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Archive for the ‘OFAC’ Category

Nov

29

Why It’s Called The Hill Rag

Posted by Clif Burns at 8:46 pm on November 29, 2016

Category: OFAC • Sudan

The Hill Front Page via https://www.facebook.com/TheHill/photos/a.445406209086.230191.7533944086/10150235234964087/?type=1&theater [Fair Use]

The Washington political gossip sheet officially called The Hill, but more commonly known as “The Hill Rag,”Â wanders into the world of OFAC regulations and, no big surprise, gets it wrong. Â The occasion for the Hill Rag’s regulatory blunder is a blurb on the representation by a DC firm of the government of Sudan in federal court litigation

[The firm] is working for the Republic of the Sudan on â€œseveral litigation matters pending before [U.S.] federal courts.â€ â€¦ Because of U.S. sanctions on Sudan, [the firm] must obtain a license from the Treasury Departmentâ€™s Office of Foreign Assets Control (OFAC) to work on the contract. OFAC approves some activities that would be otherwise prohibited by sanctions, including legal services.

Er, no. Section 538.505 of the Sudanese Sanctions Regulations provides that law firms may provide legal services without a specific license to the Government of Sudan when “made a party to domestic U.S. legal, arbitration, or administrative proceedings.” It also covers suits where Sudan is the plaintiff and which are filed to protect property interests subject to U.S. jurisdiction. These two provisions cover just about any federal court law suit involving Sudan.

The only thing that requires a specific license in these two instances is the receipt of fees by the law firm for the services provided. But licenses are not required, as The Hill says, for all legal services.

I guess the Hill Rag reporters could not find anybody in DC who could talk to them about OFAC or show them how to use The Google.

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Nov

18

Friday Grab Bag

Posted by Clif Burns at 4:41 pm on November 18, 2016

Grab Bag Here are a few recent developments that you may have missed:

The House voted yesterday to nullify the impact of a license granted by the Office of Foreign Assets Control (“OFAC”) in September which would allow Boeing to sell civil aircraft to Iran.
On Tuesday the House passed a bill to extend the Iran Sanctions Act for another 10 years. The bill, weighing in at around 50 words, makes no changes to the Act beyond extending its expiration date.
The Caesar Syria Civilian Protection Act of 2016 was passed by the House on Wednesday. Named after the alias of a military photographer who has taken pictures of the conflict in Syria, the act would require blocking of foreign persons, including presumably the Russians, who provide “significant” support to the Government of Syria or the Central Bank of Syria. It will be interesting to see how this plays out if the new Administration carries out its apparent desire to cooperate with Russia in Syria. Although Russia is fighting ISIS there, it is also supporting the current Syrian regime of Bashar al-Assad.
The temporary general license granted by the Bureau of Industry and Security (“BIS”) to permit exports to ZTE notwithstanding its inclusion on the Entity Listwas extended by BIS today until February 27, 2017. ZTE was put on the Entity List after it diverted U.S.-origin goods to Iran.

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Nov

1

OFAC Guidance To Publishers: Proceed At Your Own Risk

Posted by Clif Burns at 10:13 pm on November 1, 2016

Category: Information Exception • OFAC

DSCN7029 by Bianca Ruiz [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/pZgJCd [cropped] Last week, the Office of Foreign Assets Control (“OFAC”) issued guidance which expands the scope of the various general licenses, embodied in its rules, relating to publishing activities with nationals of sanctioned countries. OFAC has always taken the dubiousÂ position that editing and formatting for publication documents prepared by individuals in sanctioned countries was not covered by the informational materials exemption in the Berman Amendment. Instead, according to OFAC, it was a provision of a service to the sanctioned country and required a license. In its most questionableÂ incarnation, OFAC, for a period of time, insisted that publication of anything other than “camera-ready” copy of materials authored by an individual in a sanctioned country required an OFAC license. Why OFAC did not carry this nonsensical logic to its final extreme and say that picking a book from a warehouse shelf before exporting it to a sanctioned country was also a “service” requiring a license has always been unclear.

After years of newspapers openly defying these rules publishing stories from Iranian (and other) dissidents in versions that the newspapersÂ typeset instead ofÂ the typewrittenÂ copy sent by the dissidents, OFAC ultimately in 2004 amended the rules to add a general license permitting certain editing, translation, formatting and typesetting activities by publishers. Each of these rules, however, provided that these activities could not be performed on behalf of sanctioned governments or their officials.

The new guidance states what should have been more or less obvious: that the prohibition did not cover written materials authored by government officials in their personal capacity. But OFAC appears not to have been able to resist the opportunity to take back more than it gave, noting that it was up to the publisher to decide in what capacity the government official was writing and, worse, that it would not provide any guidance by issuing specific licenses in difficult cases.

Indeed, it is the policy of OFAC not to grant applications for specific licenses
authorizing transactions to which the provisions of an outstanding general license are applicable.

And even though OFAC says that it won’t offer help on determining the government official’s capacity, it does not provide any safe harbor for a publisher that makes a good faith mistake. Nope. Any such mistake would lead to significant civil penalties, currently maxed out at $284,582 per violation.

Oh, you reply, why not just apply for licenses anyway in questionable cases? You can provide all the information relating to the capacity in which the government official is writing; and then, when OFAC returns or denies the application, you will have your answer. That assumes, of course, that OFAC will return such an application rather than just file it away in an archive for the next century or so.

Is anyone else offended by an agency saying, as it seems to have done here, that you must abide by our rules but we refuse to provide any guidance on the proper interpretation of our rules?

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Oct

27

The Kremlin’s Janitor: New Sanctions on Russia Pose Dilemma for U.S.

Posted by Clif Burns at 10:35 pm on October 27, 2016

Category: BIS • OFAC • Russia Sanctions

Kremlin.ru [CC-BY-3.0 (http://creativecommons.org/licenses/by/3.0)], via Wikimedia Commonshttp://commons.wikimedia.org/wiki/File%3AVladimir_Putin_at_the_Millennium_Summit_6-8_September_2000-19.jpg As the U.S. considers more sanctions on Russia, given its cybershenanigans and its involvement in Syria on behalf of Bashar al-Assad, it is running into some unexpected difficulties. The quote of the week, from this article, explains part of the issue:

“While the president has full sanction authority, there’s nobody left to sanction in Russia besides the janitor in the Kremlin,” said Michael Kofman, a global fellow at the Wilson Center’s Kennan Institute in Washington. “In terms of expanding any kind of commercial or financial sanctions, we’re basically maxed out.”

While that is probably an exaggeration, it is not far from the truth. What that means is that individually targeted sanctions are becoming less effective, forcing a consideration of sector-based sanctions, which lead to their own problems in terms of collateral consequences. For example, the sanctions on Rosboronexport had to be revised because it prevented Afghanistan from getting parts for the Mi-17 helicopters that it uses.

Other possible sanctions would impact our allies as well as Putin and his cronies.Â Options such as preventing U.S. bank from buying ruble-based bonds, cutting off Russia from the SWIFT transfer system, or an embargo on energy exports, would each hurt Europe as much as Russia. Europe gets almost of one-third of energy from Russia.

This illustrates the problem of economic sanctions in a global economy. It’s one thing to whack an economically isolated country. You could cut Granada off from the world economy and the biggest impact would be that your holiday eggnog would have to go nutmeg-less. But for developed or developing economies that are largely integrated into the world economy, economic sanctions will have undesired and unintended effects.

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Oct

24

Just What Part of “Executory” Don’t You Understand?

Posted by Clif Burns at 3:22 pm on October 24, 2016

Category: Cuba Sanctions • OFAC

Image via https://pixabay.com/p-1202440/?no_redirect [Public Domain] A lawyer at another DC firm is having a conniption fit over the part of the new Cuba regulations that authorizes U.S. persons to enter into executory contracts in Cuba that are contingent upon OFAC approval. He apparently thinks that this goes to the “core” of the embargo and that OFAC is overstepping its authority as circumscribed by section 102 of the Helms-Burton Act and, although he does not cite it, section 204 of that same act.

We’ve all been through this before: section 204 applies only if the President seeks to “end” the embargo. As long as imports of chia pets and thermal underwear from Cuba are prohibited, the embargo has not been ended, which leaves OFAC and the White House pretty much free to do what they want in this regard.

Section 102, which is the provision relied on here by the lawyerÂ in question, codifies the Cuban Assets Control Regulations in effect as of the date of the law’s enactment. But those regulations, in section 515.201, specifically provide that everything prohibited by the regulations may be “authorized by the Secretary of the Treasury (or any person, agency, or instrumentality designated by him) by means of regulations, rulings, instructions, licenses, or otherwise.” So, once again, OFAC can pretty much promulgate general licenses and regulations to its heart’s content. Whether it was Mr. Helms or Mr. Burton who left open this truck-height loophole doesn’t really matter.

Leaving aside the broader issue of authority, the blog post criticizing OFAC’s new rules on executory contracts somehow thinks that this rule goes to the “core” of the embargo — but why that is the case is far from clear. The author thinks that the problem arises because the executory contract is somehow or other a “dealing” in the property of a Cuban national. Now granted, OFAC has previously interpreted dealing in such a broad fashion that someone who just thinks about buying a vacation casa in Cuba has probably violated the rules. But, in an actual universe where people speak a language where words have a circumscribed meaning, it seems clear that a contract that says it isn’t dealing in property until OFAC says its okay to deal in that property, isn’t “dealing” in that property. Thus, OFAC can issue this regulation on executory contracts without violating statutory prohibitions Â because an executory contract can legitimately be seen as not dealing in the property in question, because this regulation has not ended the embargo and because it remains consistent with the authority that Congress gave OFAC in section 102 of the Helms-Burton Act to authorize whatever it wants by regulations and licenses.

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