ExportLawBlog

Archive for the ‘OFAC’ Category

Dec

22

How the OFAC Gave Back Christmas

Posted by Clif Burns at 8:19 am on December 22, 2016

Before leaving for the holidays, I thought it would be appropriate to repost the good news that we receivedÂ earlier this yearÂ regarding Santa’s annual toy delivery being finally released from OFAC restrictions on his route.

FOR IMMEDIATE RELEASE
MEDIA CONTACT: Elf E. McElfface, [email protected] or (951) 262-3062

Santa’s Village, North Pole – Santa Claus today, on behalf of himself, Mrs. Claus and the 40,000 elfployees of the Santa Foundation, expressed his gratitude to the Office of Foreign Assets Control for its timely revision of its rules to grant Santa clear authority this year to visit children both in the United States and Cuba. For years, Santa’s efforts to bring holiday cheer to children of both countries has been thwarted by section 515.207 of the Cuba regulations which would prohibit Santa’s sleigh from landing in the United States while toys for Cuban children remained in the sleigh or in landing in the United States if those toys had been delivered to Cuban children first.

Today’s action waives these restrictions if Santa’s sleigh only carries items that would, if they were subject to the EAR, beÂ EAR99 or controlled only for AT reasons. This ends the long struggle over whether teddy bears and other toys — which are not food, medicine, or personal communications devices — could only be delivered to Cuban children in wrapped parcels with the child’s name and address written on the outside and with the statement “GIFTâ€”Export License Not Required” also marked onÂ the parcel package. Notwithstanding the diligence and timely efforts of Santa’s elfployees, compliance with these requirements for each non-naughty child in Cuba has heretofore been impossible.

News of the OFAC announcement led to loud cheers and applause throughout Santa’s Village. Elf E. McElfface, Santa’s spokeself, wiped a tear of joy from his eye as he said to the elves in one of Santa’s workshops that he never believed that this would occur in his lifetime, which was saying a lot given that the average life expectancy of an elf on the North Pole is currently just over 500 years.

As Christmas approaches, Santa said that he was looking forward to this year’s delivery of toys and goodies to the nice children throughout the world more than ever before and reminded children everywhere, both in Cuba and the United States, that they could call his hotline at +1 (951) 262-3062 to leave their Christmas wishes and toy requests.

This press release may include predictions, estimates or other information that might be considered forward-looking. While these forward-looking statements represent the Santa Foundation’s current judgment on what the future holds, they are subject to risks and uncertainties that could cause actual results to differ materially. You are cautioned not to place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this press release. Please keep in mind that we are not obligating ourselves to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events.

I hope all Export Law Blog readers are able to take some time off and enjoy the holidays with their family and friends. See you in 2017!

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Dec

20

Merry Snapback! Bah! Humbug!!

Posted by Clif Burns at 6:24 pm on December 20, 2016

Ebeneezer Scrooge via Wikipedia https://en.wikipedia.org/wiki/Ebenezer_Scrooge [Public Domain - Copyright Expired]

Chestnuts roasting on an open flame.

Jack Frost nipping at your shoes.

Iran Sanctions coming back all the same.

SoÂ OFAC dressed up its FAQs

Ah, yes, nothing says Christmas cheer quite like the possibility that the JCPOA will be put on Santa’s naughty list and everyone will find the old Iran sanctions back under their Christmas tree. Â This is why, of course, OFAC, full of the holiday spirit, just amended its JCPOA FAQs to answer the question on everyone’s mind: Â what happens when Santa brings the sanctions back?

Not wanting to be too much of a Grinch, on December 15, OFAC revised JCPOA FAQs M4 and M5 to reassure the exporters in Whoville that they’ll have 180 days to wind-down their dealings with Iran after snapback or US withdrawal from the JCPOA. Â But if this is a Christmas gift, it’s like the “Sea Monkey Circus” that you begged for from your parents — you know, those worms in a water bag that didn’t look anything like monkeys orÂ a circus once you actually got the gift.

Like the Sea Monkey Circus, what the wind-down means is not what you might think. Â You have 180 days to get paid for goods already delivered to Iran. Â But what if you have goods in production that were destined to Iran but not completed when the sanctions are reimposed? Do you have 180 days to finish them, deliver them and get paid? Â Nope. Â You’re out of luck. All you can do is pray to find someone willing to buy the goods at something above salvage value. Â Or that OFAC gives you a special license to finish and deliver the goods.

Grandma getting run over by a reindeer seems, well, not so bad by comparison to the JCPOA getting stolen by the Grinch.

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Dec

15

Sanctions Paranoia Strikes Again: YouTube Shutters Nork Channel

Posted by Clif Burns at 10:19 pm on December 15, 2016

Category: North Korea Sanctions • OFAC

Kim The Washington Post reports that YouTube has removed Korean Central Television’s channel, fearing that it needed to do so to avoid breaching U.S. sanctions on North Korea. The removed channel was a Nork propaganda outlet that broadcast both unintentional comedies, such as outings by the super-sized dictator, Kim Jong Un, as well as Nork fake news broadcasts. Researchers and Nork watchers found the channel to be an invaluable resource in keeping track of what is going on North Korea, even if much of these broadcasts needed to be taken not with a grain of salt but with an entire salt mine.

Although Google is mum about why the channel was killed, the Post quotes a supposed explanation from somebody named Josh Stanton, a Â blogger who appears to work for the U.S. government in his spare time. Â Josh said that the reason was “YouTube and Google probably realized there was a problem with money changing hands.” Er, no, Josh.

The issue with respect to the Nork YouTube channel arises from Executive Order 13722, issued in March 2016, which prohibits exports of services to North Korea. Prior to that there were restrictions, enforced by BIS, on exports of goods to North Korea, and restrictions, enforced by OFAC, on dealing with blocked North Koreans. Providing distribution of Korean Central Television’s broadcasts over YouTube would clearly be the export of a service to North Korea in violation of Executive Order 13722.

But, and this is a big but, there is the information exception, enacted by the Berman amendment and ignored by Mr. Stanton and the Washington Post. The information exceptionÂ prevents the President from prohibiting the “importation from any country â€¦ whether commercial or otherwise, regardless of format or medium of transmission, of any information.” See 50 U.S.C. Â§ 1702(b)(3)(emphasis supplied). The italicized language is pretty much game over for the arguments by Mr. Stanton and the Post that ad money was the problem.

What would be a problem is if there were any indications (and there are not) that Google and YouTube were editing or marketing the content. OFAC has been quite clear that it does not think that such services are covered by the information exception (although it does allow those services, through various general licenses, for private individuals in sanctioned countries). If the Norks upload their nonsense and YouTube permits it to be downloaded, there is no violation of the sanctions even if somehow ad revenue makes its way back to North Korea (which itself seems doubtful).

While waiting (don’t hold your breath) for the return of Korean Central Television to YouTube, you might want to watch this riveting North Korean news broadcast showing the Dear Leader visiting an amusement park, a kitchen (with hamburgers! which he doesn’t eat!!) and a zoo.

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Dec

2

Prosecutors’ Flood of Crocodile Tears Drown the Wind

Posted by Clif Burns at 8:43 am on December 2, 2016

Category: Criminal Penalties • Iran Sanctions • OFAC

Reza Zarrab via Facebook https://www.facebook.com/reza.zarrab.9 [Fair Use]

ABOVE: Reza Zarrab

This blogÂ recently reported on the Iran sanctions case against Reza Zarrab in which Judge Berman misread and misquoted the International Emergency Economic Powers Act to hold that the United States has criminal jurisdiction over anyone on the planet who touches a dollar bill or, more accurately, knows that someone else anywhere on the planet might touch a dollar bill. Recently, the prosecution requested a Curcio hearing seeking to disqualify Zarrab’s lawyers at Kirkland & Ellis because they also represent banks that were involved, albeit without knowledge, in the wire transfers to Iran at issue.

A Curcio hearing is one where the prosecution, overcome with a flood of crocodile tears and concern for the defendant, seeks to assure that the defendant receivesÂ effective representation of counsel from a lawyer free of anyÂ conflict. The irony is thatÂ prosecution’s goal is to deprive the defendant of counsel of choice and throw him or her into the arms of brand new counsel all, of course, in the name of protecting the defendant. A further irony here is that Zarrab is represented by top-notch lawyers at Kirkland and that everyone â€” all the banks and Zarrab â€” Â consented to Kirkland’s representation of Zarrab.

But the real kicker here is the breathtakingly terrible argument that the prosecutors use in their request for a Curcio hearing — namely that the banks are “victims” of Zarrab’s offense:

K&Eâ€™s simultaneous representation of Zarrab and at least two victims in this matter,
Deutsche Bank and Bank of America, presents a conflict. The Government has charged ZarrabÂ with defrauding these and other financial institutions by duping them into processing financialÂ transactions that they would not otherwise have engaged in, and in doing so, exposing them to theÂ possibility of substantial harm.

This argument falls apart after only a moment’s scrutiny. The banks at issue either knew that the transactions they processed were destined for Iran or they did not. If they knew, they were co-conspirators and not victims. If they did not know, they did not do anything wrong by processing the transactions and were not victims. And the fact that they are not being fined or prosecuted in this case makes clear that they did not know, that they weren’t exposed to the possibility of harm, that they did not suffer any actual harm, and that they weren’t victims in any sense in which normal people use that word.

An additional problem with this “victim” argument is that, as with any statute or rule protecting the foreign policy interests of the United States, the actual victims of violations ofÂ such statutes are the citizens of the United States. Â In that case, the only lawyer who could possibly represent Zarrab is a lawyer whose only client is Zarrab and who has not ever represented any U.S. citizens. Â For as much as the prosecution might welcome having Zarrab represented by a sole practitioner from a small village in Turkmenistan, I doubt that there are many others who think that might be an acceptableÂ outcome.

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Nov

30

Maybe There’s a Good Idea Lurking in Tom Fox’s Stealth Advertorial

Posted by Clif Burns at 4:44 pm on November 30, 2016

Category: BIS • Civil Penalties • Compliance Programs and Procedures • Criminal Penalties • DDTC • FCPA • OFAC

Internet Email by twitter.com/mattwi1s0n [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/75rLY [cropped and processed]

Over at the excellent FCPA Compliance & Ethics Blog, Tom Fox has a plug for email monitoring software disguised as a blog post. Â He’s even doing a “webinar” with the software developers â€” completely free, of course â€” Â presumably to push the sales of this product.

Notwithstanding what might not be his completely objective take on this software product, Fox raises a good issue that might warrant consideration for incorporation into your export compliance program. Â I assume everyone reading my blog and this post is acutely aware that a robust compliance plan is the best insurance against getting taken to the cleaners by the DoJ and the export agencies after it is discovered that an employee in your Hamburg office has been shipping Â your U.S. origin night vision to Iran. Â But what does your compliance program do proactively to ferret out such problems? Â Fox suggests that companies should consider periodic email sweeps for keywords

The concept is straightforward; at regular intervals you can sweep through your company email database for identified key words that can be flagged for further investigation, if required.

So, should you consider sweeping all emails for keywords such as “Iran” or “Syria”? What other keywords might help pinpoint export compliance problems? “Jail”? “Orange Jumpsuit”? “Export License,” as in “let’s avoid fussing with that stupid export license requirement”? Are there keywords that can identify times when employees say something like “Call me, since we shouldn’t put this in writing”?

While I think such an approach is a nice shiny bauble that can be dangled in front of prosecutors and enforcement agencies and therefore is worth considering, I also wonder whether such sweeps will actually be effective in detecting violations. First, in my experience, most of the problems come from sales employees outside the United States who don’t think U.S. laws should interfere with their commissions. Foreign privacy laws, particularly in the E.U., often pose barriers to rifling through foreign employees’ emails. Second, in my experience, employees, particularly those with mischief in their hearts, are much too savvy to talk openly in emails about their transshipment schemes. They almost always use code of some kind to conceal what they are up to. These employees and their code words are normally not clever enough to fool prosecutors, but those code words â€” like “the country we discussed” or “Middle Earth” â€” will easily evade keyword email sweeps.

Any thoughts on this? Share your experiences (anonymously if you wish) in the comments section.

Photo Credit: Internet Email by twitter.com/mattwi1s0n [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/75rLY [cropped and processed]. Copyright 2003 twitter.com/mattwi1s0n

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