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OFAC FAQ (Current) # 840 -FAQ Related to the Government of the Hong Kong Special Administrative Region

Date issued: Sep. 25 2020

Last substantive commentary amendment:
Dec. 08 2023

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840. If an official of the Government of the Hong Kong Special Administrative Region (HKSAR) is designated as a Specially Designated National (SDN), does that mean that the HKSAR government is blocked? What are the prohibitions on U.S. persons dealing with a designated HKSAR government official?

The designation of an official of the Government of the HKSAR does not itself block the HKSAR government or any government agency where the SDN is an official or otherwise exercises control. Accordingly, engaging in a routine interaction with an agency in which an SDN is an official, but which does not involve the SDN directly or indirectly, is not prohibited.

U.S. persons are prohibited from engaging in transactions or dealings with, and dealing in the property or interests in property of, designated HKSAR government officials, including any entities that are directly or indirectly owned 50 percent or more in the aggregate by one or more blocked persons. U.S. persons should be cautious in dealings with HKSAR government agencies in which an SDN is an official to ensure that they are not engaged in transactions or dealings, directly or indirectly, with an SDN (e.g., by entering into contracts that are signed by an SDN, entering into negotiations with an SDN, or processing transactions, directly or indirectly, on behalf of the SDN), absent authorization from OFAC or an applicable exemption. However, U.S. persons may, for example, enter into HKSAR government contracts signed by a non-SDN official of the HKSAR to whom the HKSAR government has delegated the authority to enter such contracts.

Date Released
September 25, 2020
External link location:
https://ofac.treasury.gov/faqs/840

TURBOFAC Commentary (462 words)

Notes:

1) This FAQ is substantively similar to other FAQs clarifying the relationship between blocked government officials and the activities in which a U.S. person can engage involving entities controlled by such SDNs. Compare FAQ # 285 (Burma) and FAQ # 505 (Venezuela). See also FAQ # 398 (concerning non-blocked entities controlled by SDNs).

This FAQ adds clarity to the issue by stating that “U.S. persons may, for example, enter into HKSAR government contracts signed by a non-SDN official of the HKSAR to whom the HKSAR government has delegated the authority to enter such contracts.” This is consistent with OFAC’s practice in the private sector context, discussed in Sec. 2b) of Consolidated Comment on the Civil Penalty Issued in ExxonMobil Corporation (2017), the Administrative Record Underlying the Penalty, and the Ensuing Litigation. U.S. persons are prohibited from “indirect dealings” with SDNs, but entering into contracts with non-blocked entities that are signed by non-blocked persons is not prohibited, or considered an “indirect dealing” with an SDN, simply because the blocked person delegated authority to a signatory of the contract.

This is the first FAQ that includes the “routine interaction” language, but the discussion of contracts in the following paragraph indicates that that language should not be taken to suggest that only “routine interactions” with agencies headed by SDNs are permitted.

Compare Open Society Justice Initiative et al v. Trump et al (1:20-cv-08121) (SDNY 2020) - OFAC/USG Memo. in Opp. to Pl. Motion for P.I., which was drafted subsequent to the issuance of this FAQ. The DOJ, representing OFAC, argued that the fact that two key ICC prosecutors were blocked did not mean that U.S. persons were prevented “from providing assistance or other services to the ICC or the Office of the Prosecutor (which have not been designated) and Plaintiffs generally can assist on ICC investigations so long as they do not transact with the two designated individuals, including by providing funds, goods, or services to them or for their benefit, or otherwise deal in their property or property interests.” One of the blocked prosecutors was the Chief Prosecutor of the International Criminal Court. To the degree that the position taken there could be considered to reflect OFAC’s position in an across-the-board manner, it is notable inasmuch as OFAC acknowledges that U.S. persons’ ability to deal effectively with non-blocked entities headed by blocked persons is not limited to large corporations or government ministries.

2) Accord/compare FAQ # 993 (Taliban-related). Contrast Case No. COTED-6-1.

3) Compare FAQ # 1145 (similar but specifies that “receiving an invoice bearing the blocked individual’s signature for a commercial transaction, would be prohibited by the GMSR unless authorized by OFAC or exempt”).