Mar
10
GAO Report on Iran Sanctions Blasts OFAC’s Dead Tree Licensing System
Posted by Clif Burns at 8:26 pm on March 10, 2010
Category: Iran Sanctions
The Government Accountability Office released a report last Thursday on the Iran Sanctions and there is, you might say, good news, bad news and old news in the report.
First, the good news. The GAO’s audit of the licensing process of the Office of Foreign Assets Control (“OFAC”) found that all of the licenses that OFAC had granted for exports of food, medicine and medical devices to Iran under the Trade Sanctions Reform and Export Enhancement Act of 2000 (“TSRA”) were properly granted. The 58 licenses examined by GAO all involved exports of items authorized under TSRA for export to Iran. Additionally, none of the licenses involved exports to anyone on the SDN list.
Next, the bad news.
Treasury cannot provide other agencies or Congress with complete and timely information concerning the licenses it has issued. It cannot do so because it relies on paper-based information systems that cannot be searched to identify licenses for the export of goods to Iran. … In January 2009, an internal Treasury budget request characterized the TSRA information system as a “largely paper-based†system that hinders “the speed, efficacy, reliability, and security of [Treasury’s] licensing, enforcement and compliance activities.†Treasury officials must manually review all TSRA licensing data for Iran to identify licenses that authorize the export of goods. Because the TSRA system is not integrated with Treasury’s primary licensing information system, TSRA licensing officials must manually enter the same data into both systems.
Finally, the old news. GAO discovered that U.S. goods were being successfully exported to Iran through the use of intermediary companies and transshipment of U.S. goods through other countries to Iran.
More than 50 percent of the cases listed involved use of intermediaries in the UAE for transshipment. About 20 percent involved the use of Malaysia and Singapore
Regular readers of this blog will be forgiven if they can’t suppress a yawn while reading these shocking revelations, particularly with regard to the diversion of exports to the U.A.E. Still, GAO’s report should emphasize for exporters that exports to UAE, Malaysia and Singapore deserve extra scrutiny to assure that items aren’t merely transiting those countries on their way to Iran.
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5 Comments:
When I read the GAO report last week, I thought back to the criminal cases in which OFAC would send a licensing officer to testify for the prosecution that the defendant had not applied for or received a license. With the GAO report in hand, Defense counsel should cross-examine that OFAC licensing officer and ask: “How do you know?”
@Hillbilly: Excellent point. In that regard, the picture illustrating the post is an imaginative reconstruction of OFAC’s licensing office and shouldn’t be introduced as actual evidence.
The U.A.E. huh? You don’t say……
As for the mass of paper clogging up the halls of the the Treasury Annex, quite a bit of it has gone through my printer at some point. When doing document productions for responses to OFAC administrative subpoenas, I always ask the investigator: can I just put these documents on a disc for you? I inevitably get the same answer everytime: “We like everything in hard copy.” Worth a shot I guess…maybe someday.
I can only imagine how many trees have given their lives for the enforcement and administration of U.S. economic sanctions.
Hey, Clif, I didn’t give you permission to use that archive photo of my old desk at OFAC…. Seriously, I worked at OFAC in the mid/late-90s, and I can tell you that while certainly they are not on par with DDTC and BIS regarding licensing automation, they continue to slouch toward the 21st century. At one point in my OFAC youth, I handled blocked assets licensing requests, and my big claim to fame was designing the PDF application form that they ended up using to make disposition of such cases more routine. At the time, there was great resistance to my effort to impose such formality on the licensing process by using a standard application. One manager there who shall remain unnamed chided me by saying words to the effect that “we’re not bureaucrats like the folks at State and Commerce”, with the implication being that OFAC licensing matters were lofty, unique, and not susceptible of being reduced to a routine exercise.
Indeed…. For what it’s worth, my current portfolio in-house is almost exclusively ITAR-related, so undoubtedly I’m being punished for whatever sins I committed when I was a bureaucrat myself.
Just an anecdote from my wayward days at the Treasury Annex. Back to your regularly scheduled programming….
It wont take too many trips to Dubai (especially in Winter) to be awakened by “the call” from your open window in the dawn and see the 30 ft Dows being loaded on the canal with every conceivable type of merchandise Made in USA and elsewhere, leaving for Iran. It has been this way forever, before there was a USA. Not unlike the OFAC desk, it is no far stretch to understand that even a buyer in UAE will not know if a few of the items being purchased will eventually go to Iran, or if he would be able to read a dows manifest if they were.
