Archive for the ‘Economic Sanctions’ Category


Feb

14

SDN List Hit Holds Up Food Bank Funds in Britain


Posted by at 11:12 pm on February 14, 2017
Category: Economic SanctionsOFACSDN List

Eventbrite Instagram Post via https://www.instagram.com/p/032C0eyzj7/?taken-by=eventbrite [Fair Use]So, UK accountant Mamunal Islam was minding his own business trying to raise money for a Bedford food bank. He thought maybe he’d sell tickets to a film through Eventbrite and use the proceeds to help people in his home town who needed food. He had never even heard of this obscure agency in the United States call the Office of Foreign Assets Control until San Francisco based Eventbrite told him that they were keeping his money and the hungry people in Bedford, well, they could eat cake. (Eventbrite didn’t really say the last part.)

It seems that Eventbrite thought that Mamunal Islam was a match on the SDN List, and although it never said that the food bank customers could eat cake, it did, according to an article on BBC News, say this:

Eventbrite said it was “truly sorry” but “a person with a very common name is more likely to make the list.” … Eventbrite said the Office of Foreign Assets Control (OFAC) had only recently added “M Islam” to its list. … A spokesman for the company said: “As a US company, Eventbrite must comply with US law. “In this instance, a payment to the organiser was temporarily held because of a potential OFAC name match. “Whether that is J Smith or M Islam does not make the slightest difference.”

To begin with, I don’t know what SDN List Eventbrite was using but it’s certainly not the one that OFAC publishes. Here’s every individual on the SDN List with Islam in his/her name:

ATABIEV, Islam SDN
ATABIYEV, Islam SDGT
ATABIYEV, Islam Seit-Umarovich SDGT
ABU ISLAM, Karim SDGT
ABU ISLAM SDGT
AL-SURIR, Abu Islam SDGT
AL-GADDAFI, Saif al-Islam LIBYA2
AL-QADHAFI, Saif al-Islam LIBYA2
EL-QADDAFI, Seif al-Islam LIBYA2
ELKADDAFI, Saif al-Islam LIBYA2
GADDAFI, Saif al-Islam LIBYA2
GADHAFI, Saif al-Islam LIBYA2
GHADAFFI, Saif al-Islam LIBYA2
GHATHAFI, Saif al-Islam LIBYA2
QADDAFI, Saif al-Islam LIBYA2
QADHAFI, Saif al-Islam LIBYA2
DEL ROSARIO SANTOS, Ahmad Islam SDGT

I don’t see any “M Islam” there, do you?  I don’t see anything even close other than “Islam” — which should not be cause to say that “Mamunal Islam” is a hit.  If sharing one part of a name is enough, than Eventbrite would need to block every Sally, Carol, José, Mohammed, Ahmed, Tom, Robert, Paul and James, because all those names also show up on the list.

Beyond this, Eventbrite had already burned the barn after the horses had escaped, so to speak.   If Mamunal Islam was really on the list — and he is not — then it would have been illegal to have sold any tickets on his behalf.  By the time there were actual funds to block, the rules had already been broken. So it’s not clear why Eventbrite didn’t tell Mr. Islam that there was an issue when he signed up or registered a new event rather than after he’d already sold a bunch of tickets for the food bank event.

Ultimately Eventbrite reversed its action after Mr. Islam provided “information confirming his country of birth” thereby proving, I suppose, that he is not the second son of Muammar Gaddafi.  So there was, ultimately, a happy ending, more or less, for Mr. Islam, Eventbrite, and the food bank in Bedford.

I understand that OFAC is in the business of scaring people to death and that Eventbrite’s reaction was not entirely irrational.  I’m also guessing that Eventbrite was the victim of one of the numerous paranoid screening services that market their value by claiming to screen against a semi-dubious list of sixty-two billion names of dodgy people.   Last, and perhaps least,  I’m sure “Islam” is scarier to an Internet company in San Francisco than, say, “Sally” or “Carol.”  Still, it seems that common sense should have prevailed here sooner than it did.

 

 

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Copyright © 2017 Clif Burns. All Rights Reserved.
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Feb

7

Sometimes Mistaken Identity Is Not A Laughing Matter


Posted by at 11:38 pm on February 7, 2017
Category: Economic SanctionsIran SanctionsOFAC

Tehran by Ninara [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/7QX7nZ [cropped and processed]Last week, on the heels of Iran’s ballistic missile test, the Office of Foreign Assets Control (“OFAC”) announced new sanctions on Iran. These sanctions appear to have been in the works for some time judging by wealth of detail in the explanatory press release.

The sanctions target, among other individuals, Abdollah Asgharzadeh and a network of people and companies that have assisted him in procuring items for Iran’s ballistic missile program. One person alleged to be in the network is Carol Zhou, who is described as one of “three China-based brokers” who assisted in these procurement activities. No  information is provided with respect to Carol Zhou other than her date of birth. And because she is being sanctioned under the Weapons of Mass Destruction Proliferators Sanctions, this means that secondary sanctions can be imposed under the Iran Financial Sanctions Regulations against foreign financial institutions that deal with Ms. Zhou.

It should come as no surprise to anyone, including the staff at OFAC, that Carol Zhou is an extremely common name and a name that no one would want to have right now. Not only will any transaction with the name of Carol Zhou on it, whether or not it involves the designated Carol Zhou, risk being blocked by U.S. financial institutions and entities but also that transaction will risk being rejected by every other financial institution in the world. Of course, for blocked transactions, the other Carol Zhous can just hire lawyers and march into OFAC with their passports (which hopefully will show a different birthdate) to get the blocked funds back. But there is nothing an innocent Carol Zhou can do about a rejection by a non-U.S. bank, which likely will not want to be bothered inspecting passports and will simply automatically reject the transaction.

So, while the Daniel Garcias of the world get a reprieve, the Carol Zhous of the world get a raw deal. If OFAC is going to continue to designate people with common names, it has an obligation to craft a process to minimize the collateral damage of the designation.

Photo Credit: Tehran by Ninara [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/7QX7nZ [cropped and processed]. Copyright 2010 Ninara

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Jan

31

OFAC Fines Canadian Bank for Complying with Canadian Law


Posted by at 6:29 pm on January 31, 2017
Category: Cuba SanctionsEconomic SanctionsForeign CountermeasuresOFAC

Caught in the Act by Exile on Ontario Street [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/JG66R4 [cropped and processed]The Office of Foreign Assets Control (“OFAC”) recently whacked “Toronto-Dominion Bank … a financial institution headquartered in Toronto, Canada,” with a $516,105 fine for various sanctions violations including — get this — maintaining bank accounts for 62 Cubans in Canada.  Yes, OFAC is now going after Canadian banks for holding accounts for Cubans in Canada, apparently under the common delusion that Canada is the 51st state.

Of course, part of the problem here may be the endemic sloppiness in OFAC reports of its penalty actions. It’s not at all clear exactly what corporate entity is involved, as Toronto-Dominion Bank is not the name of any corporate entity that I could locate. It appears to be a reference to TD Bank Group, a Canadian corporation headquartered in Toronto, and not a reference to its U.S. banking subsidiary TD Bank, N.A., if for no other reason than that the U.S. banking operation does not have branches in Canada.

The jurisdictional hook alleged by OFAC to cause Cuban accounts in a Canadian bank to be illegal under U.S. law is, apparently, this:

Between August 7, 2007 and January 24, 2011, TD Bank processed 99 transactions totaling $459,341.62 to or through the United States on behalf of these customers in apparent violation of the CACR

OFAC can’t be bothered to explain what provision or how this violates the CACR, probably because it is just an “apparent” violation.  However, in all instances, violations must either be “by a person subject to the jurisdiction of the United States,” which TD Bank Group in Canada is not, or must involve “property subject to the jurisdiction of the United States.” The definition of “property subject to the United States” is set forth in 515.313 which only talks about securities and doesn’t mention currency. Apparently then OFAC’s theory here is part of its overreaching belief that dollars anywhere located and by whomever owned are, nonetheless, property subject to the jurisdiction of the United States. If you touch a U.S. Dollar, you can be sent to a U.S. jail.

Leaving aside the agency’s unconscionably expansive view of its own extraterritorial jurisdiction, OFAC, yet again, pretends that this tenuous extraterritorial connection over Canada trumps (so to speak) Canada’s own laws. The Canadian Foreign Extraterritorial Measures Act forbids TD Group from complying with the U.S. boycott of Cuba. It is one thing (though not much better) to tell a U.S. company, such as Carlson Wagonlit, choosing to do business in a country with an embargo blocking statute that it must violate that foreign statute; it is quite another thing to say that to a foreign company that is incorporated in that jurisdiction.

Moreover, sections 3 and 5 of the Canadian Human Rights Act also likely would make it illegal for TD Group to deny services based on national origin to the Cuban account holders. During the time period involved in the violations at hand, section 515.505 provided that Cuban nationals who had taken up permanent residence in Canada were still blocked unless they obtained a specific license from OFAC. So, in effect, OFAC is fining TD Bank for refusing to violate the human rights of Cubans, including Cubans who were permanent residents of Canada.

An odd footnote to the OFAC announcement of the TD Bank Group fine notes the change in 515.505 which would unblock Cuban’s who became permanent residents of Canada without need for a specific license. Presumably this offers the cold comfort that, in the future, Canadian companies will only have to violate the human rights of a smaller group of people to avoid an OFAC fine.

Photo Credit: Caught in the Act by Exile on Ontario Street [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/JG66R4 [cropped and processed]. Copyright 2009 Exile on Ontario Street

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Aug

16

Yes, We Have No Bananas!


Posted by at 5:33 pm on August 16, 2016
Category: Economic SanctionsOFAC

Bananas by Anthony Easton [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/5NmyCf [cropped and processed]

The problem with many economic sanctions, particularly those aimed at drug lords, is that they wind up hurting the wrong people. Consider the case of the designation of the inaccurately named John Angel Zabaneh by the Office of Foreign Assets Control (“OFAC”) as detailed in this excellent Reuters news story. OFAC put Zabaneh on the SDN List based on its belief that Zabaneh is connected with Joaquin “El Chapo” Guzman, head of Mexico’s Sinaloa drug cartel, although Zabaneh denies this.

Because drug lords do not live by drugs alone, targeted narcotics kingpins in Central America often have other, and sometimes quite significant, legitimate business interests. In this case, Zabaneh was also a banana farmer in Belize and his farms contributed a significant portion of Belize’s banana exports. It should probably come as no surprise that bananas constitute about 20 percent of all of Belize’s exports.

So when OFAC designated Zabaneh, it ultimately resulted in shutting down his banana farms when his customers became unwilling to deal with him. This resulted, according to the Reuters article, in a 13.5 percent plunge in banana exports from Belize and the loss of 900 jobs previously held by workers on the Zabaneh farms.

There is no evidence that this caused Mr. Zabaneh to exit the drug trade, if he ever was in it, or crimped his lifestyle in any fashion. The only effects, it would appear, of the OFAC sanctions was that it allowed the U.S. government to feel good about itself and caused a bunch of people in Belize, with no connection to any drug trade, to wonder where there next meal might be coming from.

Photo Credit: Bananas by Anthony Easton [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/5NmyCf [cropped and processed]. Copyright 20xx Sami Keinanen

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Copyright © 2016 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

Jun

24

A Brief Brexplanation of Brexit and Brexport


Posted by at 11:37 am on June 24, 2016
Category: BrexitEconomic SanctionsEUOFAC

Boatleave-12 by Gary Knight [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/J5K8dc [cropped]

Although Brexit is unlikely to be in effect for almost two years or more, there are some questions as to what impact Brexit might have on British export controls and economic sanctions.  Any prediction here is risky beyond my speculation that the UK will be unlikely to alienate the U.S. and other allies by significantly altering its export and sanctions regimes.

At this point, and in the wake of the vote last night, you may find it useful to understand the legal background under which Brexit will affect U.K. export controls and sanctions.   Given that all your Facebook friends have suddenly become experts on Brexit (soon to be known as Brexperts), you can now impress them as a Brexport Brexpert.

Let’s start with the Wassenaar Arrangement.  The European Union is not a party to the Wassenaar Arrangement.  Rather all member states of the E.U. (other than Cyprus) are individual members of the Wassenaar Arrangement.   Accordingly, Brexit will have absolutely no impact on Britain’s obligations under Wassenaar.   The Wassenaar Agreement is the source, via Council Regulation (EC) No 428/2009 (and associated legal amendments) of the UK Control Lists.  Although the intermediate authority for the lists will go away on Brexit, no alteration in those control lists will occur by virtue of Brexit alone.

This brings us to Council Regulation (EC) No. 428/2009, which establishes the E.U. framework for export controls. Here it is important to understand that the regulation did not create a centralized EU export control regime. Rather it left principal authority with Member States to implement their own control regimes in accord with principles set forth in the regulation. Britain’s Export Control Order of 2008 implements 428/2009 and related EU authorities. Although it will become untethered from 428/2009 on Brexit, there is no reason that it should not remain in place post-Brexit.

The situation with sanctions is somewhat more complicated and depends on the particular EU sanction. The JCPOA, which lifted many international sanctions on Iran, for example, will not be affected because the U.K. is an independent signatory to the JCPOA.  Other E.U. sanctions, such as the Russia/Ukraine sanctions, have direct legal effect in the U.K., although it is up to the member state to establish and enforce penalties. In these instances, there is no independent legal authority in the U.K. for that sanction, and its status after Brexit becomes uncertain. It is, of course, likely that Britain will not seek to alienate its allies by walking away from these sanctions, but it will have to enact domestic legislation to implement them before or after Brexit.

Photo Credit: Boatleave-12 by Gary Knight [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/J5K8dc [cropped]. Copyright 2016 Gary Knight

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Copyright © 2016 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)