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

OFAC issued an FAQ clarifying that
“loans, contracts, or other agreements that use LIBOR as a
reference rate that are modified to replace such 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.”

In new FAQ 956, OFAC noted that in previous guidance
it had advised that certain changes to preexisting loan facilities
and other agreements may act to convert an existing, permissible
debt into a “new debt” that is prohibited under sanctions
(see FAQ 947 (“Belarus
Sanctions”), FAQ 553 (“Venezuela Sanctions”)
and FAQ 394 (“Ukraine-/Russia-Related
Sanctions”)). In FAQ 956, OFAC clarified that LIBOR reference
rate terms in preexisting agreements may be modified and replaced
without triggering relevant sanctions prohibitions, so long as no
other material terms of the loan, contract or agreement are
modified. Such benchmark modifications will not be treated as
“new debt” for OFAC sanctions purposes.

Primary Sources

1. OFAC Press Release: Issuance of New Frequently
   Asked Question




2. OFAC FAQ: Belarus Sanctions -
   956




3. OFAC FAQ: Belarus Sanctions -
   947




4. OFAC FAQ: Venezuela Sanctions -
   553




5. OFAC FAQ: Ukraine-/Russia-Related Sanctions -
   394

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