Archive for the ‘OFAC’ Category


Apr

16

Thursday Grab Bag


Posted by at 8:05 am on April 16, 2015
Category: Crimea SanctionsCriminal PenaltiesCuba SanctionsIran SanctionsOFACSudanSyria

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

  • Last month we criticized the Department of Justice for conspiring with foreign luxury car makers to jail U.S. citizens who exported luxury cars to China to arbitrage the difference between U.S. and Chinese prices for these vehicles. Apparently, the DoJ now is having second thoughts about wasting taxpayer money and its resources on this nonsense. According to the  New York Times, settlements have recently been reached in nine states where prosecutors have agreed to return seized cars to, and drop charges against, luxury car exporters. Good.
  • On Monday we reported that Obama was going to drop Cuba from the list of state sponsors of terrorism, a move we thought was largely symbolic. Yesterday he did just that, and provided the 45-day notice required under the three acts that provide the basis for the list: § 6(j)(4)(A)(i)-(iii) of the Export Administration Act of 1979; § 40(f)(1)(A)(i)-(iii) of the Arms Export Control Act; and § 620A(c)(1)(A)-(C) of the Foreign Assistance Act of 1961. The linked New York Times article wrongly states that Congress can block this action with a joint resolution. Only the Arms Export Control Act provides for this blocking mechanism, and, as we noted, there’s no way that the White House will remove Cuba from the current arms embargo. So a joint resolution under the AECA would be, like the removal itself, largely symbolic
  • The Office of Foreign Assets Control (“OFAC”) revised its rules on Monday to amend the Syrian Sanctions Regulations to permit certain activities with respect to written publications, including the ability to pay advances and royalties, to substantively edit manuscripts and to create marketing campaigns. These activities have been permitted for Cuba, Sudan and Iran since 2004. Don’t try this yet in Crimea which remains, bizarrely and incomprehensibly, the most heavily sanctioned place on the face of the planet
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Apr

3

Airbnb, Man, in Havana (Apologies to Graham Greene)


Posted by at 3:11 pm on April 3, 2015
Category: Cuba SanctionsOFAC

Casa Espada airbnb listing via https://www.airbnb.com/rooms/5701299?s=yz00 [Fair Use]The revised Cuba sanctions created a general license for those providing travel services to authorized U.S. travelers to Cuba. The ink on the Federal Register notice was scarcely dry before room sharing service Airbnb had listings in Cuba up and running.

Of course, the remaining sanctions impose some unusual restrictions on Airbnb’s activities in Cuba. First, U.S. travelers still cannot go to Cuba for fun and mojitos; they must qualify for one of the existing general licenses, e.g., to visit family or do professional research in Cuba. Airbnb needs to get from each of its customers booking a stay in Cuba a certification of the particular section of the OFAC rules which authorizes them to travel to Cuba. These records must be maintained by Airbnb for five years.

Second, Airbnb may only provide these services to U.S. persons because the general license covers travel services for travel authorized by the Cuba sanctions. Those sanctions only authorize travel by U.S. persons, so Airbnb cannot book rooms for Canadians or Italians. (There’s an argument that “authorized” might also mean “not forbidden” which would allow Airbnb to serve non-U.S. customers, but, for the moment, Airbnb is taking the conservative position.)

Third, the new sanctions do not permit Airbnb to provide non-travel related services in connection with these bookings. So, Airbnb cannot help the Cuban “hosts” design their listing or edit their photographs. Even so, many of the listings look like interesting places to stay, even though hot water, Internet, and other ordinary amenities may well be missing. I could, for one, happily stay in the Havana apartment shown in the picture to the right — particularly at its listed price of $56 per night.  And sometimes I think that not having access to the Internet on vacation might actually be a good thing!

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Apr

2

White House Fires First Salvo at Chinese Government Hacking Activities


Posted by at 12:47 pm on April 2, 2015
Category: ChinaCyber WeaponsEconomic SanctionsOFAC

By Poa Mosyuen (Own work) [CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File:HK_%E7%9F%B3%E5%A1%98%E5%92%80%E5%B8%82%E6%94%BF%E5%A4%A7%E5%BB%88_Shek_Tong_Tsui_Municipal_Services_Building_%E9%9B%BB%E8%85%A6%E9%8D%B5%E7%9B%A4_Chinese_input_keyboard_Jan-2012.jpgYesterday the Office of Foreign Assets Control published an executive order and accompanying FAQs under which the White House establishes the circumstances under which it will add certain persons and entities engaged in hacking computers and networks in the United States to the Specially Designated Nationals and Blocked Persons list. U.S. persons would be prohibited from engaging in any transactions with any of the designated cyberviolaters and all property of the cyberviolaters that comes into the United States or under the control of U.S. persons would required to be blocked.

Unlike most executive orders of this type, no parties have been designated yet under its authority; it is purely prospective in nature. This suggests that the order is, for the moment, mostly a diplomatic salvo and that its likely target is China. The numerous cyber attacks on the United States by China, including the recent Anthem breach, have been well documented and just as vociferously denied (in a clear methinks the lady doth protest too much” fashion) by the Chinese government.

Whether this will be effective in deterring China remains to be seen. One response by China to any future designation might be to double down and engage in cyber retaliation. Given the asymmetric nature of cyber warfare between the U.S. and China, due to the fact that the U.S. is more connected and more vulnerable than China, such retaliation cannot be discounted.

An additional point should be made on these new sanctions. I have seen some popular tech media and bloggers suggest that the sanctions might be applied to domestic hackers, even relatively benign ones doing things similar to what got Aaron Schwartz in trouble. It is important to remember, however, that the International Emergency Economic Powers Act, under which the executive order was issued, restricts the scope of the order to blocking “any property in which any foreign country or a national thereof has any interest,” thereby preventing purely domestic application of these sanctions. A domestic hacker would have to be working on behalf of a foreign country or foreign national to be designated under the new cyber sanctions.

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Mar

27

PayPal Has No Pals at OFAC


Posted by at 8:04 am on March 27, 2015
Category: OFACSDN List

PayPal Campus Outdoor by PayPal via https://www.paypal-media.com/assets/zip/PayPal_HQ_Campus_Outdoor.jpg [Fair Use]Internet payment facilitator PayPal recently agreed to pay to the Office of Foreign Assets Control $7,658,300 in fines and penalties to settle charges that it processed 486 financial transactions involving embargoed countries and blocked parties on OFAC’s Specially Designated Nationals and Blocked Persons List (the “SDN List”). The magnitude of this penalty becomes apparent when you consider that the 486 transactions amounted to a total of $43934.02 in transactions averaging $90.40 each.

Oh, and in case you were thinking, well that’s what they get for getting caught, you should realize that these violations were, according to the Settlement Agreement, voluntarily disclosed. Worse yet, this huge fine was imposed even though PayPal cooperated with the investigation, tolled the Statute of Limitations, and sacrificed on the altar of OFAC’s wrath its compliance division’s entire management, all of whom are now looking for new employment.

What seems to have gotten OFAC’s dander up, and led to the agency calling this an “egregious” case, pretty much the ne plus ultra of regulatory misdeeds, involved PayPal’s dealings with Kursad Zafer Cire, an A.Q. Khan crony designated by OFAC under its WMD sanctions program. Although these were only 136 transactions, totalling $7091.77 and averaging $52.15 each, PayPal processed six of these transactions after its interdiction software flagged this guy. On the sixth occasion, PayPal asked Cire to fax them his passport, which he dutifully did, and even though the passport conclusively matched the information on the SDN List, the PayPal risk officer let the transaction go through.

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Mar

25

Dead Cubans Removed from SDN List; Fictional Daniel Garcia Stays On


Posted by at 10:02 pm on March 25, 2015
Category: Cuba SanctionsOFACSDN List

Cuba Capitole by y.becart(Own work) [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://www.flickr.com/photos/yoh_59/13697566663Yesterday the Office of Foreign Assets Control (“OFAC”) quietly removed a number of Cuba-related listings from its Specially Designated Nationals and Blocked Persons list. These delistings included dissolved companies, dead people and Cuban ships that had either sunk or were out of commission. For example, Amado Padron Trujillo, designated in 1986,was executed in 1989. By Cuba. For treason. Talk about a guy who couldn’t get a break.

Also delisted was the late Alfred Stern, who was once accused of spying for the Soviet Union. He fled the United States, lived in Cuba from 1963 to 1970 and died in Prague in 1986. Another dead man taken off the SDN List was Carlos Duque, a business partner of Manuel Noriega, who stopped threatening the United States when he died last October.

Even though OFAC delisted dead people and sunken ships from the SDN List, it still could not bring itself to delist the probably fictional Daniel Garcia, who allegedly threatens the United States by running a non-existent talent agency, Promociones Artisticas (PROARTE), in Mexico City. The problem with designating a non-existent Daniel Garcia is that there are plenty of real people named Daniel Garcia who, as a result, cannot open bank accounts, get loans, buy automobiles, or get on an airplane without getting searched. We wrote about the curse of being named Daniel Garcia here.

I have been told, off the record, that no one at OFAC knows who Daniel Garcia is or was, if he ever was, and why he was put on the list in the first place. That, I’m told, is part of the reason that Daniel Garcia is fated to remain on the SDN List in perpetuity.

In short, since imaginary people never die, the real Daniel Garcias of the world are just going to have to live with it.

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