Archive for the ‘General’ Category



UBS Fined by OFAC For Dealing with Secret SDN

Posted by at 9:40 pm on August 27, 2015
Category: General

UBS by Martin Abegglen [CC-BY-SA-2.0 (], via Flickr [cropped]The Office of Foreign Assets Control (“OFAC”) whacked UBS AG, a Swiss bank, with a $1,700,100 penalty today. (That extra $100 is there to prove that OFAC reached this penalty in a super-accurate and completely scientific fashion.) The fine arises from UBS processing 222 transactions of unidentified value for an individual whose name was kept secret by the bank from OFAC but who was apparently designated as a global terrorist on OFAC’s Specially Designated Nationals and Blocked Persons List (the “SDN List”).

Although everyone understands why the Santa in Secret Santa is a secret, it may not be immediately clear why the SDN in a Secret SDN is clear. Apparently, Swiss law protects the names of global terrorists as well as those of ordinary customers. In other words, Switzerland is more interested in protecting the revenue of its banks than the safety of everyone else in the world. Frankly, if OFAC stood up to this nonsense and said it would fine UBS the maximum penalty (at least $250,000 times 222 violations which comes to $55.5 million) if it didn’t cough up the name of the SDN in question, well, even I might have said that was justified.

There’s another oddity in the OFAC release explaining the penalty. Obviously since the case was all about a secret SDN, the only way that OFAC could have learned about it without annoying the Swiss government is through a voluntary disclosure by UBS.

OFAC has determined that although UBS identified all of the apparent violations, the disclosures are not voluntary self-disclosures within the scope of OFAC’s definition under the Economic Sanctions Enforcement Guidelines, 31 C.F.R. part 501, app. A, because they were substantially similar to another apparent violation of which OFAC was already aware.

It’s rather difficult to get any idea what this means in the context that OFAC has no idea as to the identity of the SDN involved. So what does substantially similar mean? That OFAC had knowledge that UBS was supporting another SDN? Or does it mean that OFAC was aware that UBS had processed blocked funds for the Cuban government? Apparently, OFAC is saying that if it knows that you ever violated any OFAC rule you have no right to voluntarily disclose a separate and unrelated violation of that or a similar rule.

Still, between the Swiss and OFAC in this situation, I’m voting for OFAC.

Permalink Comments Off on UBS Fined by OFAC For Dealing with Secret SDN

Bookmark and Share



Guns and Meat: More on the Midamar Case

Posted by at 9:58 am on August 20, 2015
Category: General

Bobcat Skid Loader via[Fair Use]I have wondered about the persistent zeal of the DoJ in pursuing a criminal case against Bill Aossey, the owner of Midamar Corp., for irregularities in meat exports that may or may not have caused those exports to violate a ban imposed by several countries on the import of non-halal meat products. You can read more about the prosecution of Mr. Aossey here, here, and here. There have been persistent rumors that somehow or other Aossey was involved in smuggling arms to Lebanon. Now we know where those rumors came from.

On Wednesday, a Cedar Rapids newspaper announced that various members of the Herz family, who apparently had been employed at Midamar and were friends with Aossey, were indicted for, among other things, unlicensed exports of firearms to Lebanon. The indictment alleges that the arms were hidden by the Herz defendants inside Bobcat skid loaders that were  placed in containers  shipped from Midamar’s loading docks.

This issue apparently came up after Bill Aossey’s conviction when the prosecution argued that Aossey should be jailed pending sentencing. They based their argument on his association with the Herz family and the use of Midamar facilities by Herz to engage in the illegal gun exports. Aossey claimed that the containers, which belonged to the Herz defendants, was also being used by Midamar to ship relief items to Lebanon and that he did not know that guns were hidden in the skid loaders. The prosecution, on the other hand, said this:

Assistant U.S. Attorney Richard Murphy admitted there wasn’t direct information tying Aossey to buying or smuggling guns. But he argued it was difficult to believe Aossey didn’t know about it.

There is a compliance lesson here hidden among the meat, guns, skid loaders and relief items: don’t share shipping containers, even with your best friends.

Permalink Comments Off on Guns and Meat: More on the Midamar Case

Bookmark and Share



It’s August, So All the WSJ Editors Must Be in the Hamptons

Posted by at 6:34 pm on August 18, 2015
Category: General

Wall Street Journal Printing by Neon Tommy [CC-BY-SA-2.0 (], via Flickr [cropped]Welcome to Pick-on-the-Wall-Street-Journal Week, which we have just declared because the once-fabled publication has, for the second time in two days, had an unfortunate run-in with fact-checking and U.S. export laws. From a piece titled “Iranian Art Lovers Await Accord’s Benefits,” reporter Kelly Crow says this:

For decades following Iran’s 1979 Islamic revolution, U.S. collectors wishing to visit Iran needed a travel license from the U.S. Treasury Department’s Office of Foreign Assets Control, which gave out a handful of licenses a year to those seeking to visit Iran and bring home “informational materials.”

Both travel to, and imports from, Iran were banned for the brief period from April 17, 1980, pursuant to Executive Order 12211, until January 23, 1981, when Executive Order 12282 revoked the travel and import bans imposed by President Carter in Executive Order 12211. Thereafter, no license has ever been required to travel to Iran.

Imports from Iran were not banned again until 1987 when President Reagan issued Executive Order 12613 in 1987. Shortly thereafter the Berman Amendment was passed in 1988 as section 2501(b) of the Omnibus Trade and Competitiveness Act of 1988. Under the Berman Amendment, “informational materials” could be imported from Iran. OFAC guidance provides that artwork classified under HTSUS 9701, 9702 and 9703 qualifies as “informational materials” eligible for importation from Iran without a license.

So, to summarize, licenses were not required “for decades” in order to travel to Iran to bring back artwork. A license to travel to Iran and to bring back artwork was required for less than one year between 1980 and 1981. Importing artwork from (but not travel to) Iran was banned thereafter only between October 29, 1987, and August 23, 1988.  After that, artwork could be freely imported from Iran without license as informational materials.

Permalink Comments (2)

Bookmark and Share



More Export Controls Because, Er, Killer Robots

Posted by at 6:07 pm on August 17, 2015
Category: General

Trumpet-Playing Robot by Angela N. [CC-BY-SA-2.0 (], via Flickr [cropped]

Wall Street Journal tech writer Christopher Mims has a really bad idea today: impose U.S. “export controls on commercial robotics and drone technology.” Mr. Mims, who was trained as a neuroscientist, can, I suppose, be forgiven for not knowing much about export controls, but that still does not fully excuse such a ridiculous idea.

First, let’s start with his reason for imposing these export controls, which appears to have had its genesis in Mims spending too much time watching old Terminator flicks.

It’s inevitable, say the experts I talked to, that nonstate actors and rogue states will create killer robots once the underpinnings of this [commercial robotics and drone] technology become cheap and accessible, thanks to its commercial use.

Yes, but terrorists and rogue states can use mobile phones to detonate bombs remotely as well, and no one is suggesting that the way to solve this problem is to prevent the export of mobile phones and mobile phone technology.

Second, and most importantly, the notion that export controls would solve this problem is based on Mims’s notion that all technology of any value comes from the United States. If other countries have such technology, U.S. export controls won’t fix the problem and will simply disadvantage U.S. companies. On this point, Mims should read his own newspaper. The Wall Street Journal, only a few months back, noted that the biggest seller of commercial drones, the ones that Mims fears will be loaded with bombs by terrorists, is SZ DJI Technology Co., located in … are you ready? … China.

Permalink Comments (1)

Bookmark and Share



Worst. Case. Ever. Seriously

Posted by at 2:27 am on July 22, 2015
Category: General

Fernando Zevallos  [Public Domain]
ABOVE: Fernando Zavellos

After reading the D.C. Circuit Court of Appeals opinion in Zevallos v. Obama, I have to side with the Office of Foreign Assets Control (“OFAC”), something remarkable for me, but, honestly, the case for de-listing made by lawyers for a designated narcotics kingpin, Fernando Zevallos, was, simply put, ridiculous and the D.C. Circuit was overly polite in upholding OFAC’s decision not to delist him.

Zevallos’s lawyer, probably as an early sign of his desperation, argued that the Court of Appeals should review OFAC’s denial of delisting de novo and not under the arbitrary and capricious standard set forth under the Administrative Procedure Act. The court called such a request “extraordinary and rare,” pointed out that the argument was supported by only one case involving demonstrable agency bias, and, with barely muffled contempt, moved on to the merits. Sadly, for Mr. Zevallos, his arguments on the merits were even worse.

Here’s the thing. If you are trying to convince OFAC that you are no longer a narcotics kingpin, it’s best to make the argument while not sitting in a jail cell in Peru serving a twenty-five year sentence for narcotics trafficking and money laundering.

But wait, it get’s worse. It’s also not a good idea to get caught controlling Panamanian bank accounts with drug proceeds through your sister while sitting in that jail cell in Peru.

Now for the real kicker: Zevallos’s lawyers argued, apparently with a straight face, that this evidence relating to the Panamanian drug money accounts was irrelevant and OFAC could not rely on it in justifying its refusal to delist him because “it showed only that his family continued to control assets derived from narcotics trafficking” and that OFAC “may not rely on evidence that he owns such assets because he cannot legally or practically relinquish control of them, given that they are blocked.” No, I’m not making that up; it’s in black and white on page 10 of the slip opinion.

The court, naturally, is sceptical that you can’t renounce blocked assets. And it does not appear from the opinion that Zevallos even tried to do so. It seems to me that a document renouncing any claim to the funds and agreeing to escheat them to the Panamanian government, if unblocked by OFAC, would have worked like a charm.

Permalink Comments Off on Worst. Case. Ever. Seriously

Bookmark and Share