Archive for the ‘Cuba Sanctions’ Category


Oct

30

Designation by OFAC Can Be Dangerous to Your Health


Posted by at 8:18 pm on October 30, 2014
Category: Cuba SanctionsOFAC

Bupa booth via http://www.bupa.com/media/704558/bupa-corp-brochure_hires_singles.pdf [Fair Use]Global health care consortium Bupa agreed to cough up (sorry!) $128,704 to the Office of Foreign Assets Control to settle allegations that it provided health insurance to individuals on the SDN List and, in one instance, re-imbursed a policy holder for medical treatment received in Cuba. You might have assumed that there were limits to the injury that OFAC might try to inflict on SDNs or non-SDNs traveling in Cuba but you would, apparently, be wrong.

The SDN involved was designated under the Foreign Narcotics Kingpin sanctions. Unlike the Narcotics Trafficking Sanctions Regulations, the Kingpin Sanctions regulations do not provide an exception even for emergency medical services. (Of course, even though emergency medical services can be provided to SDNs under the Narcotics Trafficking Sanctions, the hospital or doctor cannot be paid for those services without an OFAC license authorizing such payment. Good luck getting treated in those circumstances.)

So the penalties for being a Narcotics Kingpen  extend far beyond simply having your bank account blocked and, potentially, can include dying from lack of needed medical care. I have no special sympathy for narcotics kingpens, but this seems a little harsh.

Trying to interfere with the health care of people traveling Cuba seems even harsher. Moreover, penalizing the reimbursement of a non-Cuban outside Cuba for services previously provided in Cuba seems not to further the U.S. policy of depriving Cuba of resources given that the payment in Cuba was already made. It also illustrates the strained reading that OFAC gives to the Cuban Assets Control Regulations in its effort to penalize anything and everything that has any connection with Cuba.

The fundamental prohibition of the Cuba sanctions prohibits U.S. persons from participating in “transactions [that] involve property in which … [a Cuban] national … has at any time … [or] had any interest of any nature whatsoever, direct or indirect.” Of course, no Cuban national has an interest in the insurance policy under which the reimbursement payment was made. The only such property in that case would have been the funds paid by the policy holder to the Cuban health care provider. To say that the reimbursement transaction “involves” that property obviously stretches the meaning of “involves” to the breaking point, but it shows how broadly OFAC reads these regulations to assure that if you blow your nose and someone in Cuba hears the noise, you’ve violated the rules.

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Aug

21

Jay-Z and Beyoncé Didn’t Commit a Real Crime


Posted by at 8:23 pm on August 21, 2014
Category: Cuba SanctionsOFAC

Jay-Z and Beyoncé in Cuba via http://iam.beyonce.com/post/50677935277 [Fair Use]
ABOVE: Jay-Z, Beyoncé in Cuba


Back in April 2013, Jay-Z and Beyoncé took a trip to Cuba, which provoked a round of wailing, teeth gnashing and threats of jail time from the usual suspects on the Hill, namely, certain South Florida members of Congress, including Rep. Ileana Ros-Lehtinen and Rep. Mario Diaz-Balart, who exhibit a near Pavlovian response anytime they hear the word Cuba. Jay-Z rapped back something to the effect that going to Cuba wasn’t a real crime like buying a kilo for Chief Keef. (If you don’t get the Chief Keef reference, just remember that Wikipedia is your friend in such matters.)

OFAC agreed with Jay-Z and not with Reps. Ros-Lehtinen and Diaz-Balart.  The trip was, OFAC said, a properly licensed “people-to-people” educational exchange tour and, therefore, violated no U.S. laws.

Apparently, the two representatives kept making a commotion about the trip, perhaps believing  that Beyoncé and Jay-Z didn’t qualify for the license because they either weren’t people or weren’t educational.  So the Treasury Department’s Inspector General was called in to review OFAC’s determination that the the famous couple were both people and educational.

In making the determination that OFAC properly declined to fine Jay-Z and Beyoncé for the trip, the Inspector General actually reviewed what Beyoncé and Jay-Z did in Cuba (your tax dollars at work!) and concluded:

Our review found these activities were consistent with the activities for which OFAC authorized the people-to-people license. For example, one article reported the trip included a visit to a children’s theater group and several clubs, where the couple heard live music and occasionally took to the dance floor. According to the article, they also toured Cuba’s top art school, where they met with young artists, and ate at some of Havana’s privately run restaurants, known as “paladares.” One of the city’s leading architects led the couple on an architectural tour of the Old City of Havana, during which the article stated the couple was mobbed by Cuban spectators.

Okay, so let’s suppose that Jay-Z and Beyoncé did nothing in Cuba but lounge on the beach and sip mojitos. What would be the problem with that? Does anyone believe that a regime that has withstood fifty years of U.S. sanctions was on the verge of crumbling but managed to hang on because two pop music stars vacationed in Cuba instead of, say, Aruba?

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Aug

12

Chong Chon Gang(nam Style) Sanctions


Posted by at 6:00 pm on August 12, 2014
Category: Cuba SanctionsNorth Korea SanctionsOFACU.N. Sanctions

Weapons found on Chong Chon Gang via http://www.un.org/ga/search/view_doc.asp?symbol=S/2014/147 [Fair Use]Avid readers of this blog will be familiar with the saga of the euphoniously named Nork vessel, the Chong Chon Gang, which was seized by the Panamanians in the Panama Canal while the vessel was attempting to carry a boatload, so to speak, of Cuban arms to North Korea. Although the Cubans claimed, ahem, that this was not a “transfer” of the arms to North Korea in violation of U.N. sanctions because they retained title to the goods, they were unable to explain why, if that were the case, they buried the missiles and other armaments under enough sugar to keep the chubby Nork dictator in sweets for the next millennium or so. The attempted suicide by the ship’s captain once the Panamanians found the buried missile parts and systems also did not do much to bolster the Cuban argument that this shipment was perfectly legal.

The U.N. Panel of Experts convened to consider the legality of the shipment brushed aside Cuba’s arguments and back in March found the shipment to be a violation of U.N. sanctions on North Korea. At the end of last month, the United States joined the party and announced a variety of additions to the SDN list arising out of the Canal incident. The two North Korean companies involved in the shipment as well as the Chong Chon Gang were designated, as were 17 other Nork ships in which the two shipping companies had an interest.

In the “Some People Are Never Satisfied” category, a blogger at Capitol Hill Cubans called the Nork sanctions “enforcement malpractice” and moaned that there were no sanctions imposed on the Cuban officials involved in the Nork shipments. A Miami Herald article provided a succinct answer to this complaint

A knowledgeable Washington official noted that perhaps Treasury did not feel it was necessary to sanction Cuban government entities and individuals because they already are under strong sanctions from the U.S. trade embargo.

Good point. Given that virtually all dealings by U.S. persons and companies with Cuban officials are prohibited under the current sanctions, what exactly did the blogger contemplate as additional sanctions here? Military intervention?

 

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Jul

2

OFAC Gores Red Bull for Skateboarding in Havana


Posted by and at 6:45 pm on July 2, 2014
Category: Cuba SanctionsEconomic SanctionsOFACSanctions

Ryan Scheckler Skateboards in Havana via http://www.redbull.com/cs/Satellite/en_INT/Gallery/Ryan-Sheckler-shreds-Cuba-and-Panama-021242761792131#/image-12 [Fair Use]

Last Friday, OFAC announced that Red Bull North America, Inc. (“RBNA” or, when we’re feeling informal, “Red Bull”) agreed to pay $89,775 to settle allegations that “seven representatives” of RBNA traveled to Cuba in order to “film a documentary” in 2009 without OFAC authorization but with the approval of RBNA’s “management.”  RBNA is the U.S. subsidiary of Red Bull GmbH, the Austrian elder statesman of excessively caffeinated energy drinks.  Although OFAC provided no details about the film itself, it is likely a 2009 documentary, described by Red Bull here, which the company made about Ryan Sheckler skateboarding in Havana.  Apparently there is no place left in the world that is safe from skateboarders other than, perhaps, some interior stretches of Antarctica.

Of course, there is a general license for journalistic activities in Cuba, which would seem to cover making documentaries, as opposed to, say, filming Transfomers LVIII: The Final (And We Really, Really Mean It This Time) Apocalypse.  But OFAC’s general license is restricted to “persons regularly employed as journalists by a news reporting organization.”  As we’ve noted before OFAC has not applied this limitation in a consistent fashion, suggesting that Michael Moore wasn’t a journalist but Charlize Theron was. Although Red Bull seems quite active in the documentary business, OFAC apparently viewed them as simply a commercial marketing endeavor in a country where Red Bull is undoubtedly sold.  In fact, judging from the Red Bull Cliff Diving World Series event held in Havana this May, a good amount of Red Bull is being consumed in Cuba.

In considering the penalty amount, OFAC said it determined and took into account that “RBNA did not voluntarily self-disclose” and that “RBNA had prior knowledge of U.S. sanctions on Cuba and took steps to conceal the transactions.”  Of course, we don’t quite understand how you conceal a documentary, particularly where Red Bull posted extensive information about it on the Internet, which is where OFAC likely discovered this transaction. On the other side of the equation, OFAC cited  RBNA’s institution of an OFAC compliance program, no other sanctions violation from 2004 to 2009 and the “non-egregious” nature of the violation.

We have over the past few years called attention to the confusion and lack of information in OFAC’s enforcement action announcements.  Last April, we highlighted what we thought was one of the more egregious “non-egregious” settlements that OFAC has announced.   The latest settlement with RBNA, furthers the confusion by imposing a fine on the low scale even after OFAC finds, albeit wrongly, that Red Bull concealed the documentary.

While OFAC makes up for its small-ish RBNA fine in its hefty enforcements against banks (à la the almost $1 billion settlement OFAC reached with BNP Paribas this week), most U.S. companies’ dealings with Cuba are going to be more on par with isolated occurrences like the one involving RBNA.  In the end, the RBNA settlement is good news for RBNA, its Red Bull parent and any other U.S. company in a similar situation.  If a U.S. company ever finds itself in the future before OFAC in an isolated situation like RBNA, the first thing to do is to pull out RBNA’s settlement announcement and try negotiating from there.

 

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May

7

Incorporating in Delaware Leads to Huge OFAC Fine for Argentinian Company


Posted by at 11:51 pm on May 7, 2014
Category: Cuba SanctionsOFAC

By Almonroth (Own work) [CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3AU.S._Treasury-3.jpgYesterday the Office of Foreign Assets Control (“OFAC”) announced that it had imposed a $2,809,800 fine on Argentina-based Decolar.com, Inc. Decolar is an online travel agency and attracted the ire of OFAC for booking trips by non-U.S. persons to Cuba, trips for 17,836 people to be precise. This made OFAC very, very angry:

Decolar demonstrated reckless disregard for U.S. sanctions requirements when it failed to ascertain the U.S. sanctions requirements applicable to its business operations, relying instead upon a third party’s oral assurances that Decolar’s conduct did not require an OFAC license. With the exercise of appropriate due diligence, Decolar’s senior
management reasonably should have been aware of the applicable prohibitions under the CACR. Based upon the number of apparent violations and the length of time over which they occurred, the apparent violations also appear to have resulted from a pattern or practice of conduct

So, you’re no doubt wondering where OFAC gets the right to fine a company based in Argentina for violating the U.S. sanctions on Cuba. Simple. Even though the company was based in Argentina, it was incorporated in Delaware. This was probably the most expensive incorporation in Delaware ever.

One thing that  is odd about the OFAC release is its coy reference to the “third party” that told Decolar that it had nothing to worry about. My guess, particularly due to OFAC’s reluctance to identify this party, is that it was likely a lawyer. Saying that relying on a lawyer is “reckless” is harsh, even by OFAC standards, but it seems that if this mysteriously anonymous third party had been, say, the company janitor, OFAC could not have resisted mentioning that. After all, that would indeed be reckless. And, of course, the company was even more reckless for not ignoring their legal counsel and doing the research themselves. You know, by looking at the Spanish version of the Cuba sanctions which OFAC keeps on its website. Oh wait, there isn’t a Spanish version.

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