New advice to multi-agency companies on increased risk of doing business in Burma – International Law
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- Several federal agencies recently issued a business advisory highlighting the increased risk of doing business in Burma.
- Four main risk areas have been identified: (1) public enterprises (PE); (2) precious stones and precious metals; (3) real estate and construction projects; and (4) weapons, military equipment and related activities.
- U.S. companies with supply chains tied to the Burmese military regime, other state-owned enterprises, or key Burmese sectors should be wary of reputational, financial, and legal risks, including violations of U.S. sanctions.
- US anti-money laundering and forced labor laws present other significant legal risks of doing business or having supply chains connected to Myanmar individuals/entities.
On January 26, several American agencies published a Myanmar Business Consulting focused on the increased risk associated with doing business in the country. The notice to businesses follows Executive Order 14014 (February 11, 2021) authorizing blocking sanctions against certain entities and individuals involved in the military coup that took place on February 1, 2021, and subsequent designations by the OFAC of various Burmese entities and individuals in Specially Designated Nationals. and the Blocked List (SDN).
The notice identifies four categories of entities and sectors of “most concern” and risks to US businesses: (1) public companies (PEs); (2) precious stones and precious metals; (3) real estate and construction projects; and (4) weapons, military equipment and related activities. These entities and sectors have been identified as primary industries providing economic resources to the Burmese military regime. The advisory cautions companies and individuals who may be exposed or involved in operations or supply chains linked to Myanmar’s military regime to exercise proper due diligence, or run the risk of engaging in conduct that could expose them to significant reputational, financial, and legal risk, including violations of U.S. anti-money laundering (AML) laws, anti-corruption laws, forced labor laws, export controls and sanctions.
Categories of concern
The major Burmese state-owned companies identified in the notice are involved in natural resources, telecommunications and other sectors:
- Myanmar Economic Holdings Limited (MEHL)
- Myanmar Economic Corporation (MEC)
- Myanmar Oil and Gas Enterprise (MOGE)
- Myanmar mining companies 1, 2 and 3
- Myanmar Gems Enterprise (MGE)
- Myanmar Pearl Enterprise (MPE)
- Myanmar Timber Enterprise (MTE)
- Myanmar Post and Telecommunications (MPT)
MGE and MPT were designated as SDNs in April 2021. According to the notice, all subsidiaries of MGE and MPT, and state-owned enterprises in Burma in general in these sectors are at high risk of sanctions.
Gems and precious metals
The military controls much of the gems and precious metals sector through two military holding companies, Myanma Economic Holdings Limited (MEHL) and Myanmar Economic Corporation (MEC), and their numerous subsidiaries. MEHL and MEC and Myanmar Pearl Enterprise (MPE) were designated as SDNs in March 2021. Transactions in this sector or with these entities and their subsidiaries pose a high risk of sanctions violations.
Real estate and construction
The Pyinmabin industrial zone, the Golden City residential development in Rangoon, and the Sule Shangri-La hotel and Sule Square commercial project are owned or controlled by the military. The military collects rent through MEHL and MEC from foreign companies that rent space to maintain a physical presence in Burma. MEHL and MEC have also been identified as joint venture partners for foreign companies seeking to develop and build properties in Burma.
Construction materials sourced from Burma pose a high risk of forced labor, including bamboo, bricks and rubber. Conducting real estate and construction transactions in Burma or sourcing construction materials from Burma poses an increased risk of sanctions, forced labor and money laundering.
weapons and military
There are extensive controls and sanctions related to Burma’s defense sector. The notice warns companies that the following countries continue to trade weapons and military equipment with Burma: China, India, Israel, Japan, North Korea, Philippines, Russia, Serbia, Singapore , South Africa and Ukraine. US companies must be mindful of the risk of diversion when engaging in defense sector transactions with customers in these countries.
Additionally, on March 8, 2021, the Ministry of Commerce’s Bureau of Industry and Security added Myanmar to the list of countries subject to military end-use and military end-user controls, restricting the export and the re-export of certain items for military use or users.
The opinion also notes that “Myanmar faces significant money laundering risks and shortcomings in the implementation of its anti-money laundering (AML) and counter-terrorist financing legal framework ( The international financial sector should recognize that the shortcomings of Burma’s financial sector and the lack of adequate measures to address its money laundering risks have led the Financial Action Task Force (FATF) to publicly identify Burma in 2020 on the list of jurisdictions subject to enhanced supervision.”
Risk of forced labor
The notice also points out that a number of goods from Burma have been linked to labor abuses, including child labor and forced labor. The Department of Labor’s List of Goods Produced by Child Labor or Forced Labor and the List of Goods Produced by Forced or Contracted Child Labor consist of 14 items:
- palm thatch
- Beans (green, soy, yellow)
- Sugar cane
Companies should update their risk assessments based on the considerations set out in the Myanmar Business Notice.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.
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