Treasury Sanctions Nicaragua-Based Russian Institution and Gold Companies

On May 15, 2024, the Office of Foreign Assets Control of the United States Treasury Department (“OFAC”) designated  pursuant to amended E.O. 13851, three Nicaraguan based entities on its Specially Designated National and Blocked Person (“SDN”) list. According to the press release, these designations targeted repression of the Nicaraguan people and leaders’ ability to manipulate the gold sector and profit from corrupt operations.

Over the past years, OFAC has designated a substantial number of current and former officials of the Government of Nicaragua as SDNs. We previously discussed a series of Nicaragua-related sanctions imposed by the US through 2018 to 2022, which are covered in-depth in our Sanctions Notes blog

Below, we discuss the sanctions which have been imposed recently with respect to the ongoing conflict in Nicaragua.

• Training Centre of the Russian Ministry of Internal Affairs in Managua (“RTC”) has been designated, for having assisted, sponsored, or provided financial, material, or technological support for, or goods or services in support of, the Nicaraguan National Police (“NNP”). OFAC had earlier designated the NNP, on March 5, 2020, pursuant to E.O. 13851 for being the central actor in the Ortega-Murillo regime’s violent oppression of the Nicaraguan people. President Ortega himself admitted that RTC in Nicaragua trains Nicaraguan law enforcement officers.
   
• Compania Minera Internacional, Sociedad Anónima (“COMINTSA”) and Capital Mining Investment Nicaragua, Sociedad Anónima (“Capital Mining”) have been designated, for operating or having operated in the gold sector of the Nicaraguan economy and both are one of the regime-aligned Nicaraguan mining company operating in the gold sector. While COMINSTA is reportedly owned by Mansell Castrillo, Capital Mining is controlled by the Ortega Murillo, son of President Ortega and is known to charge gold mining companies to do business in Nicaragua. Both Mansell Castrillo and Ortega Murillo have been designated earlier on November 15, 2021 and April 17, 2019 respectively.

As a result of the designation, all property and interests in property of the SDNs that are in the United States or in the possession or control of U.S. persons are blocked and must be reported to OFAC. In addition, the financial institutions and other persons that engage in certain transactions or activities with the sanctioned entities and individuals may also be exposed to sanctions themselves or be subject to enforcement action. Violations of OFAC regulations could trigger civil or criminal penalties.

Travel Industry Advisory:

• Promoting Accountability for Nicaraguan Officials - On May 15, 2024, the US Department of State (“State Department”) to complement the above actions taken by OFAC issued a press release “[taking] steps to impose visa restrictions on over 250 members of the Nicaraguan government, including police and paramilitary personnel, penitentiary officials, prosecutors, judges, and public higher education officials, as well as select non-government actors for their roles in supporting the Ortega-Murillo regime in its attacks on human rights and fundamental freedoms, repression of civil society organizations and profiting off of vulnerable migrants.” This action reflects U.S. efforts to promote responsible practices in the industry, prevent and disrupt illicit activity, and enhance compliance with lawful immigration and migration pathway.
   
• Alert : Disrupting Irregular Migration - On May 15, 2024 State Department, Homeland Security and the Treasury jointly issued an Alert to notify airlines, air charter operators, travel agents, and service providers of the ways in which smugglers were facilitating irregular migration and migrant smuggling and trafficking networks to the United States.  It follows the announcement by the International Air Transport Association (IATA) and several member airlines of their commitment to strengthen collaboration with governments and international organizations to address irregular migration and to consider commercial measures to minimize illicit travel. The Alert indicates that human smuggling rings may use airports outside the United States as final destinations for air travel, with overland routes accounting for the remaining distance to the United States, calling for diligence concerning indications of human smuggling on routes which do not directly touch the US.

              The Alert also recommended best practices for the industry like

              a) identifying and monitoring high risk routes,

              b) reporting concerning activities including information about travel agencies,

              c) undertaking appropriate due diligence to protect against exploitation of services and conducting increases diligence when dealing with travel agents or brokers, and

              d) compliance with regulations requiring transmission of advance passenger information prior to departure to enable proper record checks.

              Further, the Alert also mentions the actions that US will continue to take to halt irregular migration and the exploitation of migrant populations by

              a) identifying patterns and routes of concern and share indicators and best practices,

              b) sharing information with train and airlines to help them detect the migrant smuggling and human trafficking cases,

              c) taking steps to impose visa restrictions on individuals and their family members for facilitating the travel of irregular migrants to the US,

              d) sanctioning transnational criminal organizations, including migrant smuggling organization, their facilitators, and their support networks, and

              e) investigating and prosecuting migrant smuggling and human trafficking.

This action reflects U.S. efforts to promote responsible practices in the industry, prevent and disrupt illicit activity, and enhance compliance with lawful immigration and migration pathways.

We will continue to monitor developments in this area and encourage you to subscribe to be kept informed of latest developments. Please contact the authors or your usual Herbert Smith Freehills contacts for more information.