Apr
30

Different Month, Same Sanctions

Posted by Clif Burns at 7:43 pm on April 30, 2009
Category: Cuba Sanctions • OFAC

Fidel CastroOFAC released today its monthly civil penalties report and it is, as is usually the case, all Cuba all the time. EFEX Trade, LLC, a company that provides both management consulting and massage therapy services, paid $2,000 for unlicensed remittance forwarding to Cuba. The fine paid is, of course, much less interesting than EFEX’s unusually diverse business model. Please feel free to suggest possible synergies between the company’s two lines of business in the comments section.

In addition, Texas-based Varel Holding, a manufacturer of drill bits, agreed to pay $110,000 for exports made by one of its foreign subsidiaries to Cuba between June 2005 and June 2006. Varel voluntarily disclosed the exports. The OFAC notice indicated that the case was handled under prior enforcement guidelines which provided for a maximum penalty of $11,000 per violation. It’s hard to understand then why the penalty ultimately imposed was only slightly less than the maximum penalty ($121,000) notwithstanding the company’s voluntary disclosure.

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9 Comments:

  • Isn’t management consulting all about massaging figures?

    Comment by Anna Madejski on May 1st, 2009 @ 2:15 am

  • Clif — The Varel case was probably handled at the 5/22/2006 adjusted rate of $50,000 per violation, rather than the old $11,000 rate. That would make a penalty of $110,000 only 20% of the maximum $550,000 potential penalty for 11 violations (assuming each of the violative transactions was valued at over $50,000).
    – Ex-OFAC

    Comment by Ex-OFAC on May 1st, 2009 @ 9:57 am

  • Unlike the $250k penalty increase which was clearly meant to have some retroactive effect, Section 402 of P.L. 109-177, which increased the penalty to $50k, doesn’t appear to have retroactive effect, and it appears many of the violations at issue may have occurred prior to the enactment of the law and the issuance of the revised regulations. And I don’t recall right now whether OFAC took the position that it was retroactive. Also, OFAC specifically states that the case was decided under the January 2003 enforcement guidelines which reference the $11k penalty.

    This potential confusion over the applicable fine is why OFAC’s practice of submitting the briefest possible squib on enforcement actions is a disservice to everyone.

    Comment by Clif Burns on May 1st, 2009 @ 10:36 am

  • Good management has hands everywhere.

    Comment by Chris W. on May 5th, 2009 @ 12:25 pm

  • Speaking of Cuba. “What about TWEA, there is the risk of Cuban Nationals gambling in U.S. institutions”

    A friend asked me the above-noted query and my response was: “Are we talking about Cubans entering the US legally? What separates the Cuban Nationals from the Cuban baseball players entering the US to play for their country (Olympics). I have a feeling they probably took some moola back to Cuba afterward.” Am I correct?

    Regards,
    Kelly

    Comment by Kelly Yip on May 7th, 2009 @ 1:22 pm

  • 515 CFR 571 governs Cuban nationals in the U.S. pursuant to a visa, and only permits limited payments to Cubans sufficient to pay living expenses and to buy goods for personal consumption. Any moneys won in a casino would exceed that and would have to be blocked. Cuban baseball players also couldn’t be paid anything in excess of what’s necessary to cover living expenses and goods for consumption in the United States. You couldn’t pay them extra money to take back to Cuba.

    Comment by Clif Burns on May 7th, 2009 @ 2:16 pm

  • The US government prohits ordinary US citizens from traveling to one country in the world: Cuba. It also maintains a nearly 50-year economic stranglehold on the island. I think its time to realize that Cuba isn’t going to cry uncle, and at the same time wake up to the fact that the Caribbean Island of 11.2 million people is no threat to the United States. Now it’s up to the Obama Administration and Congress to show they are really for a change in this time-worn, failed policy. So far there has been some talk but nothing concrete.

    Comment by Circles Robinson on May 7th, 2009 @ 5:29 pm

  • I forgot to mention if you’d like to read more about Cuba from Cuba check out this site: http://www.havanatimes.or

    Comment by Circles Robinson on May 7th, 2009 @ 5:39 pm

  • Kudos to Circles Robinson on his comment. This is something I have written on in the past and always wondered about. At what point does the Executive stop and take a look at these sanctions programs and realize they don’t work. I have yet to see any hard empirical evidence to suggest that OFAC administered sanctions programs has effective in carrying out their objectives. This is not to say that I am against using sanctions as a foreign policy tool, but it seems apparent that some of these things just don’t work and need to be reconsidered.

    Case in point is the Iranian Transactions Regulations. Iranian importers and those seeking to export to Iran have carried out business for years by finding ways to circumvent OFAC regulations. It’s like we continue to build the U.S. legal equivalent of the Maginot line.

    Comment by EFerrari on May 27th, 2009 @ 12:32 pm

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