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Archive for the ‘OFAC’ Category

Oct

12

Happy Sudan Day!

Posted by Clif Burns at 7:44 pm on October 12, 2017

Meroe (49) by joepyrek [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://https://flic.kr/p/dD4ue9 [cropped] Today, October 12, is the day on which Executive Order 13067, which repealed earlier executive orders imposing sanctions on Sudan, becomes effective. We got here by a somewhat circuitous route. Executive Order 13067, issued in the last days of the Obama administration, delayed its effective date until July 12, 2017, although OFAC issued a general license at the time the order was issued doing everything the order would do when it became more or less permanently effective on July 12, 2017. The Trump Administration extended that effective date until October 12, 2017. Since no further ordersÂ have been issued, the lifting of sanctions contemplated by the Obama executive order is now in effect, although practically nothing much has changed given that the general license issued with the Obama order, and found in section 538.540 of the Sudanese Sanctions Regulations (“SSR”), did everything the executive order itselfÂ does now that it has officially gone into effect.

Of course, when the Office of Foreign Assets Control is involved, there is always some confusion. In the FAQs issued on the revocation of the Sudan Sanctions, OFAC makes this odd statement: “OFAC expects to remove the SSR from the C.F.R.” When that will happen and why on earth it didn’t happen today is not addressed. So, technically, the rules prohibiting Sudan transactions remain on the books although fortunately so does the general license in section 538.540. Perhaps the new folks at OFAC don’t know the difference between the printed edition of the C.F.R., where removal has to wait to the next edition, and the electronic edition, where the SSR can be removed virtually immediately.

The lifting of the sanctions on Sudan, as a practical matter, means that all imports from Sudan are permitted and most EAR99 items can be exported to Sudan. Since Sudan remains a state sponsor of terrorism, section 7205 to the Trade Sanctions Reform and Export Enhancement Act of 2000 requires a license for all exports of agricultural commodities, medicine and medical devices to Sudan. These are covered by the general license in 538.540 and the new General License A, both of which permit exports of these items pursuant to a written agreement during the one-year period from the signing of the agreement. The lifting of the sanctions has no effect on the export restrictions in the Export Administration Regulations which require licenses for exports of Sudan for most items with an ECCN other than EAR99 or items listed in Supplement 2 to Part 742 (which includes some EAR99 items). And the arms embargo on Sudan in section 126.1 of the ITAR continues to remain in effect.

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Oct

5

OFAC Fines U.S. Paper Company for “Discussing” Exports to Sudan

Posted by Clif Burns at 9:34 pm on October 5, 2017

Category: OFAC • Sudan

White Birch Paper Mill via https://whitebirchpaper.com/about-us/our-mills/papier-masson/ [Fair Use] Today the Office of Foreign Assets Control (“OFAC”) announced that it was fining White Birch Paper $372,465 to settle charges arising from exports of $354,602.26 of Canadian-origin paper from a White Birch mill in Canada to a customer in Sudan. Ah, yes, the doctrine of facilitation strikes again, although OFAC has some difficulty explaining that clearly:

Various personnel within White Birch USA and its Canadian subsidiary, White Birch Paper Canada Company NSULC (â€œWhite Birch Canadaâ€), were actively involved in discussing, arranging, and executing the export transactions to Sudan.

This makes it appear that the violation arises equally from employees of White Birch Canada being involved in the exports, which, of course, was neither illegal nor facilitation.

The violation arises, of course, from the U.S. employees, rather than the Canadian employees being involved in the exports, certainly to the extent thatÂ the U.S. employees “arranged and executed” the exports.Â However, if “discussing” the exports is facilitation, as this also seems to state, OFAC would be expanding the scope of the facilitation doctrine far beyond any prior conception of the scope of that doctrine. That would mean that if a U.S. employee said to the Canadian subsidiary “We can’t be involved in the exports to Sudan,” then that discussion would violate OFAC’s rules. Even if the employee were to stick his/her fingers in his ears and chant “la la la la la” every time a Canadian employee mentioned Sudan, that might still be a discussion as well sinceÂ “la la la la la” means, of course, “I can’t be involved in these exports.”

Of course, it is more likely that this is just sloppy draftsmanship by OFAC — something we’ve seen before — than it is an effort to expand the scope of the facilitation doctrine to any discussion of the transaction whatsoever. Still, OFAC could have avoided this issue if it simply noted that the U.S. employees were actively involved in “arranging and executing” the exports, both of which can clearly constitute facilitation.

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Oct

3

The Jeweller of Kingpins

Posted by Clif Burns at 11:41 pm on October 3, 2017

Category: OFAC • SDN List

Cartier Store Cannes via https://www.facebook.com/cartier.france/photos/a.1022361011213879.1073741852.462403637209622/1022361121213868/?type=1&theater [Fair Use] French retailer Cartier agreed to pay the Office of Foreign Assets Control $334,800 to settle allegations that it made four sales of jewelry in a United States store to a an individual designated under the Foreign Narcotics Kingpin Sanctions Regulations. In announcing the settlement, OFAC did not reveal the value of the jewelry sold by Cartier to Shuen Wai Holding Limited but did note that the ship-to address for Shuen Wai was the same as theÂ address shown on the SDN List.

This is the first penalty that I am aware of levied against a retail operation in the United States. This, no doubt, will send shock waves through the retail community. Technically speaking, if an SDN walks into McDonald’s and orders a Happy Meal, McDonald’s would be in violation of OFAC’s rules if it sold the Happy Meal to the SDN and it did not keep any money for the Happy Meal that the SDN had handed to the cashier. Does this mean that McDonald’s can’t sell you a Happy Meal or a Big Mac now without checking your ID and running it against the SDN List?

For the moment at least, the answer is you won’t have to make sure you have your driver’s license with you before you purchase a Big Mac. The OFAC announcement pointed out several things that lead to its decisionÂ to seek a fine fromÂ Cartier. First, it noted, that this was an international transaction. So unless you’re planning on asking them to send the Big Mac to some foreign country for you, there’s one difference. OFAC also noted that the luxury jewelry business was an “industry at high risk for money laundering.” This is a little puzzling since OFAC is not in the business of enforcing money laundering laws and regulations but, be that as it may, Big Mac’s are probably not a good vehicle for money laundering. (Viewers of Breaking Bad will remember, car washes are good for that.)Â Â Another important fact, not mentioned by OFAC, is that this was a third-party transaction.Â Â Unlike a party using its own U.S.-issued credit card, where the bank would presumably have screened the customer, no one would have screened the recipient of the Cartier merchandise in this instance.

In any event, OFAC reaffirmed that compliance programs should be “risk-based” and should take into account the company’s “products and services, frequency and volume of international transactions and shipments, client base, and size and geographic location(s).”Â It is a bit difficult to determine what that means in a practical matter for retail stores beyond meaning that restaurants, grocery stores, and dog grooming parlors do not need to screen all their customers against the SDN List.Â But it is probably the case that other retail businesses, particularly where the transaction involves international shipments of merchandise paid for by third parties, should consider screening those customers receiving merchandise.

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Sep

13

Beware the Smiley Face!

Posted by Clif Burns at 6:06 pm on September 13, 2017

Category: Criminal Penalties • Iran Sanctions • OFAC

Camellia George via http://blog.venmo.com/2015/10/20/introducing-camellia-george-kah-meel-ya-head-of-product-development-1 [Fair Use]

ABOVE: Parisa Mohamadi

A recently unsealed criminal complaint alleges that Parisa Mohamadi, an Iranian-born U.S. citizen, was responsible for exports of approximately $3 million of goods from the United States to Iran between 2010 and 2012. The fact pattern alleged in the indictment is a familiar one: the items, requested by Iranian buyers, were purchased by Mohamadi in the United States and shipped to a free zone company she incorporated in Dubai and then were transshipped to Iran from there.

Of course, there is no criminal violation without criminal intent. And in these transshipment fact patterns, where the shipment from the U.S. to Dubai would not require a license (if considered alone) and the shipment from Dubai to Iran was also one that was legal under UAE law, it is conceivable (indeed fairly likely) that the exporter may think that this shipment route is legal. (Remember we live in a country where 7 percent of the population believes that chocolate milk comes from brown cows.)

The criminal complaint understands this issue and tries to forward proof of Ms. Mohamadi’s criminal intent. Â Truth be told, the government’s proof of criminal intent by Ms. Mohamadi can only be described as, well, completely whack-a-doodle.

The first “proof” cited by the complaint is this statement made by Mohamadi in an email:

I KNOW WHICH COUNTRIES ARE EMBARGO AND SANCTION AND WHICH COUNTRY WILL BE EMBARGO AND SANCTION, I AM AS SHIP OWNER, SO I KNOW HOW IS SHIPPING WORKS TO FIXED THE SHIPMENTS IN ADVANCE THUS DO NOT WORRY FOR THIS DELIVERY SCHEDULE, I NEVER SHOOT MY SELF.

The complaint adds a snarky footnote pointing out that the spelling mistakes and grammatical errors are those of Ms. Mohamadi alone and not an indication of any illiteracy on the part of the investigating DHS agent who signed the affidavit. This snark might have been justified but for the agent’s reference elsewhere in the complaint to an “I-Phone” (for iPhone) and multiple references to “U.S. Principal Party of Interest” (instead of “U.S. Principal Party in Interest”). Of course, nothing in this difficult-to-parse statement is inconsistent with a belief that the shipment was legal if it went through Dubai first. Â As Ms. Mohamadi tried to make clear, she never shoots herself.

But the agent saved the best “proof” for last (with my bold and italics added):

Similarly, on November 1, 2011, Individual D from Iranian Business A emailed MOHAMADI: “How are you. I am at the sanction solution and money transfer conference in the university. So far I we doing it like no one does, very happy to be here, of course I am the youngestÂ here, and and we do it like no one. That’s what separate us from the others.” MOHAMADI responded: “Good to hear that we are the best but off course in knew that already.” This was followed by three smiley faces.

The best I can tell the agent believes that the smiley faces are proof of criminal intent because nothing else in Mohamadi’s quoted statement about “being the best” even comes close. You might recall that FBI agents get specific training in smiley faces and their meaning, so I suppose DHS agents get that training as well.

And that’s it. That’s what the criminal complaint cites to prove that the defendant knew that shipping items from the U.S through a foreign company in Dubai to Iran was illegal: Â three smiley faces and a desire not to shoot herself. Â Maybe that’s why Ms. Mohamadi doesn’t have much of a smiley face in her mug shot.

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Sep

11

Florida Imposes Its Own Embargo on Cuba

Posted by Clif Burns at 5:34 pm on September 11, 2017

Category: BIS • Cuba Sanctions • OFAC

Rick Scott Head Shot by Rick Scott [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/7Td7dc 2007 [cropped] Last week, before other things got in the way, Florida governor Rick Scott looked in the mirror and suddenly realized that he had been elected by the American voters to run the foreign policy of the United States. So, without further delay, Scott announced that Florida would cut off all state funding for any port that permitted traffic to Cuba. As a result, the ports in Everglades and Palm Beach cancelled memoranda of understanding that they were planning to sign with Cuban officials visiting the state.

Now, of course, we all understand that Governor Scott’s 8th grade civics class may not have covered some of the finer points of the U.S. Constitution, and we also understand that Cuba-bashing is a favorite sport for Florida politicians, but even a quick review of the Supreme’s Court’s decision in Crosby v. National Foreign Trade Council reveals the problems with the governor’s actions here. In Crosby, Massachusetts prohibited state agencies from buying goods from companies that did business with Burma. The Supreme Court held that the law was preempted by the Supremacy Clause of the United States Constitution. In doing so, the Court noted that the Massachusetts law interfered with the ability of the federal government to conduct foreign policy with respect to Burma. Central to that holding was the court’s finding that the Massachusetts law penalized companies for engaging in trade with Burma that was expressly permitted by the federal sanctions against Burma

Here, Governor Scott’s threat extends to all trade with Cuba, even if that trade isÂ permitted by a specific or general license. So, to take a timely example, it is legal, under section 515.591 of the Cuban Assets Control Regulations and License Exception SCP of the Export Administration Regulations to export goods and services to Cuba to assist with rebuilding infrastructure damaged by Hurricane Irma. Yet, under the threatened action, if that relief is shipped through a Florida port, that port will be penalized by Florida. This does seem, shall we say, pretty ungrateful under the circumstances: Irma’s strength, and impact on Florida, was lessened by the time she spent wreaking havoc on the northern coast of Cuba. Florida ought to think of that before blocking aid to Cuba in rebuilding destroyed infrastructure.

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Archive for the ‘OFAC’ Category

Happy Sudan Day!

OFAC Fines U.S. Paper Company for “Discussing” Exports to Sudan

The Jeweller of Kingpins

Beware the Smiley Face!

Florida Imposes Its Own Embargo on Cuba

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