New Menu-Based Sanctions Target Facilitators of Global Drug Trade
On December 15, 2021, the Biden Administration issued a new Executive Order (E.O.) pursuant to the Fentanyl Sanctions Act (FSA) that modernizes the Treasury Department’s authority to impose sanctions on foreign drug traffickers and those that facilitate the international drug trade. The new sanctions are intended to address the flow of fentanyl, methamphetamines, and precursor and essential chemicals into the United States from foreign sources.
In addition to traditional blocking sanctions, the E.O. authorizes U.S. government agencies to impose menu-based sanctions on non-U.S. persons that:
- Have materially contributed to the “international proliferation of illicit drugs” or their means of production;
- Have knowingly received property that constitutes or is derived from the proceeds of the international proliferation of drugs or that was used or is intended to materially facilitate the international proliferation of drugs;
- Have provided financial, material, or technological support for, or goods or services in support of the global drug trade or a sanctioned person;
- Are or were a leader or official of any sanctioned person or any foreign person that has engaged in the foregoing; or
- Are owned, controlled, or directed by, directly or indirectly, any sanctioned person.
The E.O. defines the “international proliferation of illicit drugs” to be any illicit activity to produce, manufacture, distribute, sell, or knowingly finance or transport narcotic drugs, controlled substances, listed chemicals, or controlled substance analogues, as defined in section 102 of the Controlled Substances Act. Parties designated pursuant to the E.O. face a menu of sanctions possibilities, including at least one of the following:
- Blocking sanctions that freeze the sanctioned actor’s U.S. property or interests in property;
- Prohibition on U.S. transfers of credit or payments involving any interest of the sanctioned actor;
- Prohibition on U.S. transactions in foreign exchange in which the sanctioned actor has any interest;
- Prohibition on any U.S. person from investing in or purchasing significant amounts of the sanctioned actor’s equity or debt; and/or
- Imposition of any of the foregoing sanctions on principle executive officers, officers, or the functional equivalent of such officers, of the sanctioned actor.
Pursuant to the new E.O., the Treasury Department’s Office of Foreign Assets Control (OFAC) announced the imposition or updating of sanctions on 25 foreign actors involved in the international trade of illicit drugs. OFAC updated its list of Specially Designated Nationals to designate 10 individuals and 15 drug trafficking organizations (DTOs) from Brazil, China, Mexico, and Colombia, as having materially contributed to the international proliferation of illicit drugs or their means of production. Of particular note is OFAC’s designation of Chinese national Chuen Fat Yip, a trafficker of fentanyl, anabolic steroids, and other synthetic drugs to the United States. According to OFAC, Chuen Fat Yip relies on virtual currency and fund transfers through money-service business and banks to finance his operations. OFAC has recently signaled that it would ramp up efforts to counter illicit activities in which cryptocurrencies and digital payment services play a role.
Please contact our sanctions and export control team with any questions about ensuring compliance with these new sanctions.