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956. For the Belarus, Russian Harmful Foreign Activities (Russia) Ukraine-/Russia-related, and Venezuela-related sanctions programs, how does OFAC view modifications to pre-existing loans, contracts, or other agreements to replace London Interbank Offered Rate (LIBOR) as the reference rate?
In July 2017, the United Kingdom Financial Conduct Authority (FCA) announced the “future cessation and loss of representativeness” of the ICE Benchmark Administration’s 35 global reference rates, the LIBOR rates. In light of the discontinuation of LIBOR as a benchmark reference rate, OFAC is issuing additional guidance.
The Belarus, Russia, Ukraine-/Russia-related, and Venezuela-related sanctions programs prohibit U.S. persons from dealing in certain new debt of persons identified as subject to these prohibitions. In FAQ 944 (Belarus), FAQ 986 (Russia-related), FAQ 371 (Ukraine-/Russia-related), and FAQ 511 (Venezuela-related), OFAC provides examples of new debt, such as “bonds, loans, extensions of credit, loan guarantees, letters of credit, drafts, bankers acceptances,...
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Notes:
1) As noted in the FAQ, the London Interbank Offered Rate (“LIBOR”)— an average of what banks say they would charge to lend to one another that is/was used as a reference rate for many debt instruments—was discontinued. The result of this is a need to amend certain debt instruments that have LIBOR as a reference rate with no alternative.
The FAQ is notable for a few reasons. First, OFAC issues the FAQ in connection with the Belarus, Russia (SSI Directives) Venezuela-related sanctions prohibitions that have “new debt” prohibitions. It is done in a way that lends further support to the view that the interpretation of “new debt” is, unless otherwise specified, harmonious across programs. (We are aware of no instance in which OFAC...