New CAATSA-related Executive Order; 33 persons added to CAATSA list of Russian defence & intelligence sectors; 2 Chinese persons sanctioned

US-Russia3Last week (20 September), US President Donald Trump issued a new  Executive Order to further the implementation of certain CAATSA-related sanctions with respect to the Russian Federation. See new OFAC FAQ, Presidential Statement and Special Press Briefing for further details. In addition, the US Secretary of State has taken two actions to implement his delegated authorities pursuant to section 231 of CAATSA and to “further impose costs on the Russian Government for its malign activities”.

First, the Secretary of State has added 33 additional persons to the section 231(d) CAATSA list of those “being a part of, or operating for or on behalf of, the defense or intelligence sectors of the [Russian government]”. This action increases the number of persons identified to 72 (39 persons were originally identified in October 2017 – see previous blog). This list does not itself impose sanctions, but any person who knowingly engages in a “significant transaction” with any of the identified persons will be subject to mandatory sanctions, pursuant to section 231(a) of CAATSA.

Second, in consultation with OFAC (see Notice here), the Secretary of State has sanctioned Chinese entity Equipment Development Department (EDD) and its director, Li Shangfu, for “knowingly engag[ing] in significant transactions with a person that is a part of, or operates for or on behalf of, the defense sector of the [Russian government]”. According to the US Department of State Fact Sheet (which includes the additional 33 identified persons), China took delivery from Russia of ten Su-35 combat aircraft in December 2017 and a batch of S-400 (a.k.a. SA-21) surface-to-air missile system-related equipment in January 2018. Both transactions were negotiated between EDD and Russia’s main arms export entity, Rosoboronexport; an entity identified on the aforementioned section 231(d) CAATSA list. The following 5 sanctions have been selected from section 235 of CAATSA to be imposed on EDD:

  1. A denial of export licences;
  2. A prohibition on foreign exchange transactions under US jurisdiction;
  3. A prohibition on transactions with the US financial system;
  4. Blocking of all property and interests in property within US jurisdiction; and
  5. The imposition of sanctions on an EDD principal executive officer, namely, its director Li Shangfu, which include a prohibition on foreign exchange transactions under US jurisdiction, a prohibition on transactions with the US financial system, blocking of all property and interests in property within US jurisdiction, and a visa ban.

This is the first time the US has sanctioned anyone under section 231 of CAATSA for knowingly engaging in a significant transaction with a person identified as “being a part of, or operating for or on behalf of, the defense or intelligence sectors of the [Russian government]”.

This entry was posted in China, Russia, USA by Michael O'Kane. Bookmark the permalink.

About Michael O'Kane

Michael O’Kane is a partner and Head of the Business Crime team at leading UK firm Peters & Peters. Described as ‘first-rate’ (Legal 500 2012), he “draws glowing praise from commentators” (Chambers 2013) for handling the international aspects of business crime, including sanctions, extradition and mutual legal assistance. Called to the Bar in 1992 and prior to joining Peters & Peters he was a senior specialist prosecutor at the Crown Prosecution Service Headquarters(CPS). At CPS HQ he was a key member of a small specialist unit responsible for the prosecution of serious and high profile fraud, terrorist and special interest criminal matters including the Stansted Airport Afghan hijacking and the prosecution of Paul Burrell (Princess Diana’s butler). Michael joined Peters & Peters in 2002. He became a partner in May 2004, and Head of the Business Crime team in May 2009. Since joining Peters & Peters, Michael has dealt with a wide range of business crime matters. He has particular expertise in international sanctions, criminal cartels, extradition, corruption, mutual legal assistance, and FSA investigations. Described as“ an influential practitioner in fraud and regulatory work, so much so that he is top of the referral lists of many City firms for independent advice for directors” (The Lawyer’s Hot 100 2009), he was recognised as one of the UK’s most innovative lawyers in the 2011 FT Innovative Lawyer Awards and included in the list of the UK's leading lawyers in 'The International Who's Who of Asset Recovery 2012. In 2012 he was the winner of the Global Competition Review Article of the Year. Michael regularly appears on television and radio to discuss his specialist areas and he is the author of the leading textbook on the UK Criminal Cartel Offence “The Law of Criminal Cartels-Practice and Procedure” (Oxford University Press 2009). Recent/Current Sanctions Work • Representing 109 individuals and 12 companies subject to designation by the European Council under targeted measures imposed against Zimbabwe. This is the largest and most complex collective challenge to a sanctions listing ever brought before the European Court. • Acting for a former Egyptian Minister and his UK resident wife, challenging their designation by the European Council of Ministers under targeted measures brought against former members of the Egyptian Government. • Advising a company accused in a UN investigation report to have breached UN sanctions imposed in relation to Somalia. • Advising a UK company in relation to ongoing commercial relationships with an Iranian company listed under both EU and UN sanctions. • Advising an individual in relation to a UK investigation for alleging breaching nuclear export controls.

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