Archive for September, 2013


Sep

27

Treasury’s Bore


Posted by at 1:23 am on September 27, 2013
Category: OFAC

Treasury's War Cover [Fair Use]Juan Zarate’s new book on OFAC, Treasury’s War, is a crashing bore and I have to admit that about half way into it I gave up. Zarate had taken my money to buy the book; I wasn’t going to let him take any more of my time as well.

I wanted to like Zarate’s book. Zarate was Assistant Secretary of the Treasury for Terrorist Financing and Financial Crimes during the Bush Administration, and I hoped that his book would provide interesting details on OFAC’s enforcement activities during his tenure. Instead, the book is mostly a lengthy self-encomium where Zarate depicts himself as a modern-day Elliot Ness who risked life and limb as one of Treasury’s “guerillas in gray suits.” Yes, he actually used that phrase. He also breathlessly relates a corkscrew landing he made (or more accurately the pilot made) during a trip to Afghanistan.

Most of the problem with the book is its deadly repetitiveness. The book might be a useful drinking game if you had to drink a shot every time Zarate says that terrorists need money, mentions Elliot Ness or describes the conference room where a meeting took place (Civil war currency on the wall! Historical artifacts such as silverware!  Mahogany conference tables! Views of the South Lawn!). I really began to suspect that Zarate was being paid by the word. We hear that one of his colleagues “looked like he belonged on the cover of GQ magazine.”

Not surprisingly, the book is also a completely uncritical look at OFAC’s activities after September 11. Zarate defends the controversial “80/20” rule for blocking assets when the agency only had 80 percent of the evidence needed to decide whether assets should be blocked. He complains about the reorganization that created the DHS and how it took away Treasury’s “guns and badges.” (The ghost of Elliot Ness appears again.) He also paints Richard Newcomb as a chief player in the war against terror notwithstanding that the former director of OFAC resigned on heels of criticism after OFAC told Congress in 2003 that OFAC “had just four full-time employees dedicated to investigating Osama bin Laden’s and Saddam Hussein’s wealth while nearly two dozen were working on Cuban embargo violations.”

There is only one interesting tidbit that I found before I gave up on the book, and it doesn’t reflect well on Zarate. During his discussion of efforts of OFAC to slurp up SWIFT data, Zarate reveals that in order to protect the sensitivity of this effort, they used the code name TURTLE for SWIFT. Who would have imagined that a reference to some financial resource named Turtle might in fact be a reference to SWIFT? No one. Not in a million years.

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Sep

25

Coming to America? What a Trip to NYC Could Mean for U.S. Sanctions on Sudan


Posted by at 9:30 pm on September 25, 2013
Category: Economic SanctionsSanctionsSudan

By U.S. Navy photo by Mass Communication Specialist 2nd Class Jesse B. Awalt/Released (DefenseImagery.mil, VIRIN 090202-N-0506A-724) [Public domain], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3AOmar_al-Bashir%2C_12th_AU_Summit%2C_090202-N-0506A-724.jpg
ABOVE: Omar Al-Bashir

From news that appeared to break recently in the Sudanese press, Sudanese President Omar Hassan al-Bashir submitted a visa application to the U.S. State Department in order for him to attend UN General Assembly meetings that begin next week. When asked about the application at Monday’s State Department press briefing, Deputy Spokesperson Marie Harf said, “We condemn any potential effort by President Bashir to travel to New York, given that he stands accused of genocide, war crimes, and crimes against humanity by the International Criminal Court. We would say that before presenting himself to UN headquarters, President Bashir should present himself to the ICC in The Hague to answer for the crimes of which he’s been accused.” Harf continued, “Clearly, we have a visa application right now and would condemn any potential travel by him, but I just don’t have anything further than that.” While it can be expected the State Department will have a concrete position by next week, this situation, and the U.S. response, could serve as an important juncture in U.S. sanctions against Sudan.

Although Syria, Iran and North Korea have attracted most of U.S. foreign policy’s attention in the past year, Sudan remains among the few countries under a comprehensive U.S. trade embargo. Sanctions against Sudan, however, continue to allow foreign subsidiaries of U.S. companies to do business there, and the sanctions themselves do not even apply in general to what the Sudanese Sanctions Regulations refer to as “Specified Areas of Sudan.” The Areas, most of which are along the Sudan-South Sudan border, are among the richest in oil and other natural resources in the entire country.

From a U.S. sanctions perspective, Sudan is more open for U.S. business than Iran. Yet since Bashir’s last trip to the United States in 2006, former Iranian president Mahmoud Ahmadinejad has attended UN meetings in New York on several occasions and even spoke at Columbia University. Although his trips were not without controversy, Ahmadinejad was still permitted to enter (and leave) the United States. Reactions from the State Department and Ambassador Samantha Power about Bashir’s visa request point out a difference that Bashir has a warrant issued for his arrest by the ICC, an organization incidentally to which neither Sudan nor the United States are parties. In short, Bashir is one of the most condemned sitting foreign leaders by the United States and most of the world. His visa request, therefore, invites comparison to those prior ones of Ahmadinejad and other leaders of sanctioned countries.

Whether Bashir, his regime and, by extension, Sudan should be subject to stronger sanctions like those against Iran is a debate for U.S. foreign policymakers that is not treated as a political priority at the moment. What is significant about Bashir’s visa request is that Bashir himself may be forcing the issue on the United States, notwithstanding the widespread violence that has continued in Sudan to the present. Issuing or denying a visa both carry significant foreign policy consequences and may lead to a closer examination as to what current U.S. sanctions and export control objectives are with respect to Sudan.

Clif adds: It should also be noted that a denial of the visa for Al-Bashir would be a violation of Article IV of the UN Headquarters Agreement, pursuant to which the United States committed not to impose any “impediments to travel” by “representatives of Members” to UN Headquarters “irrespective of the relations existing between” the United States and the country involved.

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Sep

18

Say It’s Not So, Joe


Posted by at 6:37 pm on September 18, 2013
Category: General

Joe Wolverton via http://www.youtube.com/watch?v=fibBySJm5Po [Fair Use]
ABOVE: Joe Wolverton II J.D.

Various press reports have suggested that the White House recently waived restrictions on providing arms to the Syrian rebels, but a review of the Presidential Determination itself reveals something much more limited.

In fact, the determination waives portions of the Arms Export Control Act but only to authorize a specific transaction providing defense articles to “vetted” members of the opposition and to NGOs in Syria. The defense articles are described as those “necessary for the conduct of … operations inside or related to Syria, or to prevent the preparation, use, or proliferation of Syria’s chemical weapons.” Who the “vetted” members are is not specified nor are the particular articles involved detailed.

Significantly this is not a general waiver but is a waiver only with respect to one specific contemplated transaction. Defense companies do not now have a blanket license to ship their wares to the Syrian opposition.

My favorite comment on the affair comes from one “Joe Wolverton II J.D.” writing for something called “The New American.” Joe Wolverton II J.D. offers up these comments in an article with the catchy headline “President Breaks Arms Export Laws to Send Shipments to Syrian ‘Rebels'” Apparently one of the things Joe Wolverton II J.D. failed to learn as part of getting the right to append J.D. to his name is that it is a good idea to read a law before declaring that someone, particularly a President, has broken that law.

Section 40(g) of the Arms Export Control Act, 22 U.S.C. § 2780(g), the “broken” law in question, specifically gives the President to waive the provisions of the Act with respect to a specific transaction if he finds that the waiver is “essential to the national security interests of the United States” and he makes the requisite report on the waiver to Congress. The determination makes that finding and directs the Secretary of State to make the required report to Congress. So, in the matter of proper interpretation of the Arms Export Control Act, the score is White House 1 and Joe Wolverton II J.D. 0.

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Sep

12

I’m Going to Disney World!


Posted by at 11:46 pm on September 12, 2013
Category: Arms ExportCriminal Penalties

You may think of “I’m Going to Disney World!” as an iconic slogan from a Superbowl ad, but in many cases they are instead the famous last words of foreign export defendants. Consider Sergei Baltutski, a Belarusian, who said this last April before taking his family on a trip to Disney World. Problem is, Mr. Baltutski had been having fellow Belarusians in the United States ship to him in Belarus military night vision purchased from eBay, and he got nabbed at the airport on his way to see Mickey and friends. Worst. Vacation. Ever.

Baltutski pleaded guilty, and his sentencing hearing took place recently in Philadelphia. According to his lawyer, the items, approximately $700,000 worth of night vision, were simply used by Belarusian hunters to bag wild boar which, apparently, mostly run at night. Who knew there were that many wild boar, and that many hunters, in Belarus? The sentencing hearing has been deferred a few weeks to permit Baltutski’s lawyers to prepare their boar argument to counter the prosecution’s request for higher sentences based on the potential harm to national security posed by Baltutski’s exports.

One interesting detail, provided in this news report, is that Baltutski’s accomplices sent some of the night vision to him through the Belarusian diplomatic pouch. Say what? The Belarusians are permitting illegal exports of defense articles via their diplomatic pouch? It seems to me that if the government is serious about the threat of these exports, somebody needs to have a long talk with the folks at the Belarusian Embassy. The Vienna Convention probably prohibits prosecuting anyone in the Embassy, but it doesn’t prevent putting the folks involved on a plane back to Belarus

Baltutski’s case is missing from Pacer, but here’s the indictment of his co-conspirators.

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Sep

11

First Thing We Do, Let’s Register All the Lawyers


Posted by at 11:44 pm on September 11, 2013
Category: DDTCPart 129

Daumier Lawyers [Public Domain]One of the issues that has haunted the efforts by the Directorate of Defense Trade  Controls (“DDTC”) to amend its brokering rules has been what to do with lawyers. Are lawyers that assist their clients with transactions involving defense articles brokers or not? Do they need to pony up registration fees? Worse, are there situations where they must get permission from DDTC before counseling clients on defense related transactions?

To be fair about the issue, DDTC is trying to fix an issue that arises from the overly broad definition of brokering services in the current rules. The current definition covers anyone who acts “as an agent for others in negotiating or arranging contracts, purchases, sales or transfers of defense articles or defense services in return for a fee.” The minute a lawyer calls the lawyers for the other side, the issue arises as to whether the lawyer has become a broker. It’s easy to say that the lawyer isn’t in that case an “agent” for his client in the traditional sense, except for the fact that DDTC has made clear that “agent” here is meant in a very broad sense that goes beyond the notion of an agent under the common law of agency. No lawyers have been registering as brokers, and DDTC has so far never suggested that it had any interest in pursuing lawyers.

The newly released “interim final” rule attempts to address this issue, and by explicitly raising the issue may make the situation even worse than it was when the rules were silent on the issue. The “interim final” rule says that brokering activities do not include “activities by an attorney that do not extend beyond the provision of legal advice to clients.” Not surprisingly, there is no definition of “legal advice” but DDTC tries to clarify it with this comment at the beginning of the Federal Register notice on the “interim final” rule:

The Department has clarified that “activities by an attorney that do not extend beyond the provision of legal advice to clients” is not within the definition, and notes that “legal advice” includes the provision of export compliance advice by an attorney to a client.

Two problems now are posed by the “interim final” rule. First, the exemption applies only to the extent that a lawyer is communicating with his own client. If he or she talks to the other lawyers in a transaction, the lawyer has arguably become a broker. Second, lawyers in a transaction involving defense articles are going to provide legal advice far beyond the “provision of export compliance advice.” Simple advice to the client about whether the contract should include an arbitration clause, or whether the law of New York or California applies. Those might be clear examples of legal advice but what if the lawyer provides his or her thoughts on certain risks that the transaction might pose?  Is that business or legal advice?  Has the lawyer stepped over the line and become a broker?

And here’s the most terrifying thought. If the transaction involves a “foreign defense article,” then under the “interim final” rule, a lawyer will need State Department approval before advising his or her client on whether to include an arbitration clause or before the lawyer calls opposing counsel to discuss contractual issues. I suspect that many lawyers will ignore these requirements but that is going to be harder to do under the new language in this rule when (and if) it goes into effect on October 25 of this year.

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Copyright © 2013 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)