On September 12, 2024, the Office of Foreign Assets Control (“OFAC”) of the U.S. Department of the Treasury published General License (“GL”) 8 as well as changes to various frequently asked questions (“FAQs”) in connection with the Magnitsky Global Sanctions Regulations31 CFR part 583, and the Russian Regulations on Sanctions on Harmful Foreign Activities31 CFR part 587.

GL8

GL8 permits U.S. persons to transact with entities 50% or more owned by Ly Yong Phat or LYP Group Co., provided that such entities are not listed on the Specially Designated Nationals and Blocked Persons List (“SDN “). The license does not authorize transactions with entities specifically listed on the SDN List, including O-Smach Resort, Garden City Hotel, Koh Kong Resort and Phnom Penh Hotel, which were designated simultaneously with the issuance of GL 8.

Frequently Asked Questions 1191

In conjunction with GL 8, OFAC published Frequently Asked Questions 1191which details the requirements for U.S. persons to engage in transactions with any entity owned 50% or more by Ly Yong Phat or the LYP Group and which is not on the SDN List, despite OFAC’s designation of Ly Yong Phat and the LYP group as SDN. Additionally, OFAC confirms that non-U.S. persons can conduct transactions permitted by GL 8 without exposure to U.S. sanctions. OFAC said other associates of Ly Yong Phat and the LYP Group will be monitored and may be named. Therefore, US persons should monitor the SDN list for additional blocks.

Frequently Asked Questions 1033

On September 12, 2024, OFAC updated Frequently Asked Questions 1033 include advice on Determination Pursuant to Section 1(a)(ii) of Executive Order 14071 (the “Computer Services and Software Determination”). The determination regarding computer services and software expands the restriction in Section 1(a)(ii) to include “(the) export, re-export, sale, or furnishing, directly or indirectly, from the United States, or by a U.S. person, wherever located, computer consulting and design services or IT support services or cloud-based services for covered software to any person located in the Russian Federation. “Covered software” includes business management software and design and manufacturing software. The IT Services and Software Determination specifically excludes prohibitions on Section 1(a)(ii) of Executive Order 14071:

1. any service provided to an entity located in the Russian Federation that is owned or controlled, directly or indirectly, by a U.S. person;
2. any service related to the liquidation or sale of an entity located in the Russian Federation that is not owned or controlled, directly or indirectly, by a Russian person;
3. any service for software that is: (i) subject to the Export Administration Regulations, 15 CFR part 730 et seq., (EAR) and for which the export, re-export or transfer (in-country) to the Russian Federation such software is licensed or otherwise authorized by the Ministry of Commerce; or (ii) not subject to the EAR and for which the export, re-export, or transfer (in-country) to the Russian Federation of such software would be eligible for a license exception or otherwise permitted by the Department of Commerce if it was subject to the EAR.

Frequently Asked Questions 1192

Frequently Asked Questions 1192 clarifies that the Computer and Software Services Determination includes an exemption for software-related services covered by the Export Administration Regulations (“EAR”):

• Where the export to Russia of such software is authorized or licensed by the United States Department of Commerce; Or
• When this software is not subject to the EAR and the export of this software would be eligible for a license exception or otherwise permitted by the United States Department of Commerce if it were subject to the EAR.

This means that U.S. persons can provide IT support and cloud-based services for software authorized or licensed by the Department of Commerce, including software as a service. The exclusion allows IT support and cloud-based services for covered software that is excluded from the licensing requirements in 15 CFR 746.8(a)(12)including for exports, re-exports, or transfers (intra-country) to certain civilian end-users that are wholly-owned subsidiaries, branches, sales offices, or joint ventures of companies headquartered in the United States or countries of country groups A: 5 and A: 6 in Supplement No. 1 to Part 740 of the EAR (see 15 CFR 746.8(a)(12)(ii)).

Implications for Business

Businesses operating in the IT and software industries should understand the limitations imposed by determining IT and software services and assess how their services may fit within the permitted categories.