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3 new Chinese Military Industrial Complex Sanctions FAQs

1048. After the relevant 365-day divestment period, are U.S. financial institutions required to block the attempted purchase or sale of Chinese Military-Industrial Complex Companies’ (CMIC) securities covered by Executive Order (E.O.) 13959, as amended?

No.  E.O. 13959, as amended, does not require U.S. financial institutions to block transactions.  However, transactions that would be prohibited under E.O. 13959, as amended (including an attempted sale of covered securities by a U.S. person made to effect the divestment of CMIC securities after the 365-day divestment period), must be rejected and reported to OFAC within 10 business days.  Consistent with FAQ 863, U.S. financial institutions may continue to intermediate purchases or sales by or from non-U.S. persons to or for non-U.S. persons.  

Released on 06/01/2022

Chinese Military Companies Sanctions

1047. For the purposes of Executive Order (E.O.) 13959, as amended, can holders of Chinese Military-Industrial Complex Companies’ (CMIC) securities receive stock splits, cash dividends, or dividend reinvestments related to the covered securities, and are U.S. financial institutions allowed to process transactions related to this activity?

U.S. persons who hold securities of CMICs identified pursuant to E.O. 13959, as amended, may continue to receive cash dividends and stock splits related to such covered securities, and U.S. financial institutions may continue to process such transactions.  However, purchases of CMIC securities effected through dividend reinvestments constitute purchases that are prohibited pursuant to E.O. 13959, as amended.  U.S. persons may, however, continue to facilitate the distribution of dividend reinvestments for non-U.S. persons after the relevant divestment period.

Released on 06/01/2022

Chinese Military Companies Sanctions

1046. Are U.S. persons required to divest their current holdings of Chinese Military-Industrial Complex Companies’ (CMIC) securities before the end of the relevant 365-day divestment period pursuant to section 1(c) of Executive Order (E.O.) 13959, as amended?

U.S. persons are not required to divest their holdings of CMIC securities during the relevant 365-day divestment period and may continue to hold such securities after the divestment period.  E.O. 13959, as amended, permits purchases or sales made solely to effect the divestment of CMIC securities, but only during the 365-day divestment period.  Accordingly, any such purchase or sale is prohibited after the 365-day divestment period, absent OFAC authorization.

Released on 06/01/2022

Links:

OFAC Notice

New FAQs

Categories: Chinese Military Companies sanctions Frequently Asked Questions (FAQ) Guidance OFAC Updates

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