Archive for the ‘OFAC’ Category


Dec

2

Prosecutors’ Flood of Crocodile Tears Drown the Wind


Posted by at 8:43 am on December 2, 2016
Category: Criminal PenaltiesIran SanctionsOFAC

Reza Zarrab via Facebook https://www.facebook.com/reza.zarrab.9 [Fair Use]
ABOVE: Reza Zarrab

This blog recently reported on the Iran sanctions case against Reza Zarrab in which Judge Berman misread and misquoted the International Emergency Economic Powers Act to hold that the United States has criminal jurisdiction over anyone on the planet who touches a dollar bill or, more accurately, knows that someone else anywhere on the planet might touch a dollar bill. Recently, the prosecution requested a Curcio hearing seeking to disqualify Zarrab’s lawyers at Kirkland & Ellis because they also represent banks that were involved, albeit without knowledge, in the wire transfers to Iran at issue.

A Curcio hearing is one where the prosecution, overcome with a flood of crocodile tears and concern for the defendant, seeks to assure that the defendant receives effective representation of counsel from a lawyer free of any conflict. The irony is that prosecution’s goal is to deprive the defendant of counsel of choice and throw him or her into the arms of brand new counsel all, of course, in the name of protecting the defendant. A further irony here is that Zarrab is represented by top-notch lawyers at Kirkland and that everyone — all the banks and Zarrab —  consented to Kirkland’s representation of Zarrab.

But the real kicker here is the breathtakingly terrible argument that the prosecutors use in their request for a Curcio hearing — namely that the banks are “victims” of Zarrab’s offense:

K&E’s simultaneous representation of Zarrab and at least two victims in this matter,
Deutsche Bank and Bank of America, presents a conflict. The Government has charged Zarrab with defrauding these and other financial institutions by duping them into processing financial transactions that they would not otherwise have engaged in, and in doing so, exposing them to the possibility of substantial harm.

This argument falls apart after only a moment’s scrutiny. The banks at issue either knew that the transactions they processed were destined for Iran or they did not. If they knew, they were co-conspirators and not victims. If they did not know, they did not do anything wrong by processing the transactions and were not victims. And the fact that they are not being fined or prosecuted in this case makes clear that they did not know, that they weren’t exposed to the possibility of harm, that they did not suffer any actual harm, and that they weren’t victims in any sense in which normal people use that word.

An additional problem with this “victim” argument is that, as with any statute or rule protecting the foreign policy interests of the United States, the actual victims of violations of such statutes are the citizens of the United States.  In that case, the only lawyer who could possibly represent Zarrab is a lawyer whose only client is Zarrab and who has not ever represented any U.S. citizens.   For as much as the prosecution might welcome having Zarrab represented by a sole practitioner from a small village in Turkmenistan, I doubt that there are many others who think that might be an acceptable outcome.

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Copyright © 2016 Clif Burns. All Rights Reserved.
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Nov

30

Maybe There’s a Good Idea Lurking in Tom Fox’s Stealth Advertorial


Posted by at 4:44 pm on November 30, 2016
Category: BISCivil PenaltiesCompliance Programs and ProceduresCriminal PenaltiesDDTCFCPAOFAC

Internet Email by twitter.com/mattwi1s0n [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/75rLY [cropped and processed]

Over at the excellent FCPA Compliance & Ethics Blog, Tom Fox has a plug for email monitoring software disguised as a blog post.  He’s even doing a “webinar” with the software developers — completely free, of course —  presumably to push the sales of this product.

Notwithstanding what might not be his completely objective take on this software product, Fox raises a good issue that might warrant consideration for incorporation into your export compliance program.  I assume everyone reading my blog and this post is acutely aware that a robust compliance plan is the best insurance against getting taken to the cleaners by the DoJ and the export agencies after it is discovered that an employee in your Hamburg office has been shipping  your U.S. origin night vision to Iran.  But what does your compliance program do proactively to ferret out such problems?  Fox suggests that companies should consider periodic email sweeps for keywords

The concept is straightforward; at regular intervals you can sweep through your company email database for identified key words that can be flagged for further investigation, if required.

So, should you consider sweeping all emails for keywords such as “Iran” or “Syria”? What other keywords might help pinpoint export compliance problems? “Jail”? “Orange Jumpsuit”? “Export License,” as in “let’s avoid fussing with that stupid export license requirement”? Are there keywords that can identify times when employees say something like “Call me, since we shouldn’t put this in writing”?

While I think such an approach is a nice shiny bauble that can be dangled in front of prosecutors and enforcement agencies and therefore is worth considering, I also wonder whether such sweeps will actually be effective in detecting violations. First, in my experience, most of the problems come from sales employees outside the United States who don’t think U.S. laws should interfere with their commissions. Foreign privacy laws, particularly in the E.U., often pose barriers to rifling through foreign employees’ emails. Second, in my experience, employees, particularly those with mischief in their hearts, are much too savvy to talk openly in emails about their transshipment schemes. They almost always use code of some kind to conceal what they are up to. These employees and their code words are normally not clever enough to fool prosecutors, but those code words — like “the country we discussed” or “Middle Earth” — will easily evade keyword email sweeps.

Any thoughts on this? Share your experiences (anonymously if you wish) in the comments section.

Photo Credit: Internet Email by twitter.com/mattwi1s0n [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/75rLY [cropped and processed]. Copyright 2003 twitter.com/mattwi1s0n

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Nov

29

Why It’s Called The Hill Rag


Posted by at 8:46 pm on November 29, 2016
Category: OFACSudan

The Hill Front Page via https://www.facebook.com/TheHill/photos/a.445406209086.230191.7533944086/10150235234964087/?type=1&theater [Fair Use]

The Washington political gossip sheet officially called The Hill, but more commonly known as “The Hill Rag,” wanders into the world of OFAC regulations and, no big surprise, gets it wrong.   The occasion for the Hill Rag’s regulatory blunder is a blurb on the representation by a DC firm of the government of Sudan in federal court litigation

[The firm] is working for the Republic of the Sudan on “several litigation matters pending before [U.S.] federal courts.” … Because of U.S. sanctions on Sudan, [the firm] must obtain a license from the Treasury Department’s Office of Foreign Assets Control (OFAC) to work on the contract. OFAC approves some activities that would be otherwise prohibited by sanctions, including legal services.

Er, no. Section 538.505 of the Sudanese Sanctions Regulations provides that law firms may provide legal services without a specific license to the Government of Sudan when “made a party to domestic U.S. legal, arbitration, or administrative proceedings.” It also covers suits where Sudan is the plaintiff and which are filed to protect property interests subject to U.S. jurisdiction. These two provisions cover just about any federal court law suit involving Sudan.

The only thing that requires a specific license in these two instances is the receipt of fees by the law firm for the services provided. But licenses are not required, as The Hill says, for all legal services.

I guess the Hill Rag reporters could not find anybody in DC who could talk to them about OFAC or show them how to use The Google.

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Nov

18

Friday Grab Bag


Posted by at 4:41 pm on November 18, 2016
Category: BISIran SanctionsOFACSyria

Grab BagHere are a few recent developments that you may have missed:

  • The House voted yesterday to nullify the impact of a license granted by the Office of Foreign Assets Control (“OFAC”) in September which would allow Boeing to sell civil aircraft to Iran.
  • On Tuesday the House passed a bill to extend the Iran Sanctions Act for another 10 years. The bill, weighing in at around 50 words, makes no changes to the Act beyond extending its expiration date.
  • The Caesar Syria Civilian Protection Act of 2016 was passed by the House on Wednesday. Named after the alias of a military photographer who has taken pictures of the conflict in Syria, the act would require blocking of foreign persons, including presumably the Russians, who provide “significant” support to the Government of Syria or the Central Bank of Syria. It will be interesting to see how this plays out if the new Administration carries out its apparent desire to cooperate with Russia in Syria. Although Russia is fighting ISIS there, it is also supporting the current Syrian regime of Bashar al-Assad.
  • The temporary general license granted by the Bureau of Industry and Security (“BIS”) to permit exports to ZTE notwithstanding its inclusion on the Entity Listwas extended by BIS today until February 27, 2017. ZTE was put on the Entity List after it diverted U.S.-origin goods to Iran.
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Copyright © 2016 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

Nov

1

OFAC Guidance To Publishers: Proceed At Your Own Risk


Posted by at 10:13 pm on November 1, 2016
Category: Information ExceptionOFAC

DSCN7029 by Bianca Ruiz [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/pZgJCd [cropped]Last week, the Office of Foreign Assets Control (“OFAC”) issued guidance which expands the scope of the various general licenses, embodied in its rules, relating to publishing activities with nationals of sanctioned countries. OFAC has always taken the dubious position that editing and formatting for publication documents prepared by individuals in sanctioned countries was not covered by the informational materials exemption in the Berman Amendment. Instead, according to OFAC, it was a provision of a service to the sanctioned country and required a license. In its most questionable incarnation, OFAC, for a period of time, insisted that publication of anything other than “camera-ready” copy of materials authored by an individual in a sanctioned country required an OFAC license. Why OFAC did not carry this nonsensical logic to its final extreme and say that picking a book from a warehouse shelf before exporting it to a sanctioned country was also a “service” requiring a license has always been unclear.

After years of newspapers openly defying these rules publishing stories from Iranian (and other) dissidents in versions that the newspapers typeset instead of the typewritten copy sent by the dissidents, OFAC ultimately in 2004 amended the rules to add a general license permitting certain editing, translation, formatting and typesetting activities by publishers. Each of these rules, however, provided that these activities could not be performed on behalf of sanctioned governments or their officials.

The new guidance states what should have been more or less obvious: that the prohibition did not cover written materials authored by government officials in their personal capacity. But OFAC appears not to have been able to resist the opportunity to take back more than it gave, noting that it was up to the publisher to decide in what capacity the government official was writing and, worse, that it would not provide any guidance by issuing specific licenses in difficult cases.

Indeed, it is the policy of OFAC not to grant applications for specific licenses
authorizing transactions to which the provisions of an outstanding general license are applicable.

And even though OFAC says that it won’t offer help on determining the government official’s capacity, it does not provide any safe harbor for a publisher that makes a good faith mistake. Nope. Any such mistake would lead to significant civil penalties, currently maxed out at $284,582 per violation.

Oh, you reply, why not just apply for licenses anyway in questionable cases? You can provide all the information relating to the capacity in which the government official is writing; and then, when OFAC returns or denies the application, you will have your answer. That assumes, of course, that OFAC will return such an application rather than just file it away in an archive for the next century or so.

Is anyone else offended by an agency saying, as it seems to have done here, that you must abide by our rules but we refuse to provide any guidance on the proper interpretation of our rules?

Photo Credit: DSCN7029 by Bianca Ruiz [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://flic.kr/p/pZgJCd [cropped]. Copyright 2015 Bianca Ruiz

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