Nov
5
Ex-Treasury Advisor Claims U.S. Jurisdiction over Entire Planet
Posted by Clif Burns at 2:27 pm on November 5, 2009
Category: Iran Sanctions
ABOVE: Avi Jorisch
Avi Jorisch, who used to be a policy advisor at the Treasury Department’s office of Terrorism and Financial Intelligence, wrote an Op-Ed in the Wall Street Journal titled “How Iran Skirts Sanctions: Could a U.N. agency be helping Tehran to launder money?” Jorisch’s article reaches some rather, er, surprising, ahem, conclusions about the scope of U.S. economic sanctions against Iran.
Mr. Jorisch’s article details the supposedly nefarious dealings of the Asian Clearing Union, which he erroneously refers to as a “United Nations office headquartered in Tehran.” The Asian Clearing Union, while formed during discussions sponsored by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) in 1974, is an independent multilateral organization.
Like all currency clearing unions, the Asian Currency Union allows participating countries to engage in trade with each other without converting local currency to a hard currency (such as euros or dollars) for each transaction. Rather member countries must only obtain hard currencies to clear any net deficit in that currency in their union accounts at the end of the settlement period. Even then currency swap arrangements among member countries may delay or eliminate the need for hard currency conversion at the end of the settlement period. The end goal of the Asian Currency Union, like other such clearing unions, is, obviously, to facilitate trade between the member countries, which, at this time, are Bangladesh, Bhutan, India, Maldives, Burma, Nepal, Pakistan and Sri Lanka.
Jorisch refers to the Asian Clearing Union as a “classic money laundering instrument … [used] to circumvent the U.S. sanctions program. But let’s take a look at a sample transaction that has Mr. Jorisch’s knickers in a knot:
Imagine the Iranian regime wants to buy machinery from an Indian company that insists on getting paid in dollars.
Whoa, Ari, hold your horses there. The Iranian Transactions Regulations only cover exportation by United States persons or re-exportation by foreign persons of U.S-origin goods. If the Indian seller here is exporting Indian made goods to Iran, the U.S. sanctions have not been violated. And even if a U.S. correspondent bank is involved, U.S. law only prohibits the bank’s participation, not the transaction between India and Iran. Finally, if the Asian Clearing Union means that the transaction can be cleared in dollars without a U.S. bank ever being involved, then, I think that’s not what we call skirting the Iran Sanctions but rather what should be called a legally-structured transaction. Simply put, the United States doesn’t rule the world, and it doesn’t have jurisdiction to enforce U.S. sanctions against Iran against everyone on the planet.
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11 Comments:
Whaddya mean “we don’t rule the world”? I know a few folks at DDTC who have other ideas…
As an interesting historical note, back when export controls were still getting institutionalized, money was actually classified as conditional contraband, a precursor category to “dual-use”. See, for instance, Article 24 of the 1909 Declaration concerning the Laws of Naval War.
With respect, Professor Sam, exports controls were no where near getting institutionalized in 1909. What you are referring to was a subset of the laws of war relating to prizes and blockade, and the duty of neutrals versus belligerants. The United States never imposed export controls in peacetime until 1940. All the embargoes prior to then were instituted as a consequence to a war in which the U.S. was a belligerant (which would have triggered the common law offense of “trading with the enemy”) or during war in which the U.S. was not a belligerant but in which was a declared neutral. In fact, the embargoes of 1807-09 were imposed because the belligerants, Britain and France, wviolated neutral rights. In fact of the prize cases resulting from that era, the Supreme Court noted that the principal purpose of the embargo was to protect U.S. commerce by prohibiting US ships from sailing to foreign ports and thereby risking capture.
When the Trading With the Enemy Act was passed in 1917, the legislative history stated the purpose of the act was to mitigate the harshness of the common law offense by providing for a system of licensing whereby the government could permit certain transactions in enemy property. Obviously, its been a long time since anyone at the Department of Justice – let alone Treasury – bothered to read either the 1917 or the 1942 legislative histories to TWEA.
Next you are telling me Father Christmas doesn’t exsist !!
Interesting though, you would have thought he’d know the ‘ins and outs’
Q; in your example, ”And even if a U.S. correspondent bank is involved, U.S. law only prohibits the bank’s participation, not the transaction between India and Iran” would the transaction in USD via a US bank not count as facilitation?
It would, and I believe that’s Clif’s point. No US law prohibits companies in India from transacting business with entities in Iran. And to the extent that the transactions can be conducted in local currencies, then there’s still no issue.
The issue arises when a US correspondent bank is asked to settle the transaction. Then it’s the bank that’s in trouble, not the two trading entities.
Yes, Indeed. Both Clif and Scott K. got it correct. We in the United States have no jurisdiction or say so if companies in Europe, Latin America, Middle East…etc. want to conduct business with Iran as long as it is not effected via the U.S. banking systems.
Regards,
Kelly Yip
Does US-minted currency carry an ECCN of EAR99?
Good question, MJ. But even if so, would the definitions of export/re-export even be met? For re-exports, no US persons would be involved & nobody would know how the US money would be used in the future (so nobody to prosecute?).
I think.
I’m more tempted to wonder if money would count as a publicly available printed material…(Part 734.3(a)(2))
Clif obviously is having too much fun with his blog because he’s now embedding puzzles in his entries. He left out the juiciest sentence of the WSJ article which states:
“A U.S. correspondent bank should theoretically be involved because the American government owns the greenback.”
Now it’s an intellectual property argument. Forget the theoretical part. Printed currency aside, given that all money is an idea, isn’t this just an agreement as to the exchange rate?
P.S. That picture is a stitch. It would make a great t-shirt, along with the title.
I’m often looking for new informations in the internet about this subject. Thankz!
