ExportLawBlog

Archive for the ‘OFAC’ Category

Jun

6

U.S. Company Announces Retrieval Service for Cuban Documents

Posted by Clif Burns at 10:01 pm on June 6, 2011

Cuban Certificates Just how far does the information exception to our economic sanctions programs go? Of course, the traditional response from the Office of Foreign Asset Controls (“OFAC”), the agency that administers the U.S. economic sanctions regimes, is usually “Not very far.” The issue, here, is whether a particular activity is an export of information or an export of services (or some combination of the two.) Sometimes OFAC has tried to draw the distinction by saying that the exception does not apply to information not already in existence, although it makes a somewhat unaccountable (although welcome) exception for magazine subscriptions.

So where does this new Cuban document retrieval service fall? The service advertises that it uses “proprietary” means to retrieve Cuban birth certificates and other official certificates for people in the United States. Retrieving these documents from Cuban archives seems to pose few problems. But the service doesn’t stop there:

All documents retrieved from Cuba for any official use (Cuban passport, driver’s license and marriage applications etc) need to be “legalized” in Cuba in order to be recognized as an official document.

The certificates we provide are legalized with stamps and seals from the Ministerio de Relaciones Exteriores also known as MINREX.

Adding the legalization stamps, seals and other government doohickeys may be what steps over the line, because the retrieval company is not just exporting information already in existence but is taking existing information and providing services to alter it.

Section 515.545 of the Cuban Assets Control Regulations also seems to suggest that the legalization process may be one step too far:

This section does not authorize the remittance of royalties or other payments relating to works not yet in being, or for marketing and business consulting services, or artistic or other substantive
alteration or enhancements to informational materials

The company has said that this plan has been blessed by its lawyers and that they are not obtaining licenses for these transactions. I suppose that in the end the issue is whether the legalization of the document is or is not a “substantive alteration or enhancements.” I would be disinclined to opine to a client on that matter without at least some informal discussions with OFAC. So, I’m assuming that someone in OFAC likely provided at leat an informal reaction to the retrieval plan.

[Posting has been light lately due to demands at work This week my normal posting schedule ought to resume.]

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Mar

14

The Meaning Of “Of”

Posted by Clif Burns at 5:25 pm on March 14, 2011

Category: OFAC • Sanctions

Chinhoyi Satellite View According to an article in The Herald, the state-controlled newspaper of Zimbabwe, the Office of Foreign Assets Control (“OFAC”) refused to unblock $30,000 that a U.K. couple wired to purchase land in Chinhoyi Municipality, Zimbabwe, and that was blocked by HSBC. The funds were blocked by HSBC because they were wired to an account that the municipality maintained at the ZB Bank, a bank which has been designated by OFAC under the Zimbabwe sanctions program.

A letter from an OFAC official explained the agency’s decision not to unblock the funds by saying that U.S. financial institutions are required to “block all wire transfers in which a sanctions target has an interest and that come within the institution’s possession or control, even if the institution is an intermediary and an underlying transaction does not otherwise involve a person subject to US jurisdiction.” Section 541.201 of the Zimbabwe sanctions does require the blocking of “property or interests in property of” designated entities that come within the control of U.S. financial institutions or their overseas branches. And section 541.308 of the Zimbabwe sanctions regulations defines property broadly enough to include wire transfers of funds.

But that hardly ends the inquiry. The wire transfer can only be blocked if it is the “property or [an interest] in property of” the intermediary financial institution, in this case, ZB Bank, Ltd. Nothing in OFAC’s regulations anywhere defines “property of.” And it stretches any conceivable meaning of that term to say that the funds being wired were the property of the bank rather than the property of the U.K. couple and/or Chinhoyi municipality. If that’s not clear on its face, consider this: if I had a judgment against ZB Bank (leaving aside the blocking issue), could I get a court anywhere in the world to allow me to levy on the wire transfer in this case? Of course not.

OFAC might be free to promulgate a regulation blocking funds that are about to come into the possession or control of a blocked person or entity, which it hasn’t done here or anywhere else. But the agency is not free to say that words such as “property of” mean something that those words simply don’t mean or to say that bank accounts are “property of” the bank. And once OFAC engages in such behavior, is the agency any better than the tin-pot dictator that the U.S. seeks to sanction?

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Feb

15

OFAC Fines Bank for Facilitating Foreign Transaction with Iran

Posted by Clif Burns at 9:24 pm on February 15, 2011

Category: Iran Sanctions • OFAC

Trans Pacific National Bank recently agreed pay $12,500 penalty to the Office of Foreign Assets Control (“OFAC”) to settle charges that it had facilitated transactions by a foreign person where the transactions by the foreign person would be prohibited if performed by a United States person. The facilitation consisted of initiating two wires for one of its account holder relating to a transaction between a foreign person and Iran. The foreign transaction itself did not violate U.S. law.

The recipient of the wire was not located in Iran. In fact, the only reference to Iran with respect to the wires were entries in the instructions that in one case referenced “Iran materials” and in the other referenced “Iranian materials.” The lesson to be learned here is that all parts of a wire must be screened for any reference, no matter how oblique, to a sanctioned country. In citing mitigating factors, OFAC noted that the bank had enhanced its screening procedures to require that the “memorandum information of each wire transfer also be reviewed for OFAC sanctions references.”

(I missed this latest round of OFAC civil penalties information on February 1 because OFAC has inexplicably stopped announcing the monthly release of civil penalty information on the “Recent Actions” page of its website. Concomitantly, OFAC appears to have stopped sending email announcements of the release of this information, or at least I didn’t get that email this month.)

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Jan

20

OFAC Adds Dead Man To SDN List

Posted by Clif Burns at 8:14 pm on January 20, 2011

Category: OFAC

ABOVE: Qari Hussain

Today the Office of Foreign Assets Control (“OFAC”) added Qari Hussain (a.k.a. Qari Hussain Mehsud) to its list of Specially Designated Nationals and Blocked Persons. U.S. individuals and companies are prohibited from engaging in any transactions with any person or entity on the SDN list.

Qari Hussain, according to this report, is blamed for organizing the December 2009 suicide attack on the U.S. operating center in Khost, Afghanistan, which killed seven U.S. employees of the CIA. He also recruited Faisal Shahzad, the wannabe Times Square bomber whose bomb fizzled in May 2010 and who is now serving a life sentence without possibility of parole.

It appears, however, that Hussain died on October 4, 2010, when he was blown up by a U.S. drone operating in North Waziristan. Although Hussain has been reported previously to have died in attacks that he in fact survived, this does not appear to be the case here. After his reported death in 2009, he called reporters to prove that he was alive. No such call has been made since the October 4 attack. Additionally, a “senior counter-terrorism official” as well as a high-level leader of the Tehrik-e-Taliban Pakistan, with which Hussain was associated and which initially denied reports of his death, confirmed to Asia Times Online that Hussain had died in the attack.

Although better late than never is not a particularly good rationale for putting someone on the SDN list, perhaps this is, to give OFAC the benefit of the doubt, a case of better safe than sorry given Hussain’s previous history of near-death experiences.

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Jan

4

OFAC Uses Blog to Respond to NYT Critique

Posted by Clif Burns at 8:43 pm on January 4, 2011

Category: OFAC

Cupcake of Mass Destruction The Treasury Department has a blog. Who knew? Well, if you look at it, you’ll understand the reason why no one knew. One reason might be today’s post reporting the exciting news that the tax filing season has just started. Or the recent post titled “Holiday Cheer in Kabul.” No, seriously. That’s the actual title. Apparently, Treasury doesn’t know that Afghanistan is a Muslim country and that Christmas isn’t celebrated there.

But the real reason for my bringing the Treasury blog, scintillatingly titled “Treasury Notes,” to your attention is that the newly-minted blog was used by Treasury’s Office of Foreign Assets Control (“OFAC”) to respond to the preposterous article recently published in the New York Times assailing OFAC for licensing exports of cake sprinkles and popcorn to Iran. The blog post from OFAC stated, quite correctly, that OFAC has no discretion under TSRA to refuse to license agricultural products, medicine and medical devices to Iran on the grounds that they aren’t humanitarian relief items.

Apparently, this post was also sent to the New York Times as a letter to the editor. Shockingly, the newspaper hasn’t gotten around to publishing it.

Of course, blog entries from OFAC would be particularly welcome if they were used to provide guidance to exporters in difficult and confusing areas. I scanned the few articles that have been posted so far and, sadly, did not see anything of that nature. If OFAC is only going to use the blog to respond to criticisms of the agency, well, I’m not going to bookmark it and neither should you. But the blog is in its relative infancy, so I will withhold judgment. And if I do discover any helpful posts from OFAC on it, you’ll hear about it here first.

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