Archive for the ‘Economic Sanctions’ Category

Apr

30

The Bad News Is You’re Still on the SDN List

Posted by at 6:37 pm on April 30, 2013
Category: Burma Sanctions • Economic Sanctions • OFAC • Sanctions • SDN List • Zimbabwe Sanctions
U.S. Navy photo by Mass Communication Specialist 2nd Class Jesse B. Awalt/Released (DefenseImagery.mil, VIRIN 090202-N-0506A-310) [Public domain], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3ARobert_Mugabe%2C_12th_AU_Summit%2C_090202-N-0506A-310.jpg
ABOVE: Robert Mugabe

OFAC last week issued its first general license for U.S. sanctions relating to Zimbabwe. The license authorizes for the most part “all transactions involving Agricultural Development Bank of Zimbabwe and Infrastructure Development Bank of Zimbabwe.” Both banks, however, are on OFAC’s SDN List.

Since the two banks have been and remain on the SDN List, the license does not unblock the banks’ property interests that had been blocked as of the date of the license. OFAC issued a similar general license in February of this year authorizing dealings with four banks in Burma but kept the banks on the SDN List and continue to block the banks’ property interests blocked prior to the license. A major development from these licenses is, of course, giving U.S. exporters local banking options that were previously unavailable and without them likely stymied business development in those countries.

Exporters should also take note, however, of how OFAC’s easing of sanctions through these licenses has an onerous side-effect on U.S. companies. If a company’s policy is to determine whether to deal with entities or individuals based on their presence on the SDN List or other relevant sanctioned party lists, the authorization granted to deal with listed banks through these general licenses would go unnoticed. Exporters now must check all the lists they routinely do as well as stay on top of licenses issued by OFAC to know whether someone has, from most exporters’ perspectives, been in effect delisted.

If these SDN-lite designations continue, exporters will either need to monitor closely OFAC’s daily activity or make sure their screening software is doing so for them, at least if they want to be sure they are not unnecessarily limiting their export opportunities.

Permalink Comments Off on The Bad News Is You’re Still on the SDN List

Bookmark and Share


Copyright © 2013 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)
Apr

17

An Egregious “Non-Egregious” Sanctions Violation?

Posted by at 11:36 pm on April 17, 2013
Category: Economic Sanctions • Iran Sanctions • OFAC • Sanctions

Source: San Corporation (Fair Use)OFAC announced on Friday a settlement with California-based SAN Corporation (“SAN”) for an alleged violation of the Iranian Transactions Regulations that occurred in September of 2007.  OFAC alleged that SAN sold nutritional supplements to an entity in Kuwait with knowledge that their end use was to be in Iran.  SAN agreed to pay $22,500 to settle liability for the alleged violation.  OFAC reported that the base penalty amount for the alleged violation was $25,000.

OFAC determined that the alleged violation was non-egregious and it provided several conditions to support that finding: (1) its allegation involved one instance, (2) SAN had no history of prior OFAC violations and (3) the goods at issue, in OFAC’s words, “appear to have been eligible for a license” under TSRA.

What leaves us bewildered is the parade of horribles that OFAC also recites: (1) SAN did not voluntarily disclose the transaction to OFAC, (2) SAN acted with “reckless disregard” for sanctions law by selling to an entity in Kuwait with knowledge that end use was in Iran and having been informed by the Iranian end-user that intended shipment to Iran required an OFAC license and (3) SAN did not fully cooperate with OFAC by providing “incomplete and/or inaccurate statements” to OFAC.

Whatever all the reasons were behind OFAC’s agreeing to this settlement, the result is a good reason to give pause before going to OFAC with a voluntary disclosure. While much goes into a decision of whether to make a voluntary disclosure, it is important to assess enforcement actions like this one to determine carefully if efforts spent to prepare, submit and deal with a voluntary disclosure are worth it.

Clif adds: If shipping an item to Iran without a license even after the Iranian end-user tells you that a license is required isn’t enough to make something an “egregious” violation, I am not sure the word egregious has any meaning left.

Permalink Comments (1)

Bookmark and Share


Copyright © 2013 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)
May

24

Sanctions Traded for Sanctions

Posted by at 8:29 pm on May 24, 2010
Category: Economic Sanctions • Iran Sanctions

Mahmoud AhmadinejadOn Friday, the Department of State announced that it had terminated sanctions against various Russian entities. First, it lifted sanctions that it had imposed on Rosoboronexport in 2008. Second, it lifted sanctions on the D. Mendeleyev University of Chemical Technology of Russia and the Moscow Aviation Institute that it imposed on January 19, 1999 on the basis of a determination that the two entities had “engaged in proliferation activities related to Iran’s nuclear and/or missile programs.”

According to this article in the New York Times, the U.S. traded off these sanctions to secure Russia’s cooperation in the new U.N sanctions on Iran. The Times quoted one critic of this trade-off:

John R. Bolton, who was acting ambassador to the United Nations under Mr. Bush, said Russia’s foreign minister, Sergey V. Lavrov, got the upper hand on the Obama team. “He sensed desperation in the Obama administration on this Iran resolution, and probably extracted all that the traffic would bear,” he said. “The only remaining question is what else he got that we don’t yet know about.”

This makes the lifted sanctions seem a bigger deal for the Russian entities than they probably were. All three entities were subject to bans on U.S. government procurement and foreign assistance as well as prohbitions on any U.S. imports from these entities. Because neither company was likely to be a federal government contractor, likely to be recipient of federal aid or engaged in export of items to the United States in any significant quantity, these sanctions were more symbolic than anything else.

Rosoboronexport was also subjected to a ban on U.S. government arms sales and on issuance of any license to export defense articles from the United States to Rosoboronexport. These might have had a somewhat greater impact on Rosoboronexport but, again, it is doubtful that the company had been the recipient of many U.S. government arms sales nor of many U.S. exports of defense articles.

Permalink Comments Off on Sanctions Traded for Sanctions

Bookmark and Share


Copyright © 2010 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)
Feb

4

OFAC Mugabe Sanctions Hit Home, Our Home Not His

Posted by at 10:34 pm on February 4, 2010
Category: Economic Sanctions • Zimbabwe Sanctions

Kokopelli Golf ClubA golf course in Marion, Illinois, is set to close as a result of economic sanctions imposed by the Department of Treasury’s Office of Foreign Assets Control against Zimbabwe’s Robert Mugabe and his cronies. How do the Mugabe sanctions have an impact almost 9,000 miles away?

According to this story in an Illinois newspaper, Kokopelli Golf Course was purchased, almost 15 months ago, from a Florida partnership by local investors. One of the partners in the Florida partnership, it appears, was John Bredenkamp, alleged by OFAC to be a Mugabe crony — a charge that Bredenkamp denies. So OFAC blocked the title to the golf course and the sale hasn’t closed, despite the intervention of Senator Durbin, the senior senator from Illinois, and despite arguments that the closing of the golf course as a result of OFAC’s blocking title to the club would have a significant impact on the local economy. Indeed, the closing of this town’s golf club would appear to be the only visible impact of the Mugabe sanctions since, the last time I checked, Mugabe was still sitting fat, happy, rich and in power in Zimbabwe.

The news story does not reveal the size of Bredenkamp’s interest in the partnership that owned the golf club. If his interest was greater than 50 percent, then under current OFAC guidance, as this blog reported here, the partnership and all of its assets, including the golf club, would be a blocked asset. This case shows the problem with such a rule is that it potentially punishes innocent parties. Assuming, as is likely the case, that the other partners entered into the partnership with Bredenkamp prior to Bredenkamp becoming designated by OFAC as subject to the Mugabe sanctions, there is no conceivable reason to punish the other partners. Instead, OFAC should block Bredenkamp’s interest in the partnership and any revenue due to him under the partnership agreement. The policy behind this position is even more obvious when blocking the interest of innocent partners has an impact on the economy of a small U.S. town.

If the Kokopelli Golf Club closes, Marion residents can, ironically, always go to Zimbabwe to tee off. According to Golf Digest:

Despite hyperinflation, cholera and hugely unpopular President Robert Mugabe, golf survives in Zimbabwe. At Bulawayo Golf Club (founded in 1895), members have been paying with gasoline because local bank notes are now worthless.

Fore!

Permalink Comments (3)

Bookmark and Share


Copyright © 2010 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)
Nov

2

Let Them Write Letters

Posted by at 8:34 pm on November 2, 2009
Category: Economic Sanctions • OFAC

Twitter Keeps Iran AfloatLast week several readers brought to my attention a Bloomberg story that announced in its headline “U.S. Wants Microsoft to End Message Ban in Iran, Cuba.” This created a bit of a hubbub at the world headquarters of Export Law Blog, since this blog has been advocating for some time that the information exception be read to cover instant messaging, twittering, and the like. Alas, as we learned at a tender age, you can’t believe everything you read in the newspapers. (You can, of course, believe everything you read in blogs.)

The Bloomberg story referenced a letter that OFAC sent last month to the Center for Democracy in the Americas, a group that, like Export Law Blog, has been a persistent critic of the Cuba sanctions. But when you read the letter, it’s quite clear that the letter doesn’t exactly say that the U.S. wants to end the application of sanctions to instant messaging services:

We assure you that the discontinuation of instant messaging services [by Microsoft to users in Cuba, Syria, Iran, Sudan and North Korea] was not directed by OFAC or, to our knowledge, any other Federal agency. Ensuring the flow and access to information available through the Internet and similar public sources is consistent with the policy interests of the United States Government.

OFAC is participating in an interagency effort to review any discontinuation of certain instant messaging services to sanctioned countries, with the goal of insuring that such services will be available to persons in sanctioned countries to the extent permitted by current U.S. law. [emphasis added]

The last clause is the catch here. OFAC has typically interpreted the information exception very narrowly, and there is no indication that OFAC has changed its view of what’s “permitted by current U.S. law.”

Instant messaging services require the download of software, and OFAC takes the position that software isn’t information covered by the information exception. Twitter creates a miniblog page with a unique URI for each user, which would, under OFAC’s narrow view of “information,” be considered provision of a service in violation of the sanctions regulations.

OFAC’s antiquated view of information, apparently formulated sometime between the invention of the printing press and Columbus’s discovery of the Americas, comprises only things written in ink on paper. Throw a few electrons into the mix and all bets are off.

So I wouldn’t take this OFAC letter to the bank if I were you. At least not yet.

Permalink Comments (3)

Bookmark and Share


Copyright © 2009 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

« Older Entries
Newer Entries »