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Archive for the ‘Sanctions’ Category

May

12

Re:Â Burma (or is it Myanmar?):Â Why We Are All Lost in Translation

Posted by George Murphy at 10:33 am on May 12, 2013

Baganmyo http://commons.wikimedia.org/wiki/File:Baganmyo.jpg [Public Domain] The White House last week issued a notice continuing the national emergency with respect to Burma. The notice itself is an annual rite of passage for all U.S. sanctions programs under IEEPA, including those relating to Burma. What is surprising this time around is that nothing has changed from past notices.Â The current notice still refers to the â€œunusual and extraordinary threat to the national security and foreign policy of the United Statesâ€ by â€œthe actions and policies of the Government of Burma.â€

This is where the head-scratching shouldÂ begin.Â A lot has happened in the past year or so that one would think warrants an updated (and apt) notice.Â In late 2011, Secretary of State Clinton made the first State visit to Burma since 1955.Â Last May, the President nominated the first U.S. ambassador to the country in over two decades.Â Just this past November, the President became the first sitting president to visit Burma.Â Most important to U.S. businessesÂ was OFACâ€™s significant relaxationÂ last year of countrywide sanctions prohibiting the export of financial services to Burma, new investments in Burma and imports from Burma.

All of these events are major developments in U.S.-Burmese relations.Â So why would the White House use a boilerplate notice when it could have taken the opportunity to depict an accurate picture of what U.S. foreign policyÂ currently is?Â The notice is, of course, a legal requirement and the Burmese government has not shed all doubtÂ over its commitment to democracy and human rights.Â But describing the situation as an â€œunusual and extraordinary threat” to the United States without any further context?Â In light of all this Administration has accomplished with Burma, itÂ seems odd and misleading to use an off-the-shelf response in this instance.

One consequence of thisÂ on the U.S. business community will likely be time and resourcesÂ manyÂ spend confirming that the sanctions that have beenÂ lifted against Burma have now not been repealed.Â Such a sanity check would be reasonable given the notice and especially for those who have begun exploring business with Burma.

The Administration shouldÂ haveÂ a complete andÂ consistent scriptÂ of what U.S. foreign policy is with respect to Burma so it, and the rest of us,Â can allÂ be on the same page.

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Apr

30

The Bad News Is Youâ€™re Still on the SDN List

Posted by George Murphy at 6:37 pm on April 30, 2013

Category: Burma Sanctions • Economic Sanctions • OFAC • Sanctions • SDN List • Zimbabwe Sanctions

U.S. Navy photo by Mass Communication Specialist 2nd Class Jesse B. Awalt/Released (DefenseImagery.mil, VIRIN 090202-N-0506A-310) [Public domain], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3ARobert_Mugabe%2C_12th_AU_Summit%2C_090202-N-0506A-310.jpg

ABOVE: Robert Mugabe

OFAC last week issued its first general license for U.S. sanctions relating to Zimbabwe. The license authorizes for the most part “all transactions involving Agricultural Development Bank of Zimbabwe and Infrastructure Development Bank of Zimbabwe.” Both banks, however, are on OFACâ€™s SDN List.

Since the two banks have been and remain on the SDN List, the license does not unblock the banksâ€™ property interests that had been blocked as of the date of the license. OFAC issued a similar general license in February of this year authorizing dealings with four banks in Burma but kept the banks on the SDN List and continue to block the banksâ€™ property interests blocked prior to the license. A major development from these licenses is, of course, giving U.S. exporters local banking options that were previously unavailable and without them likely stymied business development in those countries.

Exporters should also take note, however, of how OFACâ€™s easing of sanctions through these licenses has an onerous side-effect on U.S. companies. If a companyâ€™s policy is to determine whether to deal with entities or individuals based on their presence on the SDN List or other relevant sanctioned party lists, the authorization granted to deal with listed banks through these general licenses would go unnoticed. Exporters now must check all the lists they routinely do as well as stay on top of licenses issued by OFAC to know whether someone has, from most exportersâ€™ perspectives, been in effect delisted.

If these SDN-lite designations continue, exporters will either need to monitor closely OFACâ€™s daily activity or make sure their screening software is doing so for them, at least if they want to be sure they are not unnecessarily limiting their export opportunities.

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Apr

17

An Egregious “Non-Egregious” Sanctions Violation?

Posted by George Murphy at 11:36 pm on April 17, 2013

Category: Economic Sanctions • Iran Sanctions • OFAC • Sanctions

Source: San Corporation (Fair Use) OFAC announced on Friday a settlement with California-based SAN Corporation (“SAN”) for anÂ alleged violation of the Iranian Transactions Regulations that occurred in September of 2007. Â OFAC alleged that SAN sold nutritional supplements to an entity in Kuwait with knowledge that their end use was to be in Iran. Â SAN agreed to pay $22,500 to settle liability for the alleged violation. Â OFAC reported that the base penalty amount for the alleged violation was $25,000.

OFAC determined that the alleged violation was non-egregious and it provided several conditions to support that finding: (1)Â its allegation involved one instance, (2) SAN had no history of prior OFAC violations and (3) the goods at issue, in OFAC’s words, “appear to have been eligible for a license” under TSRA.

What leaves us bewildered is the parade of horribles that OFAC also recites: (1) SAN did not voluntarily disclose the transaction to OFAC, (2) SAN acted with “reckless disregard” for sanctions law by selling to an entity in Kuwait with knowledge that end use was in Iran and having been informed by the Iranian end-user that intended shipment to Iran required an OFAC license and (3) SAN did not fully cooperate with OFAC by providing “incomplete and/or inaccurate statements” to OFAC.

Whatever all the reasons were behind OFAC’s agreeing to this settlement, the result is a good reason to give pause before going to OFAC with a voluntary disclosure. While much goes into a decision of whether to make a voluntary disclosure, it is important to assessÂ enforcement actions like this one to determine carefully if efforts spent to prepare, submit and deal with a voluntary disclosure are worth it.

Clif adds: If shipping an item to Iran without a license even after the Iranian end-user tells you that a license is required isn’t enough to make something an “egregious” violation, I am not sure the word egregious has any meaning left.

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May

26

SEC To TSRA: Drop Dead!

Posted by Clif Burns at 10:05 pm on May 26, 2011

Category: Sanctions • SEC

UPS Truck You may never have heard of the SEC’s Office of Global Security Risk and probably have no idea what they do. Well, although I know what they are supposed to do, I have always wondered what the people at that office do during the work day.

Now we know. They surf websites looking for sanctioned countries, like Syria and Sudan, in drop down address lists on the websites of U.S. companies. Allegedly this is to advise U.S. investors about publicly-traded companies that supposedly jeopardize their stockholders’ investments by dealing with sanctioned countries.

After a heavy day of web surfing the Office of Global Security Risk fired off this missive to UPS in respect to a price table it found on the UPS site.

We also note an Air Freight peak season surcharge table on your website which lists surcharge amounts for regions including Latin America and Europe, Middle East, Africa in the Destination section. According to the notes section, the destinations listed include Cuba under â€œLatin America (All Other Countries)â€ and Iran, Sudan and Syria under â€œEurope, Middle East, Africa.â€ Iran, Sudan and Cuba are identified by the U.S. State Department as state sponsors of terrorism and are subject to U.S. economic sanctions and export controls.

Apparently the SEC thinks that all exports to these countries are banned. The time that the OGS staff spent surfing the web apparently did not extend to researching economic sanctions laws and discovering, say, TSRA, which permits exports of agricultural products, medicine and medical devices to sanctioned countries. Or the Berman amendment which permits export of informational materials. Never mind any of the other exceptions.

UPS replied by saying this:

The appearance of any country on the sanctions list on a UPS listing of surcharge amounts, explained [UPS Vice-President Norman] Brothers, applies only to lawful deliveries. â€œDuring the period July 10, 2006 through December 31, 2010, UPS rejected at least 55 shipments destined for Syria because they were determined to be impermissible under U.S. export controls.â€

The SEC was reportedly unembarrassed its crude understanding of U.S. export laws and immediately returned to more web surfing. You can start humming that Gershwin tune: “Nice work if you can get it.”

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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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