OFAC Provides Sanctions Guidance On Modifications Of Agreements Referencing LIBOR – Finance and Banking

OFAC issued a FAQ stating that “loans, contracts or other agreements that use the LIBOR rate as a reference rate adjusted to replace this standard reference rate will not be treated as new debt for purposes of OFAC sanctions, as long as there are no other material conditions that The loan, contract or agreement is modified.”

In New Question 956, OFAC indicated that it had indicated in previous guidance that certain changes to pre-existing loan facilities and other agreements might convert existing permitted debt into “new debt” prohibited by sanctions (see FAQ 947) “Belarus sanctions”), FAQ 553 (“Venezuela sanctions”) and FAQ 394 (“Ukraine/Russia sanctions”)). In Question 956, OFAC clarified that LIBOR terms in pre-existing agreements can be modified and replaced without triggering the relevant sanctions prohibition, as long as other material terms of the loan, contract or agreement are not modified. Such standard adjustments will not be treated as “new debt” for OFAC sanctions purposes.

Primary sources

1. OFAC Press Release: New Frequently Asked Question Issued
2. OFAC FAQ: Belarus Sanctions – 956
3. OFAC FAQ: Belarus Sanctions – 947
4. OFAC Q&A: Venezuela Sanctions – 553
5. OFAC FAQ: Ukraine/Russia Sanctions – 394

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