Archive for the ‘Economic Sanctions’ Category


Apr

15

Justin Timberlake Shows the U.S. Is Not NSYNC With Its Sanctions Songbook


Posted by George Murphy at 6:30 pm on April 15, 2014
Category: Economic SanctionsOFACRussia DesignationsRussia SanctionsSDN List

By Mandy Coombes [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3AJustin_Timberlake_-_Justified_World_Tour_-_Earls_Court_-_2.jpg

Armed with over 30 million Twitter followers and a shelf-full of Grammy and Emmy awards, Justin Timberlake may be staring down U.S. sanctions better than Putin himself.  Reuters reported last week that JT’s sold-out show next month at Helsinki’s Hartwall Arena will go on despite the fact that the largest indoor venue in the country is owned by Gennady Timchenko, Arkady Rotenberg and Boris Rotenberg.  All three Russians are on the SDN List because they are, in OFAC’s words, members of the Putin “Inner Circle.”  Perhaps equally as important to Finnish music fans, Miley Cyrus, Aerosmith and Nine Inch Nails are also scheduled to perform at the Hartwall Arena between now and June 1st.

Because U.S. company Live Nation is the concert promoter for these U.S. musicians, there is an understandable concern that dealings with Hartwall Arena may be impermissible under U.S. sanctions law because the 15,000-seat venue is entirely owned by a troika of billionaires on the SDN List.  But no one will have to stop the music as Live Nation announced that “U.S. officials had indicated at the weekend that the sanctions would not prevent the concerts going ahead.”

Some have speculated the shows would go on because Live Nation may have already paid in full Arena Events Oy, the entity owned by Timchenko and the Rotenbergs which owns the Hartwall Arena, prior to the three Russians being added to the SDN List.  But that logic doesn’t hold up because, if paying Arena Events Oy would be a violation, so would, according to the relevant executive order, providing services “for the benefit of” Arena Events Oy.  If Live Nation could not pay for the concert, Justin and Miley could not perform their services.

The most likely response that OFAC may have given Live Nation has been a recent focus of ours: the so-called 50 percent rule.  We reported a few weeks ago that Visa and Mastercard resumed transactions with banks owned by the Rotenbergs because, as we understand it, no one Rotenberg owns 50 percent or more of the banks.  Presumably, then, Timchenko and the Rotenberg Brothers do not individually hold more than 50 percent.  Of course, an entity owned entirely by three Russian SDNs is a good candidate for designation at any time.  You have to imagine that OFAC may have made some assurances to Live Nation else Live Nation would be ill-advised to fly its pricey talent in private jets to Finland only to have the Arena designated moments before the stars arrive.

These concerts are, however, a hallmark of how out of tune sanctions enforcement appears to be in relation to the zeal of the President’s executive orders authorizing the sanctions in the first place.  What better opportunity for OFAC to elucidate the 50 percent rule in order to explain how U.S. sanctions will permit four American musical acts, who are each listened to by millions around the world, to perform before tens of thousands of people about a two-hour drive from the Russian border in an arena owned solely by three Russian individuals on the SDN List.

Enforcing sanctions against entities owned or controlled by someone already targeted by sanctions is an important arrow in any country’s sanctions quiver.  How such an enforcement policy is defined and articulated publicly is critically important to its effectiveness.

As it stands now, U.S. sanctions would permit Miley Cyrus to sing her hit song “Party in the U.S.A.” to a concert with Putin in attendance.  For a whole host of reasons, we don’t want to see that.

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Apr

8

The Best Question on Burma Sanctions Is Still Unanswered


Posted by George Murphy at 6:28 pm on April 8, 2014
Category: Burma SanctionsCompliance Programs and ProceduresEconomic SanctionsGeneralOFACSDN ListZimbabwe Sanctions

By Bild von Stefan Grünig, CH-3752 Wimmis (de:Benutzer:Sgruenig)Sgruenig at de.wikipedia [GFDL (http://www.gnu.org/copyleft/fdl.html) or CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0/)], from Wikimedia Commons http://commons.wikimedia.org/wiki/File%3ABurma06.jpg

OFAC announced last week that it issued additional Frequently Asked Questions and respective answers relating to what remain of U.S. sanctions against Burma.  None of the additional questions or answers is surprising or resolves an issue that is not otherwise answered by other OFAC guidance or applicable general licenses.

The questions and answers are, for the most part, a helpful recitation of the current landscape of sanctions involving Burma that summarize in one place the state of sanctions based on an assortment of scattered statutes, executive orders, regulations and licenses.  But one question stands out along with its non-responsive answer, in part, as follows:

What are the plans to update the SDN List for Burma?

Listings and any potential delistings under our Burma authorities will be pursued as appropriate to meet changing conditions in Burma.

The question itself has a colloquial quality to it as if the frequently asked question really put to OFAC has been along the lines of “What’s going on here?”

As other questions and answers describe, a number of banks remain on the SDN List but General License 19 authorizes U.S. persons to conduct most transactions with the banks.  In a similar situation about a year ago dealing with Zimbabwean banks, we posted about OFAC’s decision to keep those banks on the SDN List but, through a general license, to authorize almost all transactions with them.  At that time, I termed both the Burmese and Zimbabwean banks as SDN-lite designations and warned of the potential compliance difficulties such situations presented.

Keeping an entity on the SDN List would have the effect of blacklisting it from possible business with U.S. persons who rely solely on software to screen names on the SDN List to decide with whom to do business.  The results, of course, would create false positives because most transactions with these Burmese and Zimbabwean entities are permissible under U.S. law.  In fact, running these banks through OFAC’s SDN Search tool produces hits with no mention of any general license permitting dealings with them.

Delisting would, of course, be one option to correct the problem, but that would unblock any currently blocked assets, something OFAC might not wish to do.  Failing that, OFAC should at least put some annotation on the SDN List to denote that these very few entities are to be treated very differently than the thousands of others on the SDN List with whom U.S. persons may have no dealings.  At the moment, the question is back to OFAC, “What are the plans to update the SDN List?”

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Apr

2

New Russia Sanctions Passed by Congress Are Needlessly Confusing


Posted by Clif Burns at 2:16 pm on April 2, 2014
Category: Economic SanctionsOFACRussia Sanctions

Putin Feeds Animals by premier.gov.ru [CC-BY-3.0 (http://creativecommons.org/licenses/by/3.0)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3APutin_animals.jpegAbout the only thing the current partisanly-split Congress can agree on is sanctions legislation: first Iran and now Russia. So the Ukraine Aid bill passed yesterday contains the obligatory sanctions provisions. The problem is, however, that even though both sides of the aisle love economic sanctions, neither side understands them, and, as a result, the bill is a mess.

Mostly the new sanctions mandate the President to impose sanctions on people he finds have done bad things: “undermin[ing] the peace, security, stability, sovereignty, or territorial integrity of Ukraine” or “ordering, controlling, or otherwise directing, acts of significant corruption in Ukraine” or the Russian Federation.  Of course, it’s up to the President to determine who these folks are, and this is a power he already has under the International Emergency Economic Powers Act (“IEEPA”) as evidenced by the last two rounds of designations. But, hey, this allows Congress to get in the game too and tell the voters at home they stood up for Ukraine, even if it is, more or less, an empty gesture.

The problem comes with respect to the particular sanctions that Congress tells the President to impose on those who have engaged in undermining security of Ukraine or directing corruption in Ukraine or the Russian Federation. At first, these look pretty standard: asset blocking and visa bans. But then we get to the exception:

The requirement to block and prohibit all transactions in all property and interests in property under paragraph (1)(A) shall not include the authority to impose sanctions on the importation of goods.

What this means is far from clear. Let’s say that the White House sanctions Alexei Kirillovich Vronsky (we’ll call him Captain Vronsky for convenience). Now let’s say that he’s short of cash after having all of his assets blocked, so he decides to sell $300 million dollars of Oblonsky Vodka to the United States. In a normal blocking scenario, the $300 million destined to Captain Vronsky would be blocked by the U.S. banks before they could be wired. Does this contravene the exception? The vodka can still be imported into the United States without problem as long as Captain Vronsky isn’t paid. On the other hand, doesn’t the blocking in this case effectively prohibit the importation of the vodka into the United States? Who knows? Certainly no one on the Hill does.

But there’s an even more hilarious mistake. The bill doesn’t define importation. Does it mean importation into the United States or Russia? Or anywhere else for that matter? An exportation from the United States is, after all, an importation somewhere else, whether Russia or some place else. So can Captain Vronsky import a shiny new Corvette into Russia from Detroit? Does the exception prohibit blocking the funds he uses to pay for the imported/exported Corvette?

Of course, the only thing clear as a result of this mess of an exception is that Captain Vronsky, even if he can buy a car from Detroit, can’t buy a condo in Detroit, since there would clearly be no importation (whichever way you define it) in that case.  I also predict the Office of Foreign Assets Control (“OFAC”), which will administer these sanctions, will take the narrow view of the exception and say that blocking payment for the goods does not prohibit their importatiion, which can still occur as long as no payments are made.

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Mar

25

OFAC: Keeping Us Safe from MOOCs


Posted by Clif Burns at 5:24 pm on March 25, 2014
Category: Cuba SanctionsEconomic SanctionsIran SanctionsSudanSyria

By Aristóteles Sandoval [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3A16-02-2011_Guadalajara_Libre_en_Palacio_Municipal.jpgThis blog previously reported on the impact of OFAC sanctions on the Massive Open Online Courses, quaintly known as MOOCs, offered by the for-profit Coursera. The sanctions have led Coursera to block students with IP addresses from Iran, Cuba and Sudan, a half-hearted attempt by the company to comply with U.S. sanctions.   Those sanctions, in general, prevent providing services to nationals of blocked countries even outside their home countries, so offering MOOCs to Iranians in, say, Germany, would be equally problematic. (Coursera gave Syrian students a reprieve relying, rather questionably, on an exemption in Syria General License 11A for educational exports by NGOs).

Last week, the Office of Foreign Assets Control gave Iranian students, both inside and outside Iran, a partial reprieve from the ban on MOOCs when it issued Iran General License G. That license permits enrollment of Iranians, both in and out of Iran, in MOOCs

provided that the courses are the equivalent of courses ordinarily required for the completion of undergraduate degree programs in the humanities, social sciences, law, or business, or are introductory undergraduate level science, technology, engineering, or math courses ordinarily required for the completion of undergraduate degree programs in the humanities, social sciences, law, or business.

Sadly, there was no happiness in Coursera-ville, because the license is restricted to “accredited graduate and undergraduate degree-granting academic institutions.” Not all of Coursera’s courses are offered by accredited academic institutions, so some of its course offering will not benefit from this general license.

Another beneficiary of the new general license would appear to be EdX, the MOOC platform founded by Harvard and MIT. EdX partners with other accredited academic institutions that provide the various offerings made available by EdX. One significant difference between EdX and Coursera is that EdX sought and obtained a license to provide MOOCs to students in  Cuba, Iran and Sudan. Apparently that license did not cover provision of STEM courses, i.e., courses in science, technology, engineering and mathematics, without specific approval by OFAC, according to this Harvard Crimson article.  That article went on to note the refusal of OFAC to permit a MOOC entitled “Flight Vehicle Aerodynamics” taught by MIT faculty.

This would mean that EdX and Coursera no longer need specific licenses for Iranian students to participate in courses taught by accredited institutions other than certain advanced STEM courses. However, licenses will still be required to initiate Cuban and Sudanese students into the intricacies of George Eliot’s Middlemarch or the structure of French symbolist poetry. (It is well known that familiarity with Eliot and Valéry are mere stepping stones to terrorist and anti-American activity, so we will be safe from literary Cuban and Sudanese terrorists, at least for the moment.) This General License, however, probably has no effect on the “Flight Vehicle Aerodynamics” course, because although it is far from clear what is meant by STEM courts “ordinarily required for the completion of undergraduate degree programs in the humanities, social sciences, law, or business,” it is probably safe to assume that “Flight Vehicle Aerodynamics” is not among them.

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Mar

19

UN Calls Foul on Dennis Rodman


Posted by Clif Burns at 11:45 pm on March 19, 2014
Category: Economic SanctionsNorth Korea SanctionsU.N. Sanctions

By Copyright Steve Lipofsky Basketballphoto.com [GFDL (http://www.gnu.org/copyleft/fdl.html) or CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3ARodman_Lipofsky.jpgThere has been a ton of publicity regarding Dennis Rodman’s preposterous Happy Birthday Mr. Dictator tour on which Rodman visited North Korea’s paunchy dictator Kim Jong-Un to wish him many happy returns and many more years of human rights violations. Of course, no dictator’s birthday celebration would be complete without bottles of vodka and other gifts of tribute from has-been basketball stars.

The U.N. Panel report, which we previously reported here, included Rodman’s swag bags for Kim Jong-Un as violations of U.N. sanctions on North Korea, singling out bottles of vodka, Irish whisky, crystal decanters and glassware and a Mulberry handbag.  The Panel made clear that these all fell within the sanction’s definition of luxury goods which covers spirits, high-quality lead crystal glassware and high-quality handbags. Of course, notwithstanding the sanctions, I’d like to see a picture of Kim Jong-Un sporting the Mulberry handbag.

But the U.N. Panel also took the opportunity to swat the United States on the matter, noting that the United States had not reported these gifts to the panel. Paragraph 26 of Security Council Resolution 2094 requires member states to report evidence that the states have of non-compliance with the U.N. sanctions on North Korea. The United States was mum on the Rodman gifts, just as the United Kingdom did not report the sale of a Princess luxury yacht manufactured in Plymouth, England, to the Nork dictator.

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