OFAC Provides Sanctions Guidance on Modifications of Agreements Referencing LIBOR

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.