Archive for the ‘OFAC’ Category



OFAC Debuts New Game Show: Guess That Violation, or Wheel of Misfortune

Posted by at 7:27 pm on November 17, 2015
Category: Cuba SanctionsOFAC

Havana by Bryan Ledgard [CC-BY-SA-2.0 (], via Flickr [cropped]The Office of Foreign Assets Control (“OFAC”) has made sort of a name for itself by issuing cryptic penalty announcements where it is a considerable challenge to figure out what went on and why the unfortunate company that has been whacked with an “agreed” fine got itself tangled up with OFAC in the first place. But the recent penalty slapped on Gil Tours Travel for some vague violation of the Cuba sanctions takes the cake or, I suppose, el pastel.

According to the penalty announcement, Gil was being fined because “dealt in property in which Cuba or Cuban nationals had an interest, by providing Cuba travel-related services involving 191 individuals, without authorization from OFAC,” which is pretty much like saying Gil broke the rules when it broke the rules. But here’s the kicker. In discussing aggravating factors, OFAC says this:

Gil Travel had some awareness that it was providing Cuba-related travel services, and that its conduct could be in violation of the CACR [Cuban Assets Control Regulations]

Say what? It had “some awareness” that it was providing Cuba-related travel service and that this “could” be in violation of the rules? What on earth does that mean? How can you not know whether you are providing Cuba-related services? Close only counts in horseshoes and hand grenades, not rule violations. It’s a binary thing: you either are or are not providing those services and, if you are, you know it. Don’t count on any clarification from OFAC to help anyone figure out what happened here.

Apparently the owner of Gil Tours told (subscription required) Law360 sort of what was going on, although his explanation is not a model of clarity either.

Gil’s president and CEO Igal Hami told Law360 on Wednesday by email that … its only involvement with the trips under investigation was in referring nonprofit agencies that had OFAC licenses to arrange Cuban travel to another tour operator that also had a license.

So, apparently (if this is true), OFAC thinks you violate the CACR if you refer someone to a licensed tour operator unless you have a license to make that referral. In other words, if I included a link here to a licensed provider of people-to-people tours to Cuba, I would be breaking OFAC rules because I don’t have a license to make that referral. No wonder OFAC didn’t want to let on what happened here.

(I’m really, really, really hoping someone at OFAC clicked the link above to see if I had committed this violation. Explanation here.)


Permalink Comments (1)

Bookmark and Share



Banks’ Fear of OFAC Blocks Travel to Cuba

Posted by at 9:15 pm on November 11, 2015
Category: Cuba SanctionsOFAC

Cuba Capitole by y.becart(Own work) [CC-BY-SA-2.0 (], via Flickr

With the corpses of banks skewered by OFAC strewn around everywhere you look, it is not altogether surprising that banks are terrified of the agency and are scared to death that the slightest misstep might bring the wrath of the agency down upon them. The latest instance of acute ofacaphobia, reported here in an excellent Miami Herald article, involves banks in a panic that travelers to Cuba on one of the general licenses might be fibbing and might really be going to Cuba to drink mojitos in Old Havana and hang out on the beach.

Before travelers can arrive in Cuba, the airline or charter company needs to pay $194 per passenger for landing fees and mandatory health insurance. According to the article, now that passengers self-certify their eligibility under the twelve categories covered by the general license for travel, banks are trying to verify that these self-certifications are accurate, asking for itineraries and other information to assure themselves that they won’t be the next cow in the OFAC abbatoir.

Meanwhile, analysts said perhaps the biggest reason banks are wary of Cuba business are the huge — and recent — fines aimed at banks that have done business with sanctioned countries. Just last month, France’s Crédit Agricole bank paid nearly $800,000 [sic – $800,000,000] to U.S. state and federal agencies to settle allegations it tried to hide or obscure references to transactions involving U.S.-sanctioned nations, including Cuba.

The result has been that travelers arrive at the airport only to learn that they aren’t going to Cuba, that the flight has been cancelled, and that they have to go home because necessary fees had not been transferred by the U.S. banks. Apparently they are so irritated that charter companies have gone to the airport with “police escorts” to deliver the bad news.

This should come as no surprise to OFAC. And there is a simple solution: issue guidance to the banks that they can rely on the traveler’s self-certification of their eligibility under the general license. If Justin Whiteshoes says he’s going to Cuba on a people-to-people tour and is, in fact, going on a bar-to-bar tour, it is going to be Justin Whiteshoes who gets whacked and not the bank that wired his $194 fee to Cuba.

Permalink Comments (1)

Bookmark and Share



OFAC Expands List of Medical Devices Eligible for Unlicensed Exports to Iran

Posted by at 10:28 pm on November 4, 2015
Category: Iran SanctionsOFAC

GE Giraffe Baby Warmer via [Fair Use]

Back in September, we reported on industry criticism of the list published by the Office of Foreign Assets Control (“OFAC”) of medical devices eligible for export to Iran without a license for certain glaring omissions, namely, infant warmers used in maternity units and neo-natal intensive care devices. This seemed ironic given that certain contraceptive devices were on the list, but critical infant care items were not.

Well, OFAC just updated the list to add a number of devices eligible for unlicensed exports to Iran, including “infant radiant warmer and parts and accessories … [and] [n]eonatal equipment (phototherapy, nasal CPAP, etc. and all components).” Whether or not OFAC listened to what we had to say or not, it clearly listened to industry and did the right thing.

There are a substantial number of additions to the new list, too many to detail here, but I noticed certain changes of particular interest. The category of radiology equipment was expanded from a single item (medical ultrasound equipment) to pretty much the full array of radiology equipment: MRIs, X-ray machines, x-ray film, contrasting agents, mammography machines, and tomography scanners.

Also on the list, and it’s hard to understand why this took so long, are hearing aids. It seems to me that we were in no position to say that Iran was not listening to our arguments on nuclear proliferation at the same time we were restricting the export of hearing aids to the Iranians.

Permalink Comments Off on OFAC Expands List of Medical Devices Eligible for Unlicensed Exports to Iran

Bookmark and Share



Keeping A List, Not Checking It Twice

Posted by at 9:13 am on October 23, 2015
Category: Iran SanctionsOFAC

Red Rug by Christopher Sessums [CC-BY-SA-2.0 (], via Flickr [cropped]

BMO Harris Bank on Wednesday escaped an OFAC fine, even though it admitted to having processed six funds transfers totaling $67,357 representing payment by a customer of sums to an Iranian entity from which the customer had purchased Persian rugs. The customer, apparently a retailer that purchased and resold Persian rugs from Iran, had been a bank customer since 2009 when the importation of rugs from Iran was still legal. Because the customer’s name contained the word “Persian,” the bank’s somewhat overzealous interdiction software had been resulting in hits for each transaction by the customer, so the bank put the customer on a false hits list to prevent transactions by the customer from being flagged each time.

On September 29, 2010, OFAC banned the importation of Iranian rugs but, apparently, the bank’s customer didn’t get the message. (That’s what you get for not reading the Federal Register cover-to-cover each morning!) The customer continued to import Iranian rugs and the bank continued to process related wire transactions. In 2011, a suspicious downstream bank in the transaction requested additional information. A Harris Bank employee apparently then learned that the payment was to Iran for Persian rugs but, because the customer was on the false hit list, did not do anything and, as a result, Harris processed five additional transactions for payments to Iran.

Normally such a scenario is a sure-fire guarantee that the company involved will get walloped with an OFAC fine, but in this case OFAC decided to show a little mercy, apparently feeling that the false-hit list was to blame and stating that the bank “may have been unaware of the risks associated with a false hit list that was not reviewed and updated regularly.” This is a bit strange given that the issue here had nothing to do with reviewing and updating the list. The customer, which was on the false hit list, was still a false hit. It had not become an SDN, and the violation did not result from an error in the list.

The violation occurred not because the bank did not review the list but because it did not review the transaction. And this reveals an all-too-common misunderstanding by front line employees about OFAC sanctions. They often see it merely as a list-checking exercise. Is the customer on the list? Nope. Okay, then, everything’s good to go. And this appears to be exactly what happened here. The front line bank employee saw that the customer wasn’t on the SDN list and was instead on the “false hit” list and that was the end of the inquiry

Even though this case really isn’t about a bad false hit list, OFAC used it as an opportunity to issue a “False Hits List Guidance.” The new guidance, if it can really be called that, states the obvious: namely, that false hit lists are a “legitimate” practice as long as you check them periodically to make sure that someone who was not an SDN two weeks ago did not suddenly become an SDN yesterday. Oddly, OFAC does not say anything in the guidance about the glaring lesson from the case at hand, so I’ll say it for them: just because a customer is on the false hit list does not mean that the transaction itself need not be reviewed. (Your welcome, OFAC.)

Of course, I can’t leave the guidance without reference to a tiny bit of silliness in it. The guidance says that a review of the list should be triggered by any “meaningful change” in the customer’s information such as “a change in ownership status, business activity, address, date of birth, place of business, etc.” Wait a second. Does this mean you can change your birth date? Really? Please tell me how you do that. My birthday comes really close to Christmas and I’ve always wanted to move it back into a more present-friendly zone such as June. Also, I bet a number of us would like to shave a few years off that birth date as well.

Permalink Comments (3)

Bookmark and Share



And The Jackpot Winner Is … New York!

Posted by at 4:41 pm on October 20, 2015
Category: Iran SanctionsOFAC

All in a Day's Work by Damian Gadal [CC-BY-SA-2.0 (], via Flickr [cropped]

Crédit Agricole just agreed to pay $787.3 million to settle charges that it violated the U.S. sanctions on Iran and other countries by stripping references to those countries in communications sent to U.S. banks to process dollar-based transactions. And to quote Yogi Berra: “It’s déjà vu all over again.”

The payment is divided up as follows: $385 million to the New York State Department of Financial Services, $156 million to the U.S. Attorney’s Office for the District of Columbia, $156 million to the Manhattan District Attorney’s Office, and $90.3 million to the Federal Reserve. Once again the biggest chunk of change goes to the NYDFS which, as you probably know, doesn’t have the power to enforce any U.S. sanctions inasmuch as it’s just a state agency, notwithstanding its own delusions of grandeur.

But wait a minute. Where is OFAC in all this? I mean, after all, the last time I checked the Iran, Cuba and Sudan sanctions all had OFAC’s name written all over them. Well, OFAC announced today at the same time a $329.5 million fine against Crédit Agricole. Is that on top of the $787.3 million, pushing the fine over $1 billion? Nope. Read the fine print at the end of the OFAC press release:

CA-CIB’s $329,593,585 settlement with OFAC will be deemed satisfied by the bank’s payment of that amount to DOJ, DANY, and the Board of Governors for the same pattern of conduct.

As noted above, out of the $787.3 million, $402.3 million dollars is going to DOJ (through the U.S. Attorney for the District of Columbia), the DANY and the Federal Reserve, more than enough to satisfy the OFAC penalty under this somewhat odd arrangement. But it is not completely insignificant that OFAC did not say that payments to the NYDFS would discharge the OFAC penalty, perhaps indicating a bit of pique by OFAC with NYDFS trying to cash in on violations of OFAC rules.

In this context, an email that Reuters obtained back in June from OFAC to NYDFS in reference to an unnamed investigation of a foreign bank (presumably Crédit Agricole) by NYDFS was not very nice at all.

Given the ongoing negotiations, the situation regarding Iran is extremely sensitive at the moment. As a result, any actions that are taken in connection with sanctions violations pertaining to Iran may have serious impacts on the ongoing negotiations and U.S. foreign policy goals and objectives. The Iranians are not going to distinguish between enforcement actions taken at the state level versus enforcement actions taken at the federal level.”

One has to assume that the NYDFS, driven to feed its addiction to federal sanctions money, gave a terse and impolite response to OFAC that can’t be printed in a family blog, which explains the oddity of OFAC settlement in this case. I think we can safely assume that NYDFS isn’t being invited to OFAC’s holiday party this year.

Permalink Comments Off on And The Jackpot Winner Is … New York!

Bookmark and Share