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Explaining the Designated Nationals and Blocked Persons (SDN) List – an interview with Eric Rose

While virtually all economic sanctions applied by the United States against Myanmar have been suspended, a number of businesspeople and companies remain sanctioned. The Specially Designated Nationals and Blocked Persons (SDN) list is held by the US Treasury Department’s Office of Foreign Assets Control (OFAC) and keeps a record of those who are still blacklisted.

Some Myanmar government officials have been removed from the list since US-Myanmar relations improved under the government of President Thein Sein, but many remain listed. American companies that want to work in Myanmar must therefore be cautious about linking up with SDNs or face prosecution in the United States.

Eric Rose is the lead director of Herzfeld Rubin Meyer and Rose (HRMR), the first US law firm to operate in Myanmar. HRMR held a briefing on the US SDN (Specially Designated Nationals) list on 2 April. He responded to the following questions.

MI: How many people or firms remain on the list and is it strictly enforced from the stance of the US Treasury Department?

ER: The actual number of SDNs is hard to determine, as there are multiple renditions of the same individual’s names or company name. The total number, which is well in excess of 100, has actually been increased last year, with multiple additions and one delisting. The SDN lists, as well as the Burma Sanctions, are strictly enforced.

MI: The Blocked list seems at variance with the US government’s position of partially lifting sanctions and supporting democratic reform in Myanmar?

ER: I agree. It seems that, once the rest of the world has dropped all sanctions (except as to military sales), the US should follow suit. Nevertheless, the delisting process in the US involves OFAC’s consultations with multiple agencies, and a pretty well-defined delisting path exists. Unfortunately, not many SDNs have taken advantage of it.

MI: Both the EU and Australia have lifted sanctions on over one thousand individuals and companies between 2012 and 2013, does this leave the US a distinct disadvantage in terms of its own trade and investment in Myanmar?

ER: Once again, I agree. The issue of a country’s government (i.e. the U.S.) giving all of its businesses a fair trading opportunity is central to the economic system of the United States. Yet, there are many more requirements that U.S. individuals and businesses are subjected to if they want to trade in, or with Myanmar. For example, there are the U.S. State Department self-reporting rules in the event that a U.S. Person invests more than $500,000 in Myanmar, or does any business with MOGE, or pays more than $10,000 to the MM government. U.S. businesses are also faced with a continuous refusal of some U.S. banks to do business with Myanmar companies, as well as with reputational risk.

MI: Asia has no restrictions in place?

ER: Not to my knowledge.

MI: Sanctions have been lifted for some names but not for others including some of the most major business people operating within Myanmar, does the list need revision?

ER: That assertion is incorrect. Other than “political” removal of names from the list (e.g. President U Thein Seen, or Speaker Thura U Shwe Mann), only one private party, U Kyaw Thein (an associate of U Tay Za in Singapore) was removed from the list in recent years. Actually, a number of individuals and businesses have been added to the list last year, primarily because of alleged dealings with North Korea.

MI: I understand H&R has extensive experience in dealing with US companies applying to the OFAC for exceptions or licenses to deal with an SDN-listed party?

ER: Yes, we do. For example, we represent the two Americans who were severely injured in the Air Bagan crash at Heho airport on December 25th, 2012, one of whom had third-degree burns over 30% of his body, and was close to death numerous times. In order to defend their rights versus Air Bagan, its parent affiliated companies in the Htoo Group (Air Bagan and some of the Htoo companies are SDN-listed) and its insurers, we had to obtain an OFAC license, which we succeed in getting in five weeks (a record time) early last year. Sometime later, Air Bagan’s lawyers realized that, in order to represent Air Bagan, they also needed to get an OFAC license. They applied in June and July, 2013, respectively. By November, no licenses were forthcoming, so they asked us to help their applications. After we intervened, their licenses were granted in three weeks.

MI: Is there a recognized process from which an SDN-listed party can petition OFAC to remove it from the SDN list?

ER: Yes, however, as shown in the Air Bagan case, specialized competent counsel is essential to represent the SDN.

MI: Does the OFAC delist SDN-listed names as part of its own ongoing internal procedure?

ER: OFAC will delist names in cases of regulatory changes (e.g. the expiration of an applicable statute or Executive Order), or if petitioned.

MI: Is it likely in your experience with other sanctioned countries, that there might be a moratorium on the Blocked List of names or will it be a case by case examination?

ER: The case-by-case examination is taking place now for those SDNs who want to be delisted, and who have abandoned the “old” ways which got them listed in the first place. That is why we are inviting SDNs to contact us. The US government has turned a page, and new guidelines are in effect. It is up to each individual SDN to decide whether he/she/it wants to continue seeing their respective name listed, or be delisted. There will not be a moratorium on the SDN listings as long as there are people like Putin, and the people around him, ruling countries.

MI: Does the existence of the list in the current state of reform, bar US businesses from working with people central to the success of the Myanmar Economy?

ER: The success of the Myanmar reform process rests on the shoulders of its over sixty million people, from farmers and fishermen, to the garment workers and entrepreneurs who start businesses every day, to the educators and medical service workers, to shopkeepers and members of the armed forces, and, in no small part, to consistently fair local and national government which implements the rule of law and then gets out of the way in order to let an equal opportunity marketplace take over. In the New Myanmar, there is room for old and young, rich and poor, majority Bamar or ethnic minority, men or women, as long as each of them has an equal opportunity to succeed based on their own intelligence, skill and education. It may sound like a “cliche,” but this is not much different than events in our own country not so long ago. Myanmar, with or without the “cronies,” will once again become, I’m convinced, the richest country in the ASEAN and the shining star in Southeast Asia it used to be some sixty-five years ago.