The US releases advisory on “risks and considerations” for businesses operating in Burma (Myanmar)

US authorities have increasingly been using advisories as a means to highlight risks in various areas related to corruption and human rights violations in supply chain and/or direct business dealings (see our prior posts related to the Cambodia business advisory, and advisories related to Xinjiang here and here). The latest joint advisory from the US summarises various financial crime and human rights-related issues in Burma and sets out guidance to help identify and mitigate those risks in supply chain and direct dealings in the country.

Risks

According to the advisory, the military coup in February 2021 and the “subsequent abuses committed by the military have fundamentally changed the direction of the economic and business environment in Burma.” Sectors which the US advises that foreign businesses should be pay particular attention to as “primary industries providing economic resources for Burma’s military regime” include:

• state-owned enterprises
• gems and precious metals
• real-estate and construction projects, and
• arms, military equipment and related activity

Due to the heavy involvement of state and military in these sectors, there is a high involvement of politically exposed persons (“PEPs”) and therefore opportunities for corruption as well as money laundering risks. Moreover, SOEs are significantly involved in industries that have been tied to human trafficking, child and forced labour, and other violations of human rights such as the crackdown on labor unions, surveillance, and targeting minority groups.

Even where a company’s supply chain might not mention Burma, businesses should be aware of the types of goods that typically are produced in Burma and may come through transit countries like China and Thailand – for example bamboo, teak, rubies and jade. Foreign businesses should look out for “warning signs”, such as inconsistencies from suppliers, and “conduct increased know-your-customer practices to ensure that customers provide satisfactory responses to address concerns”.

Where businesses have a physical presence in Burma, they are encouraged to investigate “as appropriate” whether payments for properties and related physical infrastructure could benefit sanctioned persons. Businesses should also consider whether there are any land seizure issues. Any building works may be at risk of using construction materials produced by forced labour and/or child labour in Burma. Moreover, red flags of money laundering in real estate transactions include familiar red flags such as lack of clarity as to beneficial ownership, involvement of newly established vehicles, inappropriately valued transactions, cash payments, and involvement of third parties in the transaction with no clear business rationale.

Legal implications

There are various business as well as criminal and civil penalty risks related to dealings in Burma. The advisory notes that entities and individuals in the sectors mentioned in the advisory may already be on global sanctions lists in the US, EU, or UK, as well as Canada, Australia, New Zealand and Korea. Entities may also be listed on the Department of Commerce “entity list” which imposes certain export restrictions for listed entities. Restrictions also apply to the export of dual use goods and goods for “military end use” to Burma. In addition to potential links to sanctioned persons, the advisory warns that failure to conduct “appropriate due diligence” could expose businesses to risks of supporting money laundering or forced labour and other human rights violations.

Where there is evidence that goods have been produced as a result of forced labour, US Customs and Borders Protection may prevent the goods from entering the US. US Immigration and Customs Enforcement may also conduct criminal investigations into persons who “participate in a venture knowingly or in reckless disregard that the venture has engaged in forced labor and who knowingly benefit, financially or by receiving anything of value, from such a forced labor venture.” Although the advisory does not provide legally binding guidance, businesses operating in the area will be expected to be aware of risks in their business and to conduct appropriate risk-based due diligence to identify and mitigate these risks.