Sanctions Don't Relieve Settlement Obligations

Paraguay firm must still pay under Tobacco Settlement

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Treasury's Office of Foreign Assets Control (OFAC) issued a license permitting a sanctioned Paraguayan tobacco company to continue its remittances under the 1998 Tobacco Master Settlement Agreement.

General License No. 7, issued under Global Magnitsky Sanctions Regulations 31 CFR part 583

Authorizing Certain Transactions Involving Tabacalera del Este S.A. or Tabacos USA Inc. Pursuant to the 1998 Tobacco Master Settlement Agreement

Transactions that are ordinarily incident and necessary to payments under the tobacco Master Settlement Agreement (MSA), entered into on November 23, 1998 between certain U.S. state and territory attorneys general and certain tobacco companies, are authorized.

On January 26, 2023, OFAC designated former Paraguayan president Horacio Manuel Cartes Jara (Cartes) pursuant to Executive Order 13818 for involvement in corruption and also designated Tabacos for being owned or controlled by Cartes.  

On March 31, 2023, OFAC identified Tabesa as an entity that is owned, directly or indirectly, 50 percent or more by Cartes and added Tabesa to the SDN List.  

Global Magnitsky General License 7 does not authorize debits to any blocked account on the books of a U.S. financial institution or any other transactions otherwise prohibited by the Global Magnitsky Sanctions Regulations.

In 1998, 52 state and territory attorneys general signed the Master Settlement Agreement (MSA) with the four largest tobacco companies in the U.S. to settle dozens of state lawsuits brought to recover billions of dollars in health care costs associated with treating smoking-related illnesses.   

Eventually, more than 45 tobacco companies settled with the Settling States under the MSA. Although Florida, Minnesota, Mississippi, and Texas are not signatories to the MSA, they have their own individual tobacco settlements, which occurred prior to the MSA.