There have been a lot of questions over recent months concerning the Impact of U.S. economic sanctions imposed upon the country of Sudan on the newly formed nation of Southern Sudan. As has been reported on by numerous sources, including The United States Department of the Treasury Office of Foreign Assets Control (OFAC) the prohibitions upon transactions between U.S. Persons and Sudan do not extend to transactions with Southern Sudan. However, due to the proximity of the two nations and some overlap in economic dealings, U.S. persons still need to remain cautious that any dealings with Southern Sudan do not inure some benefit to Sudan itself.

Earlier this week, OFAC addressed some of the more frequently raised concerns regarding such dealings when it offered guidance on the question of whether transactions with the Bank of Southern Sudan would be prohibited due to Sudanese sanctions. This question arises from the fact that the Bank of Southern Sudan was once a subsidiary of the Bank of Sudan.

According to OFAC, with the independence of the new Republic of South Sudan on July 9, 2011, the former Bank of Southern Sudan, sometimes referred to as the Bank of South Sudan, has been established as the new central bank of the Republic of South Sudan. It is no longer a subsidiary of or linked to the Bank of Sudan, and no longer considered to be the Government of Sudan under the Sudanese Sanctions Regulations, 31 C.F.R. Part 538. U.S. persons may deal in property and interests in property of the Bank of South Sudan so long as those dealings do not otherwise violate the Sudanese Sanctions Regulations or other U.S. laws.

The other dealings which OFAC is referring to here are those transactions through the Southern Bank of Sudan which may have a nexus to Sudan and therefore be prohibited. It will be interesting to see what the Southern Bank of Sudan’s policy towards account holders in Sudan will be. If allowed to proceed unhindered, the Southern Bank of Sudan may become an attractive route for those in Sudan seeking to skirt sanctions by making payments through that bank. Compliance programs may want to take steps to ensure that they watch for high frequency and high volume transactions originating from the Southern Bank of Sudan.

The author of this blog is Erich Ferrari, an attorney specializing in OFAC matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.