The Office of Foreign Assets Control (“OFAC”) whacked UBS AG, a Swiss bank, with a $1,700,100 penalty today. (That extra $100 is there to prove that OFAC reached this penalty in a super-accurate and completely scientific fashion.) The fine arises from UBS processing 222 transactions of unidentified value for an individual whose name was kept secret by the bank from OFAC but who was apparently designated as a global terrorist on OFAC’s Specially Designated Nationals and Blocked Persons List (the “SDN List”).

Although everyone understands why the Santa in Secret Santa is a secret, it may not be immediately clear why the SDN in a Secret SDN is clear. Apparently, Swiss law protects the names of global terrorists as well as those of ordinary customers. In other words, Switzerland is more interested in protecting the revenue of its banks than the safety of everyone else in the world. Frankly, if OFAC stood up to this nonsense and said it would fine UBS the maximum penalty (at least $250,000 times 222 violations which comes to $55.5 million) if it didn’t cough up the name of the SDN in question, well, even I might have said that was justified.

There’s another oddity in the OFAC release explaining the penalty. Obviously since the case was all about a secret SDN, the only way that OFAC could have learned about it without annoying the Swiss government is through a voluntary disclosure by UBS.

OFAC has determined that although UBS identified all of the apparent violations, the disclosures are not voluntary self-disclosures within the scope of OFAC’s definition under the Economic Sanctions Enforcement Guidelines, 31 C.F.R. part 501, app. A, because they were substantially similar to another apparent violation of which OFAC was already aware.

It’s rather difficult to get any idea what this means in the context that OFAC has no idea as to the identity of the SDN involved. So what does substantially similar mean? That OFAC had knowledge that UBS was supporting another SDN? Or does it mean that OFAC was aware that UBS had processed blocked funds for the Cuban government? Apparently, OFAC is saying that if it knows that you ever violated any OFAC rule you have no right to voluntarily disclose a separate and unrelated violation of that or a similar rule.

Still, between the Swiss and OFAC in this situation, I’m voting for OFAC.

I have wondered about the persistent zeal of the DoJ in pursuing a criminal case against Bill Aossey, the owner of Midamar Corp., for irregularities in meat exports that may or may not have caused those exports to violate a ban imposed by several countries on the import of non-halal meat products. You can read more about the prosecution of Mr. Aossey here, here, and here. There have been persistent rumors that somehow or other Aossey was involved in smuggling arms to Lebanon. Now we know where those rumors came from.

On Wednesday, a Cedar Rapids newspaper announced that various members of the Herz family, who apparently had been employed at Midamar and were friends with Aossey, were indicted for, among other things, unlicensed exports of firearms to Lebanon. The indictment alleges that the arms were hidden by the Herz defendants inside Bobcat skid loaders that were  placed in containers  shipped from Midamar’s loading docks.

This issue apparently came up after Bill Aossey’s conviction when the prosecution argued that Aossey should be jailed pending sentencing. They based their argument on his association with the Herz family and the use of Midamar facilities by Herz to engage in the illegal gun exports. Aossey claimed that the containers, which belonged to the Herz defendants, was also being used by Midamar to ship relief items to Lebanon and that he did not know that guns were hidden in the skid loaders. The prosecution, on the other hand, said this:

Assistant U.S. Attorney Richard Murphy admitted there wasn’t direct information tying Aossey to buying or smuggling guns. But he argued it was difficult to believe Aossey didn’t know about it.

There is a compliance lesson here hidden among the meat, guns, skid loaders and relief items: don’t share shipping containers, even with your best friends.

Welcome to Pick-on-the-Wall-Street-Journal Week, which we have just declared because the once-fabled publication has, for the second time in two days, had an unfortunate run-in with fact-checking and U.S. export laws. From a piece titled “Iranian Art Lovers Await Accord’s Benefits,” reporter Kelly Crow says this:

For decades following Iran’s 1979 Islamic revolution, U.S. collectors wishing to visit Iran needed a travel license from the U.S. Treasury Department’s Office of Foreign Assets Control, which gave out a handful of licenses a year to those seeking to visit Iran and bring home “informational materials.”

Both travel to, and imports from, Iran were banned for the brief period from April 17, 1980, pursuant to Executive Order 12211, until January 23, 1981, when Executive Order 12282 revoked the travel and import bans imposed by President Carter in Executive Order 12211. Thereafter, no license has ever been required to travel to Iran.

Imports from Iran were not banned again until 1987 when President Reagan issued Executive Order 12613 in 1987. Shortly thereafter the Berman Amendment was passed in 1988 as section 2501(b) of the Omnibus Trade and Competitiveness Act of 1988. Under the Berman Amendment, “informational materials” could be imported from Iran. OFAC guidance provides that artwork classified under HTSUS 9701, 9702 and 9703 qualifies as “informational materials” eligible for importation from Iran without a license.

So, to summarize, licenses were not required “for decades” in order to travel to Iran to bring back artwork. A license to travel to Iran and to bring back artwork was required for less than one year between 1980 and 1981. Importing artwork from (but not travel to) Iran was banned thereafter only between October 29, 1987, and August 23, 1988.  After that, artwork could be freely imported from Iran without license as informational materials.