Archive for the ‘Cuba Sanctions’ Category

Jul

2

OFAC Gores Red Bull for Skateboarding in Havana

Posted by and at 6:45 pm on July 2, 2014
Category: Cuba Sanctions • Economic Sanctions • OFAC • Sanctions

Ryan Scheckler Skateboards in Havana via http://www.redbull.com/cs/Satellite/en_INT/Gallery/Ryan-Sheckler-shreds-Cuba-and-Panama-021242761792131#/image-12 [Fair Use]

Last Friday, OFAC announced that Red Bull North America, Inc. (“RBNA” or, when we’re feeling informal, “Red Bull”) agreed to pay $89,775 to settle allegations that “seven representatives” of RBNA traveled to Cuba in order to “film a documentary” in 2009 without OFAC authorization but with the approval of RBNA’s “management.”  RBNA is the U.S. subsidiary of Red Bull GmbH, the Austrian elder statesman of excessively caffeinated energy drinks.  Although OFAC provided no details about the film itself, it is likely a 2009 documentary, described by Red Bull here, which the company made about Ryan Sheckler skateboarding in Havana.  Apparently there is no place left in the world that is safe from skateboarders other than, perhaps, some interior stretches of Antarctica.

Of course, there is a general license for journalistic activities in Cuba, which would seem to cover making documentaries, as opposed to, say, filming Transfomers LVIII: The Final (And We Really, Really Mean It This Time) Apocalypse.  But OFAC’s general license is restricted to “persons regularly employed as journalists by a news reporting organization.”  As we’ve noted before OFAC has not applied this limitation in a consistent fashion, suggesting that Michael Moore wasn’t a journalist but Charlize Theron was. Although Red Bull seems quite active in the documentary business, OFAC apparently viewed them as simply a commercial marketing endeavor in a country where Red Bull is undoubtedly sold.  In fact, judging from the Red Bull Cliff Diving World Series event held in Havana this May, a good amount of Red Bull is being consumed in Cuba.

In considering the penalty amount, OFAC said it determined and took into account that “RBNA did not voluntarily self-disclose” and that “RBNA had prior knowledge of U.S. sanctions on Cuba and took steps to conceal the transactions.”  Of course, we don’t quite understand how you conceal a documentary, particularly where Red Bull posted extensive information about it on the Internet, which is where OFAC likely discovered this transaction. On the other side of the equation, OFAC cited  RBNA’s institution of an OFAC compliance program, no other sanctions violation from 2004 to 2009 and the “non-egregious” nature of the violation.

We have over the past few years called attention to the confusion and lack of information in OFAC’s enforcement action announcements.  Last April, we highlighted what we thought was one of the more egregious “non-egregious” settlements that OFAC has announced.   The latest settlement with RBNA, furthers the confusion by imposing a fine on the low scale even after OFAC finds, albeit wrongly, that Red Bull concealed the documentary.

While OFAC makes up for its small-ish RBNA fine in its hefty enforcements against banks (à la the almost $1 billion settlement OFAC reached with BNP Paribas this week), most U.S. companies’ dealings with Cuba are going to be more on par with isolated occurrences like the one involving RBNA.  In the end, the RBNA settlement is good news for RBNA, its Red Bull parent and any other U.S. company in a similar situation.  If a U.S. company ever finds itself in the future before OFAC in an isolated situation like RBNA, the first thing to do is to pull out RBNA’s settlement announcement and try negotiating from there.

 

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Copyright © 2014 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)
May

7

Incorporating in Delaware Leads to Huge OFAC Fine for Argentinian Company

Posted by at 11:51 pm on May 7, 2014
Category: Cuba Sanctions • OFAC

By Almonroth (Own work) [CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3AU.S._Treasury-3.jpgYesterday the Office of Foreign Assets Control (“OFAC”) announced that it had imposed a $2,809,800 fine on Argentina-based Decolar.com, Inc. Decolar is an online travel agency and attracted the ire of OFAC for booking trips by non-U.S. persons to Cuba, trips for 17,836 people to be precise. This made OFAC very, very angry:

Decolar demonstrated reckless disregard for U.S. sanctions requirements when it failed to ascertain the U.S. sanctions requirements applicable to its business operations, relying instead upon a third party’s oral assurances that Decolar’s conduct did not require an OFAC license. With the exercise of appropriate due diligence, Decolar’s senior
management reasonably should have been aware of the applicable prohibitions under the CACR. Based upon the number of apparent violations and the length of time over which they occurred, the apparent violations also appear to have resulted from a pattern or practice of conduct

So, you’re no doubt wondering where OFAC gets the right to fine a company based in Argentina for violating the U.S. sanctions on Cuba. Simple. Even though the company was based in Argentina, it was incorporated in Delaware. This was probably the most expensive incorporation in Delaware ever.

One thing that  is odd about the OFAC release is its coy reference to the “third party” that told Decolar that it had nothing to worry about. My guess, particularly due to OFAC’s reluctance to identify this party, is that it was likely a lawyer. Saying that relying on a lawyer is “reckless” is harsh, even by OFAC standards, but it seems that if this mysteriously anonymous third party had been, say, the company janitor, OFAC could not have resisted mentioning that. After all, that would indeed be reckless. And, of course, the company was even more reckless for not ignoring their legal counsel and doing the research themselves. You know, by looking at the Spanish version of the Cuba sanctions which OFAC keeps on its website. Oh wait, there isn’t a Spanish version.

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Copyright © 2014 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)
Apr

23

Stuck Between a Rock and an OFAC Place

Posted by at 9:40 pm on April 23, 2014
Category: Cuba Sanctions • OFAC

Carlson Wagonlit US HQ via http://careers.carlsonwagonlit.com/jc/external/en/global/meetUs/Locations-Country-DetailPages/USA-Pages/USA_overview.html [Fair Use]Last week the Office of Foreign Assets Control announced that it whacked Carlson Wagonlit with a massive $5,990,490 fine for doing business in Europe as an American. Specifically, the massive fine was levied because Carlson was involved in arranging travel for Europeans to Cuba. Carlson became subject to U.S. sanctions on Cuba in 2006 when French hotel chain Accor sold its 50 percent stake in Carlson Wagonlit to Carlson and JPMorgan Chase, resulting in control of Carlson Wagonlit by U.S. companies.

In justifying the massive fine OFAC tut-tuts that Carlson Wagonlit was a sophisticated international company that processed Cuba travel for “four years before recognizing that it was subject to U.S. jurisdiction” and that it had either no compliance program or an “inadequate” one. Of course, OFAC omits from its chastisement of Carlson Wagonlit one significant fact: the 900-pound E.U. Council Regulation that made it illegal for Carlson Wagonlit to refuse to book travel to Cuba

In essence, and as I’ve said before, OFAC’s enforcement of the Cuba Sanctions against U.S. companies in Europe in these circumstances is tantamount to making it illegal for American companies to do business in Europe. This is particularly true for travel companies which simply cannot avoid being requested to book travel for Cuba. If the Company refuses, it violates E.U. law; if it complies, it violates U.S. laws. Sanctioned if you do; sanctioned if you don’t.

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Copyright © 2014 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)
Mar

25

OFAC: Keeping Us Safe from MOOCs

Posted by at 5:24 pm on March 25, 2014
Category: Cuba Sanctions • Economic Sanctions • Iran Sanctions • Sudan • Syria

By Aristóteles Sandoval [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3A16-02-2011_Guadalajara_Libre_en_Palacio_Municipal.jpgThis blog previously reported on the impact of OFAC sanctions on the Massive Open Online Courses, quaintly known as MOOCs, offered by the for-profit Coursera. The sanctions have led Coursera to block students with IP addresses from Iran, Cuba and Sudan, a half-hearted attempt by the company to comply with U.S. sanctions.   Those sanctions, in general, prevent providing services to nationals of blocked countries even outside their home countries, so offering MOOCs to Iranians in, say, Germany, would be equally problematic. (Coursera gave Syrian students a reprieve relying, rather questionably, on an exemption in Syria General License 11A for educational exports by NGOs).

Last week, the Office of Foreign Assets Control gave Iranian students, both inside and outside Iran, a partial reprieve from the ban on MOOCs when it issued Iran General License G. That license permits enrollment of Iranians, both in and out of Iran, in MOOCs

provided that the courses are the equivalent of courses ordinarily required for the completion of undergraduate degree programs in the humanities, social sciences, law, or business, or are introductory undergraduate level science, technology, engineering, or math courses ordinarily required for the completion of undergraduate degree programs in the humanities, social sciences, law, or business.

Sadly, there was no happiness in Coursera-ville, because the license is restricted to “accredited graduate and undergraduate degree-granting academic institutions.” Not all of Coursera’s courses are offered by accredited academic institutions, so some of its course offering will not benefit from this general license.

Another beneficiary of the new general license would appear to be EdX, the MOOC platform founded by Harvard and MIT. EdX partners with other accredited academic institutions that provide the various offerings made available by EdX. One significant difference between EdX and Coursera is that EdX sought and obtained a license to provide MOOCs to students in  Cuba, Iran and Sudan. Apparently that license did not cover provision of STEM courses, i.e., courses in science, technology, engineering and mathematics, without specific approval by OFAC, according to this Harvard Crimson article.  That article went on to note the refusal of OFAC to permit a MOOC entitled “Flight Vehicle Aerodynamics” taught by MIT faculty.

This would mean that EdX and Coursera no longer need specific licenses for Iranian students to participate in courses taught by accredited institutions other than certain advanced STEM courses. However, licenses will still be required to initiate Cuban and Sudanese students into the intricacies of George Eliot’s Middlemarch or the structure of French symbolist poetry. (It is well known that familiarity with Eliot and Valéry are mere stepping stones to terrorist and anti-American activity, so we will be safe from literary Cuban and Sudanese terrorists, at least for the moment.) This General License, however, probably has no effect on the “Flight Vehicle Aerodynamics” course, because although it is far from clear what is meant by STEM courts “ordinarily required for the completion of undergraduate degree programs in the humanities, social sciences, law, or business,” it is probably safe to assume that “Flight Vehicle Aerodynamics” is not among them.

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Copyright © 2014 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)
Feb

25

OFAC Nukes MOOCS

Posted by at 8:59 pm on February 25, 2014
Category: Cuba Sanctions • Economic Sanctions • Iran Sanctions • OFAC • Sudan • Syria

Formal Fridays via http://www.glassdoor.com/Photos/Coursera-Mountain-View-Office-Photos-EI_IE654749.0,8_IL.9,22_IC1147431.htm [Fair Use]I missed this earlier, but back at the end of January, Coursera, a provider of the euphoniously acronymed MOOCs (Massive Open Online Courses) said “No MOOCS for you” to residents of Cuba, Iran, Syria and Sudan who wanted to better themselves by taking online courses such as “Scandinavian Film and Television” or “Buddhism and Modern Psychology.” I certainly sleep better at night now knowing that the Cuban and Iranian threats are not being needlessly augmented by educating Cubans and Iranians on the subtle politics of Borgen or the psychological insights of the Four Noble Truths.

Because the online courses involve feedback, grading and the like, the concern is that these courses are an export of services, forbidden by the current sanctions on these countries, rather than the export of information, which is permitted under the Berman Amendment. Coursera is a little vague in explaining how it just found that out, saying that it “recently received information that has led to the understanding that the services offered on Coursera are not in compliance with the law as it stands” and that prior to that the law was “unclear.”

Coursera has given Syrian students a reprieve by saying that the State Department has told it that OFAC’s Syria General License 11A covers MOOCs for Syria. That license permits non-governmental organizations to export services to Syria in support of education. I’m not clear how Coursera qualifies as an NGO since it is not a non-profit but a for-profit corporation that seeks revenues and profits through its certification programs and sales of textbooks purchased through its affiliate relationship with Amazon. Nor am I quite clear how the State Department has acquired the ability to determine the scope of OFAC licenses.

The company claims that it is weeding out Cubans, Sudanese and Iranians based on IP addresses, apparently not having taken one of their own course on VPNs which would allow an Iranian wannabe student to appear, online at least, as a German or Italian or whatever. And since civil violations of OFAC rules do not require intent, Coursera is still liable if an Iranian is sitting in Iran but using a VPN to appear as if he or she were elsewhere.

This last point underlines a particular stupidity of applying a 19th century sanctions philosophy to a 21st century Internet where there are no borders. If an Iranian student is, in fact, sitting with his or her laptop in Germany, it would not be illegal for Coursera to provide its services to that student. It is only illegal when the student is in fact physically located in Iran. Now if you can identify a sensible policy which explains why it is more dangerous to teach an Iranian about Scandinavian TV while in Iran than it is in Germany, then you are much more clever than I am.

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Copyright © 2014 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

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