The US Treasury Department and the US State Department have announced two new rounds of sanctions against Syria, including the first designations under the recently-enacted Caesar Syria Civilian Protection Act (“Caesar Act”). The first round, announced on June 17, 2020, resulted in the addition of 39 individuals and entities to the List of Specially Designated Nationals and Blocked Persons (“SDN List”) maintained by the US Treasury Department’s Office of Foreign Assets Control (“OFAC”) pursuant Caesar Act and a Syria-related Executive Order (“EO 13894”). The US State Department’s press release describes the designations as “the beginning of what will be a sustained campaign of economic and political pressure to deny the Assad regime revenue and support it uses to wage war and commit mass atrocities against the Syrian people.” A second round of designations followed on July 29, 2020.
As part of the first round of designations, OFAC designated 24 targets for “actively supporting the corrupt reconstruction efforts of Syrian President Bashar al-Assad,” with nine parties designated under the Caesar Act, in addition to other Executive Orders issued under OFAC’s Syria sanctions program. The designated parties include individuals and entities involved in large-scale real estate development projects and the development of land that was expropriated from Syrians displaced by the Assad regime. Simultaneously, the US State Department designated 15 targets under EO 13894, including Syrian President Bashar Al-Assad, his wife Asma Al-Assad, and other members of the Assad family.
According to the US Treasury Department’s press release, the second round of designations targets “individuals and entities who are actively supporting the corrupt reconstruction efforts of Syrian President Bashar al-Assad,” including investors in luxury real estate in Syria. Specifically, OFAC designated 10 parties to the SDN List as part of the second round of designations, with four of them designated pursuant to the Caesar Act and Executive Order 13582 (“EO 13582”) for providing significant support to the Government of Syria, and the remaining six designated solely pursuant to EO 13582. Simultaneously, the US State Department designated four targets pursuant to EO 13582, including members of the Assad family and the Syrian Arab Army.
The US sanctions against Syria are already comprehensive, and are designed to address various proliferation, terrorism-related, and human rights concerns. OFAC is invoking the additional designation authorities provided for in the Caesar Act for the first time with the SDN designations described above.
Background on the Caesar Act and Other Designation Authorities Invoked in Recent Syria-related Designations
The Caesar Act
The Caesar Act, named in honor of a Syrian photographer who documented Syrian atrocities, authorizes blocking and visa restrictions against non-US persons who knowingly engage in the following activities:
- Provide significant financial (including the provision of loans, credits, or export credits), material, or technological support to or engage in a significant transaction with the Government of Syria (including any state-owned or controlled entities), or senior political figure thereof, or to a foreign person “operating in a military capacity” in Syria on behalf of the Governments of Syria, Russia, or Iran, or a foreign person subject to US sanctions with respect to Syria;
- Sell or provide significant goods, services, technology, information, or other support that significantly facilitates the maintenance or expansion of the Syrian Government’s domestic production of natural gas, petroleum, or petroleum products;
- Sell or provide aircraft or spare aircraft parts that are used for military purposes in Syria for or on behalf of the Government of Syria to foreign persons operating in an area controlled by the Government of Syria or to foreign forces associated with the Government of Syria;
- Provide goods or services associated with the operation of aircraft used for military purposes in Syria for or on behalf of the Government of Syria to any foreign person operating in an area controlled by the Government of Syria; or
- Directly or indirectly provide significant construction or engineering services to the Government of Syria.
The Caesar Act was signed into law as Title LXXIV of the National Defense Authorization Act for Fiscal Year 2020 on December 20, 2019, expanding the US sanctions regime against Syria. The Caesar Act does not change US comprehensive sanctions targeting Syria or the US comprehensive export/reexport ban targeting that country.
Notwithstanding the fact that the Caesar Act calls for the mandatory imposition of sanctions on parties engaging in targeted activities, the US Administration still has significant discretion to determine which parties may be engaged in the activities described above and to decide whether to impose sanctions.
EO 13894 of October 14, 2019 was issued in light of Turkey’s military offensive in norther Syria in October 2019. Under EO 139894, certain Turkish government entities and ministers were briefly designated on the SDN List, but were removed several days later (our previous blog posts on EO 13894 can be found here and here). EO 13894 has been implemented in the recently-issued Syria-Related Sanctions Regulations effective June 5, 2020 (please see our previous blog post here).
EO 13582 of August 17, 2011 was issued in the wake of the Syrian Government’s escalation of military activities to address civil unrest. EO 13582 blocks the Government of Syria and authorizes the SDN designation of parties determined to have “materially” assisted, sponsored, or provided support to or for the Government of Syria.
While the Government of Syria has been under some form of US sanctions regime since 1979, the Caesar Act is the latest addition to the designation authorities at the US Government’s disposal under the comprehensive Syria sanctions program. In light of the recent targeting of the construction and real estate sectors in the recent designations, parties engaging in or otherwise facilitating projects in these sectors should conduct thorough due diligence and risk assessments to assess their exposure under the new sanctions. In particular, the authorities provided under the Caesar Act increase the potential secondary sanctions risks for non-US companies and financial institutions involved in activities with parties designated under the Caesar Act, even if those activities otherwise have no US nexus.
Parties dealing with or providing financing to non-Syrian companies that are engaged in targeted activities, or with known connections, in Syria (which may include construction sector companies in Lebanon, Turkey, Russia, and China), should consider conducting more diligent risk-mapping exercises for direct or indirect connections to Syria. In addition, financial institutions based across the Middle East, including subsidiaries and branches of international financial institutions, should consider their holistic approaches to due diligence in light of these recent actions. Given the “hub” model typically employed by those based in financial centres in the Middle East covering the wider region, their financing activities will typically cover parties located or operating in the jurisdictions mentioned above.