841. What does Syria General License 20 authorize?
Syria General License (GL) 20 authorizes, subject to certain conditions, all transactions and activities prohibited by the Syrian Sanctions Regulations (SySR) that are ordinarily incident and necessary to the wind down of transactions involving, directly or indirectly, Emma Tel LLC or any entity in which Emma Tel LLC owns, directly or indirectly, a 50 percent or greater interest, through 12:01 a.m. eastern standard time, December 30, 2020. Persons unable to wind down transactions prohibited by the SySR involving, directly or indirectly, Emma Tel LLC, or any entity in which Emma Tel LLC owns, directly or indirectly, a 50 percent or greater interest, before 12:01 a.m. eastern standard time, December 30, 2020, are encouraged to seek guidance from OFAC.
For the duration of GL 20, non-U.S. persons may wind down transactions involving, directly or indirectly, Emma Tel LLC, or any entity in which Emma Tel LLC owns, directly or indirectly, a 50 percent or greater interest, without exposure to sanctions under the Caesar Syria Civilian Protection Act of 2019, provided that such wind down activity is consistent with GL 20. While GL 20 is in effect, wind down transactions involving non-U.S. persons may be processed through the U.S. financial system or involve U.S. persons, as long as the transactions comply with the terms and conditions in GL 20. Non-U.S. persons unable to wind down transactions involving, directly or indirectly, Emma Tel LLC or any entity in which Emma Tel LLC owns, directly or indirectly, a 50 percent or greater interest before 12:01 a.m. eastern standard time, December 30, 2020, are encouraged to seek guidance from OFAC.
Date Released
September 30, 2020
1) This FAQ is similar to other FAQs (see e.g. FAQ # 817) addressing designations of individual entities that were made in conjunction with the issuance of a wind-down license.
Consistent with OFAC's standard practice, OFAC provides guidance assuring non-U.S. persons not subject to the prohibitions of the SySR that secondary sanctions provisions will not be enforced for dealings that would qualify for the GL if the non-U.S. persons involved were U.S. persons. Compare the “exposure to sanctions” language found in FAQ # 834. For more on the practice referred to, i.e. of not enforcing secondary sanctions in response to activities in which U.S. persons could engage without a license, see General Note on Secondary Sanctions and “Derivative Designation” Criteria; Identification of the Gap Between the Theoretical and Practical Scopes of Authorities Targeting Transactions with no U.S. Nexus; Enforcement Risk Management and refer generally to General Note on "Counterfactual Secondary Sanctions and Derivative Designation Safe Harbors" in Certain OFAC Guidance and FAQs (System Ed. Note).
2) *Note Common to FAQ # 807, FAQ # 835, FAQ # 841, FAQ # 883, FAQ # 1102 and FAQ # 1112
FAQ # 835, FAQ # 841, FAQ # 883, FAQ # 1102 and FAQ # 1112 all stand for the notable proposition as it relates to U.S. person facilitation of other involvement in underlying transactions of non-U.S. persons that are described by a general license, but not within the scope of OFAC's jurisdiction to begin with. More specifically, the FAQs all interpret standard wind down GLs that authorize "all transactions prohibited by the [sanctions] that are ordinarily incident and necessary to the wind down of any transaction involving [certain blocked persons]..."
The FAQs, issued across three separate sanctions programs over a span of over two years, all specify that "Wind-down transactions involving non-U.S. persons may be processed through the U.S. financial system or involve U.S. persons as long as the transactions comply with the terms and conditions in [the GL]..."
What is notable about the statement is that, with the disjunctive "or," OFAC makes it relatively clear that U.S. banks may process a transaction involving the covered blocked entity even if the transaction does not otherwise involve a U.S. person, and other U.S. persons (e.g. U.S. person employees of non-U.S. persons) may facilitate transactions that have no other U.S. nexus, so long as those transactions are described by the applicable GL, which does not specify that a given "wind down" transaction must be one for the winding down of operations of U.S. persons with the given blocked person.
OFAC's longstanding interpretation of its standard "wind down" GLs requires a qualifying "wind down" transaction to be one that has some connection to pre-sanctions activitiy (accordingly "the entry into new purchase contracts, or the stockpiling of inventory, involving [the relevant blocked person]" is generally not within the scope of a wind down GL. The legal basis for determining that a U.S. person bank can process a payment between a two non-U.S. persons with no U.S. nexus is not that the U.S. person bank would be winding down its operations with the blocked person, but instead, the U.S. person bank processing would be "ordinarily incident" to the underlying transaction that is "licensed" in the sense that it is described by the GL, but not "licensed" in the sense that OFAC has jurisdiction over the underlying offshore transaction. For more on this, see General Note Pertaining to U.S. Person Engagement in Transactions Incident to Transactions by Foreign Persons. In other words, this is implicitly an interpretation of OFAC’s standard “ordinarily incident” interpretive provision.
Finally, note that in FAQ # 807 (Removed), the question asked is "Can U.S. financial institutions process transactions involving [the relevant blocked persons] under Iran General License K-1 if the U.S. financial institution is the only U.S. person involved in the transaction," and the answer is "[y]es, provided the transaction is ordinarily incident and necessary to the maintenance or wind down of transactions involving [the relevant blocked persons]..." The FAQs referenced above stand for the same proposition, but FAQ # 807 is more direct as it relates to the "U.S. financial institution is the only U.S. person involved in the transaction" factor.