Blacklisted banks in Myanmar complicate investments

By Elizabeth Gibson

After half a century of isolation under military rule, there have, of course, been challenges in reopening Myanmar’s economy to foreign investment. The easing back of one of the United States’ most stringent sanctions regimes does not necessarily mean investment in Myanmar is going to be simple.

Reporting requirements for investors interested in Myanmar aside, one of the early challenges appears to be getting financial services in Myanmar. Despite the lifting of general sanctions and the elimination of sanctions against some key politicians, Myanmar’s banks are still on the Treasury Department’s blacklist. President Obama and the State Department announced this past May that some Myanmar sanctions would be lifted in recognition of the Myanmar government’s reform efforts, but that does not mean Myanmar, formerly Burma, is starting with a clean slate.

“Burma has made important strides, but the political opening is nascent, and we continue to have concerns, including remaining political prisoners, ongoing conflict and serious human rights abuses in ethnic areas,” Obama said in May, noting that sanctions would not be fully lifted.

When the implementation of the changes began in July, the U.S. government once again made it clear that, outside of the new exemptions, U.S. entities are still barred from transactions with persons and entities in Myanmar on the Specially Designated Nationals (SDN) list or entities owned 50 percent by someone on that list. Furthermore, each time the United States eases sanctions, it tends to also designate new businesses to keep some limitations in place.

The Treasury Department’s Office of Foreign Assets Control has issued a general license allowing U.S. financial services to be exported to Burma and another general license authorizing investment, but non-governmental organizations and businesses interested in Myanmar have expressed frustration that it is still difficult to do work if they cannot open accounts at banks in Myanmar.

The general licenses and accompanying regulations (31 C.F.R. 537) essentially permit eligible entities to the transfer funds through designated banks in Myanmar, but it does not authorize other services, such as a U.S. person opening a checking account at a designated bank.

The problem with opening a checking account in Myanmar was raised by businesses during a meeting of the Department of State’s Advisory Committee on International Economic Policy in November. Peter Harrell, the Deputy Assistant Secretary of State for Threat Finance and Economic Sanctions Policy, stated that the department was looking into the issue.

John-Marshall Klein, a foreign affairs officer with the Office of Terrorism Finance and Economic Sanctions Policy, said temporary guidance was being provided on a case-by-case basis to assist businesses and non-governmental organizations in the interim.

Myanmar’s banks also have been working to get ready for investment, but some of Myanmar’s banks have gone out of business over the years as a result of the sanctions program. For example, the Treasury Department lifted sanctions in September from Myanmar Mayflower Bank and Asia Wealth Bank, both of which had been sanctioned for money laundering. But the gesture was not a sign the banks had reformed their ways. The banks simply were no longer a threat because Myanmar had yanked their licenses after the initial designation and the banks no longer existed.