Sanctions by the United States Department of the Treasury – Update I

27.08.2020

Note: This announcement, originally published on 26 August 2020, was updated to clarify the deadline for external settlement instructions. Changes have been highlighted.
 

Clearstream Banking1 refers to the publication made by the United States Department of the Treasury (“OFAC”) on 31 July 2020 with regards to the Global Magnitsky Sanctions Regulations.

Under E.O. 13818, the Xinjiang Production and Construction Corps (XPCC) was designated by OFAC. OFAC also issued Global Magnitsky General License (GL) 2. GL 2 does not authorise any transactions involving the XPCC itself; however, GL 2 does authorise, subject to certain conditions, U.S. persons to engage in transactions and activities prohibited by the Global Magnitsky Sanctions Regulations as long as these transactions and activities are ordinarily incident and necessary to the wind down of transactions involving any entity in which the XPCC owns, directly or indirectly, a 50%or greater interest (“Blocked XPCC Subsidiary”), through 12:01 Eastern Daylight Time on 30 September 2020.

Clearstream Banking is dependent upon services by its depositaries, cash correspondents and other agents, many of whom are U.S. persons.

Clearstream Banking reminds customers of the requirement to comply, and ensure compliance by any of the customer’s underlying clients, with any applicable law or regulation.

Customers are additionally requested to note the operational requirements below in respect of the following securities:

ISIN  

Issuer name

Issuer status

CNE1000004P0

Xinjiang Tianye Water

Blocked XPCC Subsidiary

Instructions to settle securities covered by General License 2 until 29 September 2020 at 06:55 CEST/12:55 HKT

Non-U.S. persons may wind down transactions with, or divest from, a Blocked XPCC Subsidiary without exposure to sanctions under E.O. 13818, provided that such wind-down activity is consistent with General License 2. 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 General License 2.

To evidence such compliance, please ensure the following representation is provided by MT599 in respect of each instruction (delivery/receipt, free of payment/delivery versus payment), together with the relevant unique transaction reference, to your Clearstream Banking Client Services team. Absent the provision of such representation, Clearstream Banking will be unable to process the instruction.

Wind-down instructions

Please note, you must meet the following conditions:

  • The transaction being wound down must have existed before 31 July 2020 and these steps are necessary to close out or complete settlement (for example, in connection with repo, short covering).

Representation to be provided to Clearstream Banking by each instructing party:

“We represent: this instruction is covered by OFAC General License 2; no SDN is involved; the ultimate recipient of the securities is neither a U.S. person nor an SDN or SDN equivalent, and the instruction is ordinarily incident and necessary to the WIND DOWN of transactions.”

Note: In this context, SDN means an entity or person on the US OFAC Specially Designated National and Blocked Person List; and U.S. person means a party incorporated under U.S. Laws or located in the U.S.

Divestment or transfer of holdings

Please note, you must meet the following conditions: 

  • For delivery instructions:
    This instruction must be to deliver impacted securities to a non-US person.
  • For receive instructions:
    • The instruction must be to receive securities on behalf of / for a U.S. person which is only for purposes of immediate divesting to a non-US person.
      OR
    • The instruction must be to receive securities on behalf of / for a non-U.S. person.

Representation to be provided to Clearstream Banking by each instructing party:

“We represent: this instruction is covered by OFAC General License 2; no SDN is involved; the ultimate recipient of the securities is neither a U.S. person nor an SDN or SDN equivalent, and the instruction is a divestment or transfer of debt, equity, or other holdings in a Blocked XPCC Subsidiary to a non-U.S. person.”

Note: In this context, SDN means an entity or person on the US OFAC Specially Designated National and Blocked Person List; and U.S. person means a party incorporated under U.S. Laws or located in the U.S.

Please be aware that external settlement instructions up until 29 September 2020 will need to be received by Clearstream Banking an hour earlier than the normal Hong Kong customer deadline (so, 06:55 CET rather than 07:55 CET) due to additional requirements at depository level.

Further information

For further information, customers may contact Clearstream Banking Client Services or their Relationship Officer.

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1. Clearstream Banking refers collectively to Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Trade and Companies Register under number B-9248, and Clearstream Banking AG (for Clearstream Banking AG customers using Creation Accounts), registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500.