Myanmar -- Sanctions Compliance Regulatory Overview

The political situation in Myanmar, particularly since the February 2021 military coup, has led to a significant increase in international sanctions from major jurisdictions. These sanctions are designed to pressure the military junta and are increasingly interpreted to apply to virtual assets (cryptocurrencies).

Cryptocurrency Sanctions and Restrictions in Myanmar primarily stem from the sanctions regimes of the United States (OFAC), the European Union (EU), and the United Kingdom, among others, which all impact Virtual Asset Service Providers (VASPs) globally. While the UN has issued resolutions concerning Myanmar, it does not maintain a separate, comprehensive sanctions regime that would directly create a UN-specific crypto sanctions list for Myanmar; instead, its resolutions inform national sanctions.

Here’s a breakdown of the applicable sanctions and compliance requirements for VASPs:

I. Key Sanctioning Bodies and Their Regimes Affecting Myanmar

A. United States (OFAC – Office of Foreign Assets Control)

OFAC maintains a robust sanctions program against Myanmar, targeting the military junta, its leaders, associated entities, and state-owned enterprises.

1. Legal Basis:

   • Executive Order (E.O.) 14014 (February 11, 2021): Blocks property of persons contributing to the situation in Burma.
   • E.O. 14033 (July 20, 2021): Imposes additional sanctions in connection with the human rights abuses and undermining of democracy in Burma.
   • E.O. 14077 (June 10, 2022): Further expands the scope to prohibit certain new investment in Burma.
   • Burma Sanctions Regulations (31 CFR Part 537): Implements the Executive Orders.
   • OFAC's Guidance on Sanctions Compliance for the Virtual Currency Industry: Clarifies that sanctions obligations apply equally to transactions involving virtual currencies.

2. Scope of Sanctions:

   • Blocking Sanctions: Prohibits U.S. persons from dealing in any property or interests in property of designated individuals and entities (Specially Designated Nationals and Blocked Persons – SDNs). This includes any type of asset, including virtual assets.
   • Sectoral Sanctions: May target specific sectors of the Myanmar economy (e.g., state-owned enterprises, mining, timber, gems, banking).
   • Financial Sanctions: Prohibitions on transactions with designated financial institutions or those facilitating sanctioned activities.

3. Specific References:

   • OFAC Burma Sanctions Program: https://ofac.treasury.gov/sanctions-programs/country-specific-and-program-based-sanctions-programs/burma-myanmar-sanctions-program
   • OFAC's SDN List: https://ofac.treasury.gov/sdn-list (regularly updated with Myanmar-related designations)
   • OFAC Guidance for the Virtual Currency Industry: https://ofac.treasury.gov/media/2311/download?inline

B. European Union (EU) Sanctions

The EU has also imposed several rounds of restrictive measures against the Myanmar military regime.

1. Legal Basis:

   • Council Decision (CFSP) 2013/184/CFSP (as amended): Concerning restrictive measures against Myanmar/Burma.
   • Council Regulation (EU) No 401/2013 (as amended): Concerning restrictive measures against Myanmar/Burma.
   • EU Anti-Money Laundering Directives (AMLD5/AMLD6): Incorporate VASPs into the AML/CFT framework, providing the basis for applying sanctions to virtual assets.

2. Scope of Sanctions:

   • Asset Freeze: Freezing of funds and economic resources belonging to, owned, held, or controlled by designated persons and entities. "Economic resources" is broadly defined and includes virtual assets.
   • Prohibition on Making Funds/Economic Resources Available: Prohibition on making funds or economic resources available, directly or indirectly, to designated persons or entities.
   • Travel Bans: For listed individuals.
   • Arms Embargo: And restrictions on equipment for internal repression.

3. Specific References:

   • EU Sanctions Map (Myanmar): https://www.sanctionsmap.eu/#/main/country/MM (Provides consolidated information and links to legal acts)
   • EU Consolidated List of Sanctions: https://www.sanctionsmap.eu/sanctionslist/list (Searchable list, includes Myanmar designations)

C. United Nations (UN) Sanctions

The UN Security Council has imposed an arms embargo on Myanmar, but it does not maintain a comprehensive economic sanctions regime comparable to those on North Korea or Iran.

1. Legal Basis:

   • UN Security Council Resolution 2664 (2022): Provides for humanitarian carve-outs to asset freeze measures in UN sanctions regimes, but does not impose new sanctions on Myanmar.
   • UN Sanctions Lists: While no specific Myanmar-focused UN economic sanctions list exists, if an individual or entity in Myanmar were to be designated under a broader UN sanctions regime (e.g., counter-terrorism), those obligations would apply.

2. Relevance for Crypto: UN sanctions are implemented through national legislation. Therefore, UN-mandated sanctions (like the arms embargo) primarily affect states and do not directly address crypto transactions in the same way as OFAC or EU regulations. However, if a VASP were to facilitate a transaction with a person/entity subject to a UN asset freeze (e.g., related to terrorism financing) and that person were in Myanmar, the VASP would be in violation of national implementing legislation.

3. Specific Reference:

   • UN Sanctions Committees: https://www.un.org/securitycouncil/sanctions/committees (General overview of UN sanctions)

D. Other Jurisdictions (e.g., UK, Canada, Australia)

The UK, Canada, and Australia have also implemented autonomous sanctions regimes against Myanmar, largely mirroring the objectives of the US and EU. VASPs operating in these jurisdictions must comply with their respective national sanctions laws, which also interpret virtual assets as covered by asset freezes and financial prohibitions.

• UK Sanctions List: https://www.gov.uk/government/publications/the-uk-sanctions-list (Includes Myanmar designations)

II. Sanctions Compliance Requirements for VASPs

VASPs, regardless of their operational jurisdiction, have significant obligations when dealing with transactions that may involve Myanmar.

A. Sanctioned Entity Screening Obligations

1. Customer Screening (KYC/CDD):
   • VASPs must screen all new and existing customers (individuals and entities) against relevant sanctions lists (OFAC SDN List, EU Consolidated List, UK Sanctions List, etc.) at onboarding and on an ongoing basis.
   • This includes beneficial ownership screening to identify any sanctioned individuals or entities behind a corporate structure.
2. Transaction Screening:
   • Transactions, especially those involving parties in or linked to Myanmar, should be screened in real-time or near real-time. This can involve screening sender/receiver names and associated wallet addresses (if a link to a sanctioned entity is established).
   • Heightened scrutiny is required for transactions involving known high-risk indicators (e.g., opaque wallet addresses, mixing services used to obscure origin/destination).
3. Adverse Media Screening:
   • Regularly monitor news and public sources for information that could link customers or transaction parties to sanctioned entities or activities in Myanmar.

B. Geographic Restrictions and Prohibited Transactions

1. Direct vs. Indirect Prohibitions: Sanctions prohibit both direct and indirect dealings with sanctioned persons/entities. This means a VASP cannot process a transaction for a sanctioned person directly, nor can it process a transaction that indirectly benefits a sanctioned person (e.g., through an unsanctioned intermediary).
2. High-Risk Jurisdiction: Myanmar is generally considered a high-risk jurisdiction for money laundering and terrorist financing, and thus for sanctions evasion. VASPs should apply enhanced due diligence (EDD) to all customers and transactions connected to Myanmar.
3. Prohibited Services:
   • Providing any virtual asset service (exchange, custody, transfer, etc.) to designated individuals or entities.
   • Facilitating transactions that violate specific sectoral sanctions (e.g., if a VASP knows funds are destined for a sanctioned military-owned enterprise).
4. No Blanket Ban: It's important to note that most sanctions regimes do not impose a blanket ban on all transactions with Myanmar. However, the high-risk environment necessitates extreme caution and robust controls. The National Unity Government (NUG) of Myanmar has endorsed USDT, which complicates the landscape by potentially legitimizing certain crypto usage for some, while still requiring compliance with international sanctions that could target individuals/entities within the NUG or associated with it.

C. Reporting Obligations

1. Blocking/Rejection: If a VASP identifies a virtual asset belonging to, or a transaction involving, a sanctioned entity, it must:
   • Block the funds/assets (OFAC).
   • Reject the transaction (if no property interest is created) or block and report (OFAC/EU).
   • Report the blocked assets or rejected transactions to the relevant authorities (e.g., OFAC in the US, national competent authorities in the EU/UK).
2. SAR/STR Filing: Suspicious activity reports (SARs) or suspicious transaction reports (STRs) must be filed with financial intelligence units (FIUs) if there are red flags indicating potential sanctions evasion or other illicit activities.

D. Record-Keeping

VASPs must maintain comprehensive records of all customer due diligence, transaction screening, sanctions alerts, and reporting actions for a minimum period (typically 5-7 years), as required by their jurisdiction.

III. Penalties for Violations

Penalties for violating sanctions are severe and can include:

• Civil Penalties: Substantial monetary fines (e.g., OFAC civil penalties can reach millions of dollars per violation).
• Criminal Penalties: For willful violations, individuals and corporate officers can face significant prison sentences and even larger fines.
• Reputational Damage: Significant harm to a VASP's reputation, loss of trust, and potential revocation of licenses.

Specific References for Penalties:

• OFAC Enforcement Information: https://ofac.treasury.gov/recent-actions/20230222-3375 (Example of a recent enforcement action against a VASP for sanctions violations, though not Myanmar-specific, illustrates the general approach)

IV. Country-Specific Sanctions Lists Relevant to Crypto (Myanmar)

While Myanmar itself does not issue a "crypto-specific" sanctions list, the critical point for VASPs is that the general sanctions lists of OFAC, the EU, UK, Canada, Australia, etc., include individuals and entities from Myanmar. These designations apply to all forms of assets, including cryptocurrencies.

Therefore, for a VASP, the "country-specific sanctions lists" that apply to crypto in Myanmar are effectively:

• OFAC's Specially Designated Nationals and Blocked Persons (SDN) List: Contains numerous individuals and entities linked to the Myanmar military regime.
• EU Consolidated List of Persons, Groups and Entities Subject to EU Financial Sanctions: Similarly lists Myanmar-related designations.
• UK Sanctions List: Also includes Myanmar designations.

VASPs must cross-reference their customer base and transaction monitoring against these global lists to identify any Myanmar-based (or linked) individuals or entities that are sanctioned. There is no separate, dedicated list solely for crypto users or crypto addresses from Myanmar. Instead, the general sanctions lists apply, and it is the VASP's responsibility to identify if a crypto user or transaction is connected to a listed entity.

Conclusion

The landscape of cryptocurrency sanctions in Myanmar is dynamic and complex. VASPs must implement robust, risk-based compliance programs that include thorough customer and transaction screening against international sanctions lists. Given the heightened risk associated with Myanmar, enhanced due diligence is critical for all transactions and customers linked to the country to avoid severe legal and financial penalties.

Disclaimer: This information is for general informational purposes only and does not constitute legal advice. VASPs should consult with legal counsel specializing in sanctions and cryptocurrency law to ensure full compliance with all applicable regulations.