The department issued a general license Friday authorizing transactions with the banks, saying it would help promote responsible investment. It supports a July 2012 easing of U.S. investment sanctions to reward the government of President Thein Sein for democratic reforms.
The U.S. Campaign for Burma quickly criticized the move as premature and sending the wrong message because of serious and continuing human rights violations in ethnic conflicts in the north and west of the country.
"Once again, the Obama administration shows a complete disregard for the serious nature of ongoing concerns in Burma, prematurely lifting the ban on banks in Burma without determining if they have met the conditions for removal. The Kachin and Rohingya continue to be persecuted while the U.S. government focuses on financial gains, not consequences for ongoing, systematic atrocities," said Jennifer Quigley, advocacy director for the Washington-based activist group.
U.S. businesses have been urging the administration to loosen its controls on the banks to make it easier to operate in the country also known as Burma and tap into its emerging market. The U.S. is the only nation that still retains such controls on investment in the country.
The license covers the Asia Green Development Bank, Ayeyarwady Bank, Myanma Economic Bank and or Myanma Investment and Commercial Bank.
"Increased access to Burma's banking system for our companies and non-governmental organizations will help to facilitate Burma's continued social and economic development, serve as a model for responsible investment, and help to provide a better future for the Burmese people," Treasury Under Secretary for Terrorism and Financial Intelligence David Cohen said in a statement.
Ayeyarwady Bank is owned by Zaw Zaw, a Burmese tycoon on the sanctions list. A June 2009 leaked diplomatic cable from the U.S. Embassy in Yangon described him as "one of Burma's up-and-coming cronies," but he has recently donated to charities supported by opposition leader Aung San Suu Kyi's political party.
Asia Green Development Bank is owned by Tay Za, described by Treasury in 2008 as an arms dealer and financial henchman of the former military regime. A company controlled by Tay Za has also donated to the Suu Kyi-backed charities.
All four banks remain on the so-called Specially Designated Nationals list, and while U.S. companies can conduct transactions through the banks, they can't invest or do joint ventures with them.
John Sullivan, Treasury spokesman for terrorism and financial intelligence, said keeping the banks on the sanctions list and retaining the underlying authorities of the sanctions serves as an "insurance policy" in case of backsliding.
U.S. businesses are still barred from transactions with three other banks on the list: Innwa Bank, Myawaddy Bank and Myanma Foreign Trade Bank.