Archive for the ‘Iran Sanctions’ Category



Court Holds US Can Jail Anyone Anywhere for Dollar Based Transactions

Posted by at 7:58 am on October 21, 2016
Category: Criminal PenaltiesIran SanctionsOFAC

Reza Zarrab via Facebook [Fair Use]
ABOVE: Reza Zarrab

I often joke about the number of foreigners who arrive in the United States with their families hoping to see Mickey Mouse but who wind up seeing Elliot Ness and a jail cell instead. Controversial Turkish businessman Reza Zarrab showed up in Miami on March 19 of this year to take his wife and daughter to Disneyland and was arrested at the airport.  His application for bail was denied, and he is still languishing in jail, despite having retained fifteen lawyers from top-flight law firms.

Zarrab is accused of violating U.S. sanctions on Iran by processing payments through his financial network for companies in Iran.   His dream team of lawyers sought to dismiss the indictment, arguing that U.S. sanctions could not reach a foreign citizen requesting foreign banks to send money from foreign citizens to persons in Iran. Judge Berman, writing for the United States District Court for the Southern District of New York, just issued an opinion disagreeing with the defendant’s claim and asserting that the United States could prosecute anyone anywhere in the world engaged in any transactions involving U.S. Dollars.

There are two questions here, one much easier than the other.   The first is whether the Iran Transactions and Sanctions Regulations prohibit this conduct.   The court held, and probably rightly so, that since dollar-based transactions were involved, the transactions ran afoul of the prohibition in the regulations against the export of services from the United States to Iran.  Clearly, if a U.S. bank was used to clear the dollar transaction, there is a good argument that financial services were exported from the United States to Iran in violation of the prohibition in section 560.204 on the export of services from the United States to Iran.

The second and harder question is whether Congress, when it passed the International Emergency Economic Powers Act, under which the regulations were promulgated and which establishes criminal penalties for violations of those regulations, intended to reach extraterritorial conduct. And on this issue, Judge Berman reaches the conclusion that Congress intended in IEEPA intended to criminalize any conduct involving U.S. dollars but he does so by misquoting the relevant statutory provision:

50 U.S.C. § 1702(a)(l)(B) grants the President broad powers, including the power to
“investigate, block during the pendency of an investigation, regulate, direct and compel … any property in which any foreign country or a national thereof has any interest … subject to the jurisdiction of the United States.”

Except here is what the statute really says with the omitted portions bolded and the significant provisions underlined:

investigate, block during the pendency of an investigation, regulate, direct and compel, nullify, void, prevent or prohibit, any acquisition, holding, withholding, use, transfer, withdrawal, transportation, importation or exportation of, or dealing in, or exercising any right, power, or privilege with respect to, or transactions involving, any property in which any foreign country or a national thereof has any interest by any person, or with respect to any property, subject to the jurisdiction of the United States

The significance of Judge Berman’s misquotation is that he omits a significant qualification regarding “property subject to the jurisdiction of the United States.” The actual language gives the President the power “with respect to, or transactions involving,” property in which a foreign national has an interest but omits the power with respect to “transactions involving” property “subject to the jurisdiction of the United States.” This is significant because Congress’s omission of “transactions involving” underlines the common understanding that Congress granted authority to block such property but did not go so far as to assert that it can criminalize foreign conduct by foreign persons that could be characterized as “transactions involving” such property.

NOTE:  My apologies for the sporadic posting but anyone who knows me knows that I am a die-hard Cubs fan, meaning that I’ve been up late, way too late, watching baseball games.  These games, as you may know, have run so late into the night in large part because pitchers (we’re looking at you Pedro Baez!) are blithely ignoring the never-enforced 12-second rule and are taking the time it takes for Watson to break a 256-bit AES cipher between pitches.  Once baseball finishes up for the season, I’ll be back to a more regular schedule.

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Copyright © 2016 Clif Burns. All Rights Reserved.
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Flowers for Ahmadinejad

Posted by at 9:25 pm on September 13, 2016
Category: Iran SanctionsOFAC

Sorbet Autumn Select Mix Viola via [Fair Use]The Office of Foreign Assets Control (“OFAC”) today fined a company a whopping $4,320,000 for selling things to Iran. Oh wow, you say, this must have been some really bad stuff like, say, high-powered computers or drones, right? Yep, really dangerous stuff — flower seeds. As in, the things you bury in your backyard and hope sprout up as zinnias.

Well, okay, so maybe they didn’t sell anything dangerous. The company, which is PanAmerican Seed in Illinois, must have sold like a billion dollars worth of seeds, right? Um, we don’t know the value of the seeds. For some reason OFAC won’t say. This is odd because OFAC almost always says what the value of the shipments was. OFAC does say something surpassingly strange about the dollars involved, something it’s never said before. In aggravating factor 4, OFAC says this:

PanAm Seed engaged in this pattern of conduct over a period of years, providing over $770,000 in economic benefit to Iran.

Now this is definitively not the value of the shipment. If $770,000 was the price of the exported goods, then PanAmerican which, presumably, was paid for the seeds by people in Iran, got the $770,000 benefit, or at least however much of that price represented its profit. I suppose this means the profit Iranians made after planting the seeds and selling the flowers, although how OFAC figured that out is rather hard to discern. And if the profits made by Iranian on the seeds is the economic benefit to Iran, then the value of the shipments had to be well south of that figure.

Why OFAC would go to such length to obfuscate the value of the shipments is unclear. Leaving aside that we are talking about petunia seeds here, PanAmerican Seed, at least if OFAC is to be believed, did not behave well. Apparently, it knew what it was doing; it concealed the ultimate destination of the shipments; it refused to cooperate with OFAC when it was turned in; and it apparently provided “inaccurate, misleading, or incomplete” information to OFAC

In any event, it still seems that OFAC has better things to do than to tiptoe through the tulips in Tehran.

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Copyright © 2016 Clif Burns. All Rights Reserved.
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ZTE Gets Last Minute Reprieve (Sort Of)

Posted by at 10:33 pm on June 28, 2016
Category: BISChinaEntity ListIran Sanctions

ZTE Stand 6 via [Fair Use]The Bureau of Industry and Security today announced that it was extending the Temporary General License which permitted exports to ZTE from June 30 all the way to August 30. ZTE, as this blog reported here, was placed on the Entity List because of elaborate shenanigans by the company by which it bought U.S. goods and resold them to Iran.

Two weeks after bringing the ban hammer down on ZTE, BIS issued a temporary general license which covered March 24 to June 30, more than three months. The new temporary license expires on August 30, one day short of two months from June 30. Why this temporary license is shorter than the previous one was not disclosed but one can only suspect that ZTE may not be minding its manners in the way that BIS would like to see.

The problem for U.S. exporters is that such a short license, with the real possibility, given its shortened length, that it may not be renewed beyond August 30, opens up the possibility that the exporter will sell items to ZTE that it may not later be able to service even though the warranty on those items is still in force. If the temporary general license is not renewed and ZTE stays on the list, the ability of the U.S. exporter to send replacement parts to ZTE or, alternatively, to repair the item in the United States and return it to ZTE will be in question. It would not surprise me if the temporary general license does not get much use.

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Copyright © 2016 Clif Burns. All Rights Reserved.
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DOJ Issues Misleading Press Release in Connection with Export Guilty Plea

Posted by at 11:47 pm on June 15, 2016
Category: BISCriminal PenaltiesIran SanctionsOFAC

All in a Day's Work by Damian Gadal via Flickr [Fair Use]
ABOVE: Erdal Kuyumcu

This blog reported earlier on the case against Erdal Kuyumcu in connection with exports of an EAR99 Cobalt Nickel powder (CoNiCrAIY) to Iran. In that initial post, I questioned the government’s evidence that Mr. Kuyumcu knew that his sales of this powder to a customer in Turkey were destined to Iran, noting that the criminal complaint based its allegations on the “training and experience” of an investigating agent who felt that unrelated emails discussing Iran covered these shipments. (I also mocked the agent’s claim that a “[b]ased on my training and experience … [a] colon followed by a close parenthesis … represents a smiley face.”)

Yesterday the Department of Justice issued a press release stating that Mr. Kuyumcu had pleaded guilty to the charges against him. Of course, the DoJ, as usual, could not restrain itself from misleading hyperbole in the process of patting itself on its own back:

Kuyumcu, a United States citizen, conspired to export from the United States to Iran a metallic powder composed of cobalt and nickel without having obtained the required license from the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC). The metallic powder can be used to coat gas turbine components, such as turbine blades, and can also be used in aerospace, missile production, and nuclear applications. Such specialized metals are closely regulated by the U.S. Department of Commerce to combat nuclear proliferation and protect national security, and exporting them without an OFAC license is illegal.

Why, you ask, if CoNiCrAIY powder is “closely regulated” by the U.S. Department of Commerce was its export a violation of OFAC rules? Good question. CoNiCrAIY powder is EAR99 and its export is not regulated, either “closely” or otherwise, by the Department of Commerce. Perhaps the DoJ has gotten confused, innocently or otherwise, by ECCN 2E003.f which controls certain “technology” for application of certain specified inorganic compounds, including CoNiCrAIY and similar compounds, on non-electronic substrates. But even this is not tantamount to close regulation of the powder because other inorganic compounds covered within these controls of deposition technology include tungsten and oxides like, er, carbon dioxide. By this logic, if Kuyumcu exported a carbonated soft drink to Iran, the DoJ could claim that he exported a product to Iran “closely regulated” by the Department of Commerce.

Once again, we see that the government can misinterpret export laws and regulations with immunity while everyone else does so at their peril.

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Copyright © 2016 Clif Burns. All Rights Reserved.
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More Border Search Shenanigans by Customs in Sanctions Case

Posted by at 8:51 pm on May 25, 2016
Category: Border SearchesCriminal PenaltiesCustomsIran SanctionsOFAC

Los Angeles International Airport by Daniel Betts [CC-BY-SA-2.0 (], via Flickr [cropped]Here we go again. Another case has surfaced where U.S. Customs seized computers and other electronic media from a U.S. traveler at the border, shipped them off to be imaged, rifled through the imaged contents looking for evidence and then weeks later, based on emails they found while going through the computer images, finally sought a search warrant arguing that there is probable cause that the Iran sanctions had been violated.

This almost identical scenario recently led a federal district court in Washington, DC, to toss out evidence gathered in this fashion. And neither of these cases is particularly tough: if you have the time to haul the computer from the airport after the passenger has departed, you have time to get a warrant before snooping through the computer. This is not like the typical border search where Customs looks at a suitcase before the traveler takes it with him to a foreign country.

The latest case involves a search of Idin Rafiee, a San Diego resident and U.S. citizen, who, on October 5, 2012, was traveling to London through LAX. He had a computer, an external hard drive, a smart phone and a tablet with him. A Customs agent told Mr. Rafiee that Customs was detaining his electronic media on the ground that there was reason to believe that there was child pornography on it. The media was imaged on October 9 and returned to Rafiee on  October 13. The government did not seek a search warrant until November 1, 2012, and based the warrant on emails that it obtained from the seized media before it had obtained a warrant. Subsequently, Rafiee was charged with violating the U.S. sanctions on Iran.

The child pornography claim was a complete fabrication. There was never any evidence supporting such a belief and no such pornography, or any pornography for that matter, was alleged by the government to have been found. Instead, the only evidence the government had before it searched Rafiee’s devices was an alleged statement by a disgruntled employee that the defendant was doing business in Iran, even though the notes of the conversation with the employee produced by the Government did not mention Iran.

Of course, even if the Government had some valid reason to grab Rafiee’s stuff, there was no exigency once they had it to justify searching it before getting a warrant. They had all the time in the world, as their one month delay in applying for a warrant amply demonstrates. Beyond that, the notion that you can bootstrap a warrant request with evidence from the same computer you are asking to be permitted to search is, at best, ludicrous.

Not surprisingly, the Government finally dropped all charges against Rafiee on May 13, 2016, before the Court even had an opportunity to rule on Rafiee’s motion to suppress.


Photo Credit: Los Angeles International Airport by Daniel Betts [CC-BY-SA-2.0 ( licenses/by-sa/2.0)], via Flickr [cropped]. Copyright 2014 Daniel Betts

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