U.S. companies with potential exposure to or involvement in operations or supply chains tied to the military regime that overthrew Burma’s elected government in February 2021 are being advised that if they do not conduct appropriate due diligence they run the risk of engaging in conduct that may expose them to significant reputational, financial, and legal risks, including violations of U.S. anti-money laundering laws and sanctions.
An advisory from the U.S. departments of State, the Treasury, Commerce, Labor, and Homeland Security and the Office of the U.S. Trade Representative states that the specific entities and sectors of greatest concern within Burma include (1) state-owned enterprises, (2) gems and precious metals, (3) real estate and construction projects, and (4) arms, military equipment and related activity.
The advisory states that given the insufficient reporting requirements in Burma for cross-border transfers of goods and funds, U.S. gem, pearl, and precious metal importers should undertake enhanced due diligence to better understand their supply chains and ensure they are not sourcing from or brokering through military-owned or -operated entities in Burma. A supply chain that, on paper, does not refer to or otherwise appear to touch Burma may still involve links in which the Burmese military is the ultimate beneficiary. For example, jade, rubies, and sapphires from Burma have been previously smuggled into countries like China and Thailand to be cut and sold on international markets as “made in Thailand” or “made in Hong Kong.” The advisory emphasizes that it is the responsibility of businesses and individuals to ensure their sourcing is consistent with what is being reported from vendors and suppliers to avoid potential liability for sanctions violations.
The advisory also recommends that U.S. businesses maintaining a physical presence in Burma, including leasing or purchasing facilities for corporate offices, retail, wholesale, warehousing, and related physical infrastructure, should (1) investigate as appropriate to determine whether payments are benefiting designated entities, (2) take appropriate measures to ensure their compliance with applicable requirements related to U.S. sanctions and money laundering controls, and (3) conduct heightened due diligence around land tenure to identify, mitigate, and redress issues regarding possible land seizures.
Other warnings in the advisory include the following.
- Businesses should review and consider updating their risk assessments associated with continuing to do businesses with Burma’s SOEs, many of which are subject to allegations of child and forced labor (particularly with respect to teak, rubies, and jade), corruption, and other human and labor rights abuses.
- Businesses and individuals involved in construction and development in Burma using bamboo, bricks, palm thatch, and teak should take the necessary steps to mitigate risks of exposure to child and/or forced labor.
- Other products believed to be made with child or forced labor in Burma include sesame, shrimp, sunflowers, beans (green, soy, yellow), rice, rubber, and sugarcane.
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