Archive for the ‘OFAC’ Category



Oh, The Places You’ll Go!

Posted by Clif Burns at 3:25 pm on April 18, 2014
Category: BISIran SanctionsOFAC

By Alec Wilson [CC-BY-SA-2.0 (], via Flickr
N604EP in Zurich last January (Alec Wilson via Flickr, CC-BY-SA-2.0)

According to an article in the New York Times, and a picture snapped by one of its reporters in Tehran, a U.S. registered corporate jet with a discreet U.S. flag painted on the tail and with the registration number N604EP was spotted three days ago on the runway of Mehrabad Airport in Tehran, Iran. At first, apparently not having seen the photographic evidence, Director General of Tehran’s Mehrabad Airport Nasrollah Mansouri Shirazi told the Tasnim News Agency, an IRGC-affiliated group, that no U.S. planes had landed at his airport. (Baghdad Bob is alive and well at the Mehrabad Airport!)

The appearance of the U.S. plane in Tehran has, of course, resulted in a whirlwind of speculation about what it is doing there. As the Times correctly points out, its unlikely to be a covert diplomatic mission what with the U.S. flag emblazoned on the tail and the jet sitting in full daylight in a spot where a reporter could snap a photograph. (Such trenchant observations are why the New York Times is, after all, the U.S. newspaper of record.)

The whole affair has the Bank of Utah, which owns the plane in trust for some shadowy and undisclosed investors, all flustered.

Brett King, one of its executives in Salt Lake City, said, “We have no idea why that plane was at that airport.

Mr. King, who helps run the bank’s trust services business, said the bank had no “operational control” or “financial exposure” to any of the planes.

For his part, Mr. King said Thursday in an interview that he was trying to get to the bottom of the aircraft’s presence in Tehran. “The Bank of Utah is very conservative, and located in the conservative state of Utah,” he said. “If there is any hint of illegal activity, we are going to find out and see whether we need to resign” as trustee.

If the jet was in Iran without authorization, the Bank, as the legal owner of the plane, is going to have a hard time trying to wash its hands of the matter simply by resigning as “trustee” and trying to walk away from the issue. It will certainly need to demonstrate to federal regulators that it took all necessary steps in its dealings with the mysterious owners to prevent them from flying the plane to embargoed destinations without authorization.

One final amusing note is that the New York Times cannot figure out which agency needed to authorize the plane to land in Iran:

Under United States law, any American aircraft would usually need prior approval from the [Treasury Department's Office of Foreign Assets Control] to go to Iran without violating a complicated patchwork of rules governing trade.

In the case of this particular aircraft, powered by engines made by General Electric, the Commerce Department typically would have to grant its own clearance for American-made parts to touch down on Iranian soil.”

Er, no, the license from OFAC would be enough. If the Times reporter spent a few moments with Google he would have easily found the Commerce Deparment saying this:

Although BIS maintains license requirements for Iran, OFAC is responsible for administering most Iran sanctions. You are not required to seek separate authorization from BIS to export or reexport an item subject to both BIS’s Export Administration Regulations (EAR) and OFAC’s Iranian Transactions and Sanctions Regulations (ITSR) (31 CFR Part 560). However, you will also violate the EAR if you do not obtain an OFAC authorization if one is required.

I guess the fact-checkers at the Gray Lady aren’t what they used to be. . . .

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Music of My Hartwall Arena

Posted by Clif Burns at 10:29 pm on April 16, 2014
Category: OFACRussia Sanctions

By Paul Holloway from Birmingham, United Kingdom (The Hartwall Arena  Uploaded by Fæ) [CC-BY-SA-2.0 (], via Wikimedia Commons, my colleague George Murphy posted an analysis on the potential impact (or lack thereof) of the Russia/Ukraine sanctions on a series of concerts by U.S. artists such as Justin Timberlake at Hartwall Arena in Helsinki, Finland. The post noted that the performances would still go on despite the ownership interests by three newly-designated SDNs in Hartwall Arena: Boris and Arkady Rotenberg and Gennady Timchenko. The post speculated that this was because none of the three named individuals had a fifty percent interest or greater in the venue. Under current rules as interpreted by OFAC, a company would not be blocked even if owned entirely by blocked individuals if no single blocked individual owned 5o percent or more of the company.

That post generated an email to us from an official at Live Nation, the concert promoter for the events at Hartwall, taking issue with the post.

I wanted to reach out because there has been quite a bit of erroneous information out in the public domain about the ownership of the Helsinki venue. The shows are going to continue because the venue is not subject to the US sanctions, not “despite” the sanctions.

I replied that the post had said the concert would go on “despite” the ownership of the venue by the three SDNs, not “despite” the sanctions, a very different thing, particularly since the post speculated that the venue wasn’t subject to the sanctions due to the 50 percent rule.

This led to another response:

They do not own 100% of the venue, there several dozen owners. Based on the best information available to Live Nation they own 100% of an entity which owns only a minority interest in the venue itself, which is the reason the sanctions do not apply.

That was certainly not what numerous new sources (such as The Guardian) were reporting as to the ownership of Hartwall Arena, and the official did not respond to my request to document the assertion about the Rotenberg and Timchenko interests in Hartwall . I did a little digging myself and sent to the Live Nation official this presentation made by Roman Rotenberg, the son of Boris Rotenberg and chairman of the Hartwall Arena. That presentation contains a slide that helpfully diagrams the precise ownership of the Arena. It states that the “owners” of Hartwall Arena are Gennady Timchenko and “Rotenberg family via Långvik Capital.” The organizational diagram shows a “company based in Luxembourg” owned by Timchenko that owns 50 percent of Arena Events Oy that, in turns, owns the Hartwall Arena. It also shows that “Oy Långvik Capital Ltd (Finland)” — owned by the Rotenberg family — owns the other 50 percent of the Arena Events Oy.

If Live Nation is trying to assert that Arena Events only owns a minority interest in Hartwall Arena, that is not consistent with what Roman Rotenberg says. The organizational chart shows that Arena Events Oy owns Helsinki Halli Oy (Hartwall Arena) and owns 49% of Jokerit Hockey Club Oy, the company that owns the  hockey team based at Hartwall Arena. It is not clear why the chart would indicate the 49% minority interest in Jokerit but not a corresponding minority interest in Helsinki Halli Oy if, in fact, that was also a minority interest as the Live Nation official asserts.

I also checked the records relating to Arena Events Oy on the Finnish Trade Register which is the official source for corporate records maintained by the Government of Finland. Those records do not indicate the stock ownership of Arena Events Oy and, thus, nothing in those publicly available corporate records contradicts Roman Rotenberg’s charts and statements showing that Timchenko and the Rotenberg family each own 50 percent of Hartwall Arena.

This information, if true, raises the possibility that concerts by Americans at Hartwall Arena might be problematic. Timchenko’s ownership of the Luxembourg holding company would mean that this holding company is blocked, and the Luxembourg holding company’s 50 percent in Helsinki Halli would result in Helsinki Halli being blocked as well. If Helsinki Halli is blocked, no U.S. person or company can be involved in events there. Whether or not Oy Långvik Capital is blocked is not clear, since we don’t know the ownership interests of Boris and Arkady Rotenberg in that company, but this does not matter if Helsinki Halli is blocked by virtue of Timchenko’s 50 percent stake.

So if Justin Timberlake sings a few songs at Hartwall he better hope that Live Nation is right and Roman Rotenberg is wrong about the ownership of the concert venue. Otherwise, he may be the next Dennis Rodman.

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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 (], via Wikimedia Commons

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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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 ( or CC-BY-SA-3.0 (], from Wikimedia Commons

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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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 [CC-BY-3.0 (], via Wikimedia Commons 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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