Archive for the ‘OFAC’ Category


Aug

21

Jay-Z and Beyoncé Didn’t Commit a Real Crime


Posted by at 8:23 pm on August 21, 2014
Category: Cuba SanctionsOFAC

Jay-Z and Beyoncé in Cuba via http://iam.beyonce.com/post/50677935277 [Fair Use]
ABOVE: Jay-Z, Beyoncé in Cuba


Back in April 2013, Jay-Z and Beyoncé took a trip to Cuba, which provoked a round of wailing, teeth gnashing and threats of jail time from the usual suspects on the Hill, namely, certain South Florida members of Congress, including Rep. Ileana Ros-Lehtinen and Rep. Mario Diaz-Balart, who exhibit a near Pavlovian response anytime they hear the word Cuba. Jay-Z rapped back something to the effect that going to Cuba wasn’t a real crime like buying a kilo for Chief Keef. (If you don’t get the Chief Keef reference, just remember that Wikipedia is your friend in such matters.)

OFAC agreed with Jay-Z and not with Reps. Ros-Lehtinen and Diaz-Balart.  The trip was, OFAC said, a properly licensed “people-to-people” educational exchange tour and, therefore, violated no U.S. laws.

Apparently, the two representatives kept making a commotion about the trip, perhaps believing  that Beyoncé and Jay-Z didn’t qualify for the license because they either weren’t people or weren’t educational.  So the Treasury Department’s Inspector General was called in to review OFAC’s determination that the the famous couple were both people and educational.

In making the determination that OFAC properly declined to fine Jay-Z and Beyoncé for the trip, the Inspector General actually reviewed what Beyoncé and Jay-Z did in Cuba (your tax dollars at work!) and concluded:

Our review found these activities were consistent with the activities for which OFAC authorized the people-to-people license. For example, one article reported the trip included a visit to a children’s theater group and several clubs, where the couple heard live music and occasionally took to the dance floor. According to the article, they also toured Cuba’s top art school, where they met with young artists, and ate at some of Havana’s privately run restaurants, known as “paladares.” One of the city’s leading architects led the couple on an architectural tour of the Old City of Havana, during which the article stated the couple was mobbed by Cuban spectators.

Okay, so let’s suppose that Jay-Z and Beyoncé did nothing in Cuba but lounge on the beach and sip mojitos. What would be the problem with that? Does anyone believe that a regime that has withstood fifty years of U.S. sanctions was on the verge of crumbling but managed to hang on because two pop music stars vacationed in Cuba instead of, say, Aruba?

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Aug

20

The Consolidated Screening List Isn’t


Posted by at 9:01 pm on August 20, 2014
Category: BISCompliance Programs and ProceduresDDTCDebarred ListDenied Party ListEntity ListOFACRussia SanctionsSanctionsSDN ListUnverified List

PortShip by USDA (cropped) via https://www.flickr.com/photos/usdagov/9715983721 [CC BY 2.0 https://creativecommons.org/licenses/by/2.0/]The U.S. Government, over at export.gov, provides a so-called Consolidated Screening List, which you might think would be a one-stop shopping list for your screening needs, something that might be useful if you or your company does not subscribe to or implement one of the commercial screening solutions. Unfortunately, the Consolidated Screening List doesn’t consolidate all the lists you should review and has other significant limitations.

The good news is that the list now does include the Foreign Sanctions Evaders List, which was not included for some time after the list was adopted by Treasury back in February of this year. The description of the list still does not mention the FSE list, but the entries on that list have been quietly added.

However, two other Treasury Department lists are still not included. The relatively new Sectoral Sanctions Identifications List is missing as action. U.S. persons are forbidden from engaging certain transactions with entities on this list, including providing credit in excess of ninety days. Part of the reason for this is probably that the “consolidated” list is infrequently updated. The last update of the list was almost two months ago, on June 26, 2014.

In addition, the Palestinian Legislative Council List, adopted back in 2006, is not included. U.S. financial institutions must reject (not block) transactions with people on the PLC list.

Not only is the “consolidated” list not complete or consolidated, but also it is dangerous to rely on it alone for another significant reason. The search page for the list only retrieves literal matches and does not allow address searching. In addition to searching the consolidated list, you should also rely on OFAC’s sanction list search tool. That tool uses, fairly successfully, “fuzzy logic” to retrieve similarly spelled names. Because many of the names on the list are transliterated versions of Arabic names, meaning that there are many alternate spellings, the “fuzzy logic” will be somewhat more successful in identifying alternate spellings.

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Aug

14

What Happens in Nay Pyi Taw Doesn’t Always Stay in Nay Pyi Taw*


Posted by at 8:21 pm on August 14, 2014
Category: Burma SanctionsOFAC

Lake Garden Hotel Lobby via http://www.accorhotels.com/photos/9096_ho_00_p_346x260.jpg [Fair Use]
ABOVE: Lake Garden Hotel Lobby


When John Kerry, while attending the Association of Southeast Asian Nations (ASEAN) Regional Forum hosted by Burma, stayed at the Lake Garden Hotel, a posh French-managed resort in the country’s capital of Nay Pyi Taw, he probably wasn’t expecting it to be a big deal. Of course, that’s probably because no one at State realized that the resort was owned by Burmese tycoon U Zaw Zaw who is on OFAC’s SDN List. Sometimes you really are smarter when you stay at a Holiday Inn Express.

The State Department, however, rushed in to try to put out the public relations fires.

“You can stay at this hotel no matter who you are, you just can’t do business with it. So if you wanted to sell them towels, you could not do that. But you could stay there,” [State Department spokesman Marie] Harf explained.

That’s a fairly clumsy invocation of the travel exemption contained in the International Emergency Economic Powers Act (“IEEPA”), 50 U.S.C. § 1702(b)(4), which exempts from sanctions “any transactions ordinarily incident to travel to or from any country.” Although many exemptions do not extend to dealings with SDN, this statutorily based exemption does. (In case you’re wondering, the travel ban to Cuba is not affected by this exemption because those sanctions are imposed not under IEEPA but under the Trading with the Enemy Act.)

Of course, the problem here is this: what is “ordinarily incident” to international travel? Certainly, Kerry staying in the room, ordering a little room service, buying a miniature of vodka from the room’s minibar, and perhaps even watching a pay-per-view movie would fall within this. But suppose (purely hypothetically, of course) that Secretary Kerry decided to pay for a massage in the hotel spa? Is that “ordinarily incident” to international travel? Or paying the resort its standard greens fee for a round of golf?  As is the case in most sanctions matters, there is no clear answer here and no answers from OFAC.  That Holiday Inn Express is looking smarter and smarter.


*This headline would have been so much better if the military junta had not moved the capital of Burma from Rangoon to Nay Pyi Taw in 2005

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Aug

13

SDNs of a Feather, Aggregate Together: New OFAC Guidance on 50 Percent Rule


Posted by at 8:15 pm on August 13, 2014
Category: OFACRussia SanctionsSDN List

SMP Bank Credit Cards via http://smpbank.ru/uploads/show/c20c2f8bd8d7d2550bdd3b4c38bbdd00839d8fd2.jpg [Fair Use]The Office of Foreign Assets Control (“OFAC”) today issued new guidanceand revised its FAQs, on its notorious fifty-percent rule. Under that rule, an entity in which a blocked person has a fifty percent interest or greater is itself blocked, even though it may not be listed on OFAC’s List of Specially Designated Nationals and Blocked Persons (the “SDN List.”).

Under the new guidance, if multiple blocked parties own an interest in an entity, their interests will be aggregated and that entity will be blocked if that aggregated interest is 50 percent or more. So if SDN1 holds 1 percent of Company X and SDN2 holds 49 percent of Company X, Company X will be blocked because the aggregated interests of SDN1 and SDN2 equal 50 percent.

This new rule is not merely a clarification policy but a clear reversal of guidance previously given by OFAC. As you may recall, when Arkady and Boris Rotenberg, co-owners of SMP Bank, were added to the SDN List back in March, Visa and Mastercard initially stopped allowing their cards to be processed through SMP Bank. The two credit card companies had a change of heart after having been apparently advised by OFAC that there was no need to aggregate the Rotenberg brothers individual 38.5 percent interests. Then, at the end of April, OFAC designated SMP Bank and Mastercard and Visa cut them off again from their international payment system. Why OFAC has changed its mind here on aggregation is not clear.

Ironically, this new rule may have more  negative impact on U.S. businesses than it will on Putin and his friends because it will make SDN screening quite difficult in many cases. Under the old rule, when evaluating whether an entity was blocked, you only needed to screen individuals with an interest of 50 percent or more. Under the aggregation rule, you must now screen every owner to see whether multiple owners are blocked and in the aggregate hold an interest of 50 percent or more. It seems no one at OFAC thought about this.

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Aug

12

Chong Chon Gang(nam Style) Sanctions


Posted by at 6:00 pm on August 12, 2014
Category: Cuba SanctionsNorth Korea SanctionsOFACU.N. Sanctions

Weapons found on Chong Chon Gang via http://www.un.org/ga/search/view_doc.asp?symbol=S/2014/147 [Fair Use]Avid readers of this blog will be familiar with the saga of the euphoniously named Nork vessel, the Chong Chon Gang, which was seized by the Panamanians in the Panama Canal while the vessel was attempting to carry a boatload, so to speak, of Cuban arms to North Korea. Although the Cubans claimed, ahem, that this was not a “transfer” of the arms to North Korea in violation of U.N. sanctions because they retained title to the goods, they were unable to explain why, if that were the case, they buried the missiles and other armaments under enough sugar to keep the chubby Nork dictator in sweets for the next millennium or so. The attempted suicide by the ship’s captain once the Panamanians found the buried missile parts and systems also did not do much to bolster the Cuban argument that this shipment was perfectly legal.

The U.N. Panel of Experts convened to consider the legality of the shipment brushed aside Cuba’s arguments and back in March found the shipment to be a violation of U.N. sanctions on North Korea. At the end of last month, the United States joined the party and announced a variety of additions to the SDN list arising out of the Canal incident. The two North Korean companies involved in the shipment as well as the Chong Chon Gang were designated, as were 17 other Nork ships in which the two shipping companies had an interest.

In the “Some People Are Never Satisfied” category, a blogger at Capitol Hill Cubans called the Nork sanctions “enforcement malpractice” and moaned that there were no sanctions imposed on the Cuban officials involved in the Nork shipments. A Miami Herald article provided a succinct answer to this complaint

A knowledgeable Washington official noted that perhaps Treasury did not feel it was necessary to sanction Cuban government entities and individuals because they already are under strong sanctions from the U.S. trade embargo.

Good point. Given that virtually all dealings by U.S. persons and companies with Cuban officials are prohibited under the current sanctions, what exactly did the blogger contemplate as additional sanctions here? Military intervention?

 

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