ExportLawBlog

Archive for the ‘OFAC’ Category

Aug

4

Lawsuit Challenges OFAC’s Efforts to Limit Right to Counsel

Posted by Clif Burns at 8:50 pm on August 4, 2010

An Attorney Pleads His Case Just last week, I reported on guidelines newly issued by the Office of Foreign Assets Control (“OFAC”) relating to the use of blocked assets to pay attorneys fees to challenge orders blocking those assets. And I was more than a little critical of the absurd limits that OFAC put on attorneys fees that could be paid from blocked assets as well as OFACs express justification of the policy on the grounds that lawyers make it harder for OFAC to do what it wants to do. Specifically, OFAC said — if you can believe it — this:

This policy is not intended to ensure complete compensation to counsel. Limitations on the amount of funds released to a Blocked Party are necessary to preserve the Presidentâ€™s authority and leverage in the conduct of foreign policy

And I predicted that this statement might come back to haunt OFAC if any lawyers were ever able to challenge the policy notwithstanding OFAC’s efforts to make that as difficult as possible.

Well, it would seem that this day may have come. An article in the New York Times reports that lawyers who are attempting to file a lawsuit on behalf of Anwar al-Awlaki have filed suit to challenge an OFAC requirement that the lawyers obtain an OFAC license prior to filing the lawsuit on behalf of Mr. al-Awlaki even if the lawyers are acting pro bono, i.e., without compensation. Anwar al-Awlaki was added to OFAC’s SDN list on July 10, making him one of the few Americans on that list. Among other things, al-Awlaki is alleged to have been the mastermind behind the failed Christmas Day bombing attack on a commercial jetliner headed for Detroit.

Under existing regulations, found in 31 C.F.R. Â§ 594.506, some legal services can be provided to specially designated global terrorists without a license. But none of the services authorized under section 594.506 are involved in al-Awlaki’s case. The lawyers are seeking to file suit on his behalf to challenge an alleged administration order making al-Awlaki subject to extrajudicial execution.. And although the regulations permit lawyers to initiate legal proceedings “in defense of property interests subject to U.S. jurisdiction,” there is no provision permitting lawsuits to defend al-Awlaki from extrajudicial execution or loss of non-property rights.

The lawyers had requested a license from OFAC, which had not been granted, so the lawyers filed suit challenging the license requirement itself. The money quote from the complaint is this:

The same government that is seeking to kill Anwar al-Awlaki has prohibited attorneys from contesting the legality of the governmentâ€™s decision to use lethal force against him

I am inclined to believe that al-Awlaki is probably a dangerous terrorist, a loathsome individual, and a threat to humankind. Still, everyone, no matter how loathsome, deserves legal counsel. It’s one of the bedrock principles that differentiates us from our enemies; and if we abandon those principles in any instance, then we are on the path to becoming no better than those against whom we fight.

Having finished my inspirational Atticus Finch speech in the previous paragraph, I should note that what’s involved in the al-Awlaki matter is somewhat different from the issues raised by the OFAC guidelines on using blocked funds to pay for legal representation. Here the lawyers, who are provided by the ACLU and the Center for Constitutional Rights, are not seeking any compensation, much less compensation from any of al-Awlaki’s blocked funds (assuming that any even exist). A judicial determination that OFAC cannot block right to counsel in this situation will not necessarily mean that there are constitutional or other legal problems with the agency setting limits on hourly fees — even the paltry fees permitted under the current blocked asset guidelines. Still, OFAC’s unabashed admission in the blocked fund guidelines that lawyers diminish the President’s “leverage” in the conduct of foreign affairs is not likely to help the governments case in defending any power by OFAC to deny American citizens the right to counsel.

OFAC has, it seems, two options here. It could issue the licenses to moot the ACLU challenge to the OFAC rules at issue and allow the Anwar al-Awlaki suit to proceed. Or it could double down and argue that the suit challenging OFAC’s rules is, in effect, a suit on behalf of al-Awlaki in violation of OFAC’s rules and start a penalty proceeding against the lawyer-plaintiffs. Speculation on what OFAC might do here is welcome in the comments section.

UPDATE: Doug Jacobson notes in the comments section that CCR and ACLU issued a press release tonight indicating that they had received a license from OFAC but would continue to press their suit that the license requirement is unconstitutional.

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Jul

27

OFAC’s War on Right to Counsel Continues

Posted by Clif Burns at 9:39 pm on July 27, 2010

Category: OFAC

Tipping the Scales The Department of Treasury’s Office of Foreign Assets Control (“OFAC”) last week revised its rules on the use of blocked funds to pay attorneys’ fees to challenge OFAC’s blocking order. Perhaps the single most odious practice OFAC is its use of these rules to interfere with the right of blocked parties to obtain counsel. It’s obviously much easier to deprive people of property if you simultaneously impose limits on their ability to hire counsel to protest that deprivation. And although the revised rules do make it somewhat easier to use blocked funds to pay attorneys’ fees, they do not go far enough to end this shameful agency practice.

If a person has his or her assets blocked by OFAC, that person has no money to pay attorneys to challenge the blocking order unless some of the assets are unblocked. OFAC rules permit funds to be blocked but only in the case of U.S. citizens. And even then, the amounts that can be unblocked under the rules are unreasonably low and clearly designed to hinder the right of the victim of the agency action to hire competent counsel.

The rules limit payments to attorneys to a maximum of $125 per hour up to a limit of $14,000 for administrative proceedings, $14,000 for district court litigation, and $10,000 for appellate court litigation. OFAC is straightforward in admitting that these amounts are not intended to compensate counsel fairly and are intended simply to make it difficult for blocked parties to obtain counsel and challenge agency action:

This policy is not intended to ensure complete compensation to counsel. Limitations on the amount of funds released to a Blocked Party are necessary to preserve the President’s authority and leverage in the conduct of foreign policy.

Seriously. OFAC actually said that. If someone can ever find counsel willing to challenge these limits, this statement will certainly come back to haunt the agency.

The newly revised rules liberalize these limits in cases involving U.S. citizens whose assets have only been provisionally blocked by OFAC. In such cases, the total monetary caps will be lifted even though the $125 per hour limit on fees will remain in place. Upon imposition of a final order by OFAC blocking the assets in question, the monetary caps will apply again.

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Jul

18

OFAC Nails UN Bank For Dealing With Cuban Diplomats to the UN

Posted by Clif Burns at 11:13 am on July 18, 2010

Category: Cuba Sanctions • OFAC

UN HQ The latest monthly release of civil penalty information by the Office of Foreign Assets Control (“OFAC”) describes a penalty “settlement’ with the United Nations Federal Credit Union, which agreed to pay $500,000 to settle charges that the UNFCU “dealt in property in which Cuba or a Cuban national had an interest’ — as they quaintly say it in OFAC-speak. In ordinary English this means that UNFCU engaged in banking transactions with Cubans, likely with Cuban diplomats to the United Nations.

Of course, we have to say the transactions were likely with Cuban diplomats because, given OFAC’s longstanding aversion to providing anything but the most minimal details about its penalty settlements, the notice leaves out such crucial details as whether the Cubans involved were diplomats, non-diplomatic Cuban officials, ordinary Cubans, or herds of Cuban cattle. Nor were the types of transactions involved mentioned or their amounts.

In this case, the absence of details makes OFAC look foolish by suggesting the possibility that OFAC is penalizing the UNFCU for providing banking services to Cuban diplomats posted to the U.N. Apparently, such diplomats need to travel with suitcases of Cuban pesos and pay for their meals in the U.N. cafeteria with their national currency.

If that’s what OFAC is doing, it would be in direct contravention of the U.N. Headquarters Agreement, particularly given that the UNFCU is located in the U.N. Headquarters area. Article V, Section 15(4) of that agreement provides that even with respect to diplomats from countries not recognized by the United States, such as Cuba, the U.S. must accord them the same privileges and immunities as other diplomats while within the headquarters district. If a diplomat from France can bank at the UNFCU located in the U.N. Headquarters district, so can Cuban diplomats, no matter how much OFAC hates Castro and his diplomatic lackeys.

The UNFCU website has this statement (click on “Account Restrictions”) about its ability to deal with Cuban diplomats:

Please be aware that UNFCU, under authorization from the US Treasury Department, is only permitted to operate accounts for actively employed UN staff stationed in Cuba, Iran, Burma, and for Cuban citizens who are stationed in the United States.

Based on this, perhaps what was going on — and again OFAC forces us to speculate — was that the UNFCU was providing banking services to Cubans at U.N. locations outside the United States. The UNFCU website’s branch listing shows that the UNFCU has branches in Geneva, Vienna, Rome and Nairobi. Of course, the UNFCU’s extra-territorial application of U.S. sanctions could create a new problem for itself because these sanctions could well violate local laws that prohibit discrimination based on national origin.

Additionally, and more significantly, the UN could always solve the problem by only providing office space to financial institutions that do not, like UNFCU, discriminate against UN members based on national origin.

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Jun

22

Get Your Flying Carpets and Beluga Caviar Before It’s Too Late

Posted by Clif Burns at 3:40 pm on June 22, 2010

Category: Iran Sanctions • OFAC

Flying Carpet House and Senate conferees announced yesterday that they had reached agreement on the Iran sanctions legislation passed earlier this year by the House and Senate. The conferees also released the text of the newly agreed bill, now titled the Comprehensive Iran Sanctions, Accountability and Divestment Act of 2010.

The act’s most significant feature is its extraterritorial scope: it imposes sanctions on foreign persons and companies outside the United States that engage in transactions in Iran that violate the act. Such secondary boycotts have prompted objections from our allies in the past with respect to the Iran Sanctions Act of 1996, 50 U.S.C. Â§ 1701 note, which the new act, if signed into law, would amend. And these same allies are likely to object once again to the enhanced extraterritorial effect of the new provisions.

The extraterritorial sanctions relate to foreign entities that (a) invest in Iran’s petroleum sector, (b) provide refining technology to Iran or (c) export refined petroleum to Iran. Since these activities by U.S. persons are already prohibited by current sanctions, the focus of this legislation is clearly on persons and companies outside the United States.

Threshold amounts of investments and exports are specified in the new act before sanctions are imposed. For example, for exports of refining products or refined petroleum, the threshold is a value of $1 million for one export or more than $5 million for all exports in a 12-month period. The thresholds for investment in Iran’s petroleum sector would be halved from the current limit of $10,00,000 per transaction and $40,000,000 over a 12-month period to $5,000,000 and $20,000,000 respectively. If those thresholds are exceeded, then mandatory sanctions would have to be imposed.

The number of mandatory sanctions that must be imposed would be increased from two to three and the list from which those three mandatory sanctions must be chosen would be increased from six to nine. The three new mandatory sanctions are denial of access to U.S. foreign exchange markets, denial of access to U.S. financial institutions and, even more significantly, an order prohibiting the import or export of any items from or to the United States by the sanctions party. Under the 1996 Act, the equivalent sanctions only included a possible ban on exports from the United States of military, dual-use and nuclear items.

The new act would forbid all imports from Iran except for informational materials (books, DVDs, etc.) and “accompanied baggage for personal use.” Gifts under $100, carpets, and foodstuffs, all permitted by current regulations, would no longer be able to be imported into the United States if this act becomes law.

Less change would be effected by the new act if signed into law with respect to exports to Iran. Exports of agricultural products, medicine and medical, as permitted under the Trade Sanctions Reform and Export Enhancement Act of 2000, would continue to be permitted, as would exports of informational materials, humanitarian assistance and parts and technologies necessary to assure the safety of civilian aviation. The law does codify, at least with respect to Iran, recent exceptions that the Treasury Department’s Office of Foreign Assets Control (“OFAC”) made to the export ban for goods and services incident to the exchange of personal communications over the Internet or for access to the Internet.

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Jun

19

Malware Spam Uses OFAC as Bait

Posted by Clif Burns at 12:02 pm on June 19, 2010

Category: OFAC

OFAC Spam Commercial computer security firm Sophos reports the recent appearance of spam emails that attempt to get the recipient to click on an Excel file attachment described as a “report of the declined deposit by OFAC.” If the attachment is opened, it delivers as its payload a variant of the Koobface malware which, once it installs itself on the victim’s computer, attempts to harvest financial and other confidential data and allows the computer to be controlled remotely as part of a botnet. The sender’s address is often spoofed and appears to be coming from the Treasury Department.

Most readers of this blog, however, would probably have had their suspicions alerted by the description of the attachment as a “report of the declined deposit by OFAC.” OFAC, of course, doesn’t decline deposits. Banks and financial institutions do. OFAC’s only role is to penalize banks that fail to decline or block deposits when required to do so by OFAC’s rules.

So now you can add malware protection to the list of the many invaluable services provided by this blog to its readers!

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