fac. Business relation Employee screening 14

16 Annex: ICC Guidance on the Use of Sanctions Clauses dd. Aug. 20, 2014 The following sanctions clause is more problematic in that it refers to internal policies that are unknown to the nominated bank. By ing so it brings into question whether the bank will comply with its irrevocable obligation: [Bank] complies with the international sanction laws and regulations issued by the United States of America, the European Union and the United Nations (as well as local laws and regulations applicable to the issuing branch) and in furtherance of those laws and regulations, [Bank] has apted policies which in some cases go beyond the requirements of applicable laws and regulations. Therefore [Bank] undertakes no obligation to make any payment under, or otherwise to implement, this letter of credit (including but not limited to processing cuments or advising the letter of credit), if there is involvement by any person (natural, corporate or governmental) listed in the USA, EU, UN or local sanctions lists, or any involvement by or nexus with Cuba, Sudan, Iran or Myanmar, or any of their governmental agencies. 15

17 Annex: ICC Guidance on the Use of Sanctions Clauses dd. Aug. 20, 2014 Recommendations 4.1 It is recommended that banks should refrain from issuing trade finance-related instruments that include sanctions clauses that purport to impose restrictions beyond, or conflict with, the applicable statutory or regulatory requirements. It is also advisable for practitioners to be aware of the risks posed by such clauses if included by other banks involved in their transactions. 4.2 In trade finance transactions involving letters of credit or demand guarantees subject to ICC rules, practitioners should refrain from bringing into question the irrevocable, independent nature of the credit, demand guarantee or counter-guarantee, the certainty of payment or the intent to honour obligations. Failure to so could eventually damage the integrity and reputation of letters of credit and demand guarantees which may have a negative effect on international trade. 16

18 Contact Information Martin Vogt, LL.M., Atty. Deputy Global Head of Sanctions & Embargoes

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