Industry News

New FAQ from OFAC for Belarus, Ukraine/Russia, and Venezuela Sanctions

Jan. 18, 2022


OFAC issued a new FAQ on January 7 clarifying the agency’s position regarding modifications to pre-existing loans, contracts, or other agreements to replace LIBOR as the reference rate.

The London Interbank Offered Rate, or the LIBOR rate, was a daily rate established by collecting interest rate estimates from up to 18 global banks. It has been a key benchmark for setting the interest rates charged on adjustable-rate loans, mortgages and corporate debt for more than 40 years. However, due to scandals and the role it played in the 2008 Financial Crisis, LIBOR is being phased out as a loan benchmark. In July 2017, the United Kingdom Financial Conduct Authority (FCA) formally announced the “future cessation and loss of representativeness” of the LIBOR rates.

As a result of this change, loans, contracts, or other agreements that used LIBOR as a reference rate may need to be modified to substitute a new benchmark reference rate. OFAC has indicated that some changes to contractual terms can convert pre-existing debt that was not subject to sanctions prohibitions into new debt that is subject to the sanctions prohibitions. See FAQ 947 (Belarus), FAQ 394 (Ukraine-/Russia-related), and FAQ 553 (Venezuela-related). The Belarus, Ukraine-/Russia-related, and Venezuela-related sanctions programs prohibit U.S. persons from dealing in certain new debt of persons identified as subject the prohibitions. OFAC identifies new debt as “bonds, loans, extensions of credit, loan guarantees, letters of credit, drafts, bankers acceptances, discount notes or bills, or commercial paper” issued on or after various specified dates. (FAQ 944 (Belarus), FAQ 371 (Ukraine-/Russia-related), and FAQ 511 (Venezuela-related).

In this new FAQ, OFAC clearly states that modification of loans, contracts, or other agreements with LIBOR as a reference rate to replace the benchmark reference rate will not be treated as new debt for OFAC sanctions purposes, so long as no other material terms of the loan, contract, or agreement are modified.

While these new FAQ from provide helpful guidance, sanctions compliance issues can still be very complex. If you have any questions relating to OFAC sanctions do not hesitate to contact an attorney at Barnes, Richardson & Colburn LLP.