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OFAC Update: Sanctions Against Chinese Military Company Securities

January 11, 2021

Late on January 8, 2021, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) published its first general license under the new Chinese Military Company sanctions program.

General License 1 permits all transactions and activities otherwise prohibited by Section 1(a)(i) of Executive Order 13959 involving publicly traded securities or securities that are derivative of (or designed to provide investment exposure to such securities of) an entity whose name “closely matches the name” of a Communist Chinese Military Company (CCMC) identified in the Annex to E.O. 13959 “but that has not been listed” on OFAC’s Non-SDN Communist Chinese Military Companies List. Such transactions are authorized through 9:30 a.m. EST on January 28, 2021.

That same day, OFAC also announced an updated Non-SDN Communist Chinese Military Companies List, which is located here.  

Additionally, on January 6, OFAC issued additional guidance in the form of Frequently Asked Questions (FAQs) 863, 864, and 865. In FAQ 863, OFAC advised that U.S. persons can provide certain support services in relation to transactions in publicly traded CCMC securities, so long as the underlying transactions are not prohibited. These support services include clearing, execution, settlement, custody, transfer agency, and back-end services. FAQ 865 also clarified that market intermediaries and other participants can engage in ancillary or intermediary activities that are necessary to facilitate divestment of CCMC securities during the wind-down period, so long as the underlying transactions are not otherwise prohibited. FAQ 864 clarified that E.O. 13959’s prohibitions also apply to transactions in publicly traded securities of a CCMC with a name that “exactly or closely” matches the name of an entity specifically identified in the Annex to E.O. 13959.

To see all of OFAC’s written guidance on the CCMC sanctions, please see here

If you have any questions or concerns about U.S. sanctions, please contact Bruce G. Paulsen (212-574-1533) or Andrew S. Jacobson (212-574-1477) at Seward & Kissel’s Sanctions Practice Group.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm or its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.


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