Archive for the ‘Sanctions’ Category

Jan

5

The Name Game Chinese Style

Posted by Clif Burns at 8:16 pm on January 5, 2010
Category: China • OFAC • Sanctions

Tiananmen SquareAn interesting story in today’s Wall Street Journal details instances in which a number of U.S. companies imported items from China Precision Machinery Import Export Corporation despite the fact that CPMIEC is on the Office of Foreign Assets Control’s Specially Designated Nationals List. The reason for this, asserts the story, is that Chinese companies on the SDN list “have proved adept at creating aliases or subsidiary shell companies to mask their ownership.”

Consider this example cited in the article:

John Iliff, general manager of American Forge & Foundry, says the single shipment of oil-drainage tanks it received in 2006 from the CPMIEC unit set off no alarms. “Trading in illegal goods certainly never crossed our minds,” he says.

The shipment came from China JMM Import & Export Shanghai Pudong Corp., which didn’t appear on any sanctions list until Thursday. Records indicate the company shares an address and phone number with a CPMIEC unit that was previously banned: CPMIEC Shanghai Pudong Corp. The Treasury determined that the two companies are affiliated.

That designation of JMM Import & Export occurred just a few days ago on December 31, 2009, almost three years after the cited shipment. But there were several red flags that American companies might have picked up on before OFAC’s belated designation of the CPMIEC affiliate. Not only is there a similarity in the names of the two companies, but they shared the same street address. Standard procedure should be not only to check names on the SDN list but addresses as well.

But the larger issue here is that the obvious ease with which Chinese companies can morph into new entities effectively renders company-based sanctions almost completely ineffective. It’s obviously as easy for Chinese companies to rename themselves as it is for underage Chinese gymnasts to acquire new, earlier and eligible birth dates on official documents. I’m not so sure what the solution is here but it doesn’t appear to be imposing penalties or additional compliance obligations on U.S. companies that deal with affiliates of companies on the SDN list.

Permalink Comments (5)

Bookmark and Share


May

26

Microsoft Shuts Off IM Service in Sudan and Other Sanctioned Countries

Posted by Clif Burns at 2:42 pm on May 26, 2009
Category: Sanctions • Sudan

Live Messenger in SudanEconomic sanctions continue to spread into cyberspace as Microsoft announced last Friday that customers in sanctioned countries would receive an error message if they tried to log into their Windows Live Messenger accounts and would no longer be able to use the service.

When you try to sign in to Windows Live Messenger, you receive the following error message:

810003c1: We were unable to sign you in to the .NET Messenger Service.

Microsoft has discontinued providing Instant Messenger services in certain countries subject to United States sanctions. Details of these sanctions are available from the United States Office of Foreign Assets Control ["OFAC"].

Why it took Windows so long to get with the program when arch-rival Google had disabled downloads to Sudan and other sanctioned countries ages ago is not clear.

Although the shutoff applies to Cuba, North Korea, Iran, Sudan and Syria, Sudan seems to have taken it most to heart, judging from this report on the shutoff in the Sudan Tribune, a Paris-based on-line newspaper covering Sudan:

The software, Microsoft’s Windows Live Messenger, allows users to chat directly with one another, send photos, play games or send messages to mobile phones. The Messenger is widely used by the Sudanese diaspora to contact their families and until last week had been available for free downloading in the countries targeted by US sanctions.

Of course, Microsoft’s action is incredibly easy for users to circumvent. First, users can log back into their accounts and change their country to a non-sanctioned country. (Oddly, Microsoft’s drop-down list for countries on its Live Messenger sign up page- still includes Sudan — not to mention Cuba, North Korea, Iran and Syria!) Second, if Microsoft is also using geolocation filters on the IP addresses, the user can always connect through a proxy server located in a non-sanctioned country. Et voilà, the Sudanese (or Syrian, Cuban, Iranian or North Korean) resident can IM to his or her hearts content, Microsoft is in full compliance with the law, and OFAC is none the wiser and can still believe that it has hastened the downfall of these governments by keeping their citizens from communicating with their family and friends.

Permalink Comments (1)

Bookmark and Share


Apr

7

The Biggest Publicity Stunt Since Elvis Joined the Army

Posted by Clif Burns at 7:57 pm on April 7, 2009
Category: Criminal Penalties • OFAC • Sanctions

Robert MorgenthauNonagenarian New York prosecutor, Robert Morgenthau, still keeps trying to grab the spotlight after all these years, even if it means wasting immense amounts of New York state funds on a criminal prosecution he can’t win and which should have been brought, if at all, by federal prosecutors. I’m talking about his 118-count indictment released today against a Chinese citizen Li Fang Wei and a Chinese company LIMMT Economic and Trade Company, Ltd., both safely ensconced in China.

Notwithstanding the 59 pages of the indictment, it can all be boiled down to a few sentences. LIMMT was added to the Department of Treasury’s Specially Designated Nationals (“SDN”) list in 2006. This meant that any funds destined to LIMMT which passed through the U.S. banking system would be blocked. In order to avoid this outcome, LIMMT, and its manager Li Fang Wei, told its customers, all foreign, to send U.S. dollar payments to other accounts held by LIMMT under other names or by related companies at various Chinese banks. Some of these transactions transited New York banks 118 times. The indictment claims that each of these 118 transactions constituted the falsification of business records which is a criminal offense under New York Penal Law § 175.10. And there you have, in under two minutes, all 59 pages and all 118 counts.

I think that even if your legal training consists solely in watching Law and Order marathons on cable, you can probably see a glaring flaw in the theory of the indictment. In order for a crime to have been committed, the entries that each bank made when wiring funds at the request of LIMMT’s foreign customers had to be false. But these were all the real names of real accounts held at real Chinese banks, and the indictment does not try to claim otherwise. It’s not clear, then, what was falsified, particularly in the context of a statute that appears principally directed at cooking the books — i.e., entering a wrong dollar amount in the ledger and pocketing the difference.

Beyond that, there is of course the question of the jurisdiction of New York state courts over Chinese citizens for acts that occurred in China, that were legal in China, and, even to the extent that they fostered trade with Iran, didn’t have concrete effects in the United States. Even if there were a credible theory of prescriptive jurisdiction here, hell will freeze over before China will allow the U.S. to extradite Li Fang Wei under these charges.

Finally, of course, there is the legitimate question as to why a state prosecutor, even a New York state prosecutor, is mucking around in matters of U.S. foreign policy that are more properly in the purview of the Office of Foreign Assets Control (“OFAC”) which designated LIMMT in the first place. After all, OFAC had been blocking these attempts by LIMMT to alter its corporate identity by amending the SDN listing for LIMMT to include the aliases that are the subject of the New York state indictment. That was an appropriate response by OFAC to LIMMT’s shenanigans. I think it’s safe to say that OFAC doesn’t need, and probably doesn’t want, the efforts of a state DA and inveterate publicity hound to handle the foreign policy issues created by LIMMT’s trading activities.

What next? Is Morgenthau going to indict Syria’s Bashar al-Assad for supporting designated terrorist groups?

Permalink Comments (4)

Bookmark and Share


Feb

5

Hot Boat-ato Tossed By Cyprus to U.N. Sanctions Committee

Posted by Clif Burns at 8:13 pm on February 5, 2009
Category: Iran Sanctions • Sanctions • U.N. Sanctions

MonchegorskRetired Russian merchant ship Monchegorsk, alleged to be carrying Iranian arms shipments, wound up in Cypriot hands after being forced by the U.S. Navy to moor in Cyprus last week. The ship was searched by Cypriot authorities which on Tuesday turned over to the U.N. a report on what was found on the ship. What exactly is on the ship and where the ship was headed remain subjects of speculation. At issue, however, is whether the Iranian cargo violates U.N. Resolution 1747 and, if so, what to do about it. Paragraph 5 of that resolution declares that Iran “shall not supply, sell or transfer directly or indirectly … any arms or related materiel.”

The story starts two weeks ago when the U.S. Navy stopped the ship in the Red Sea on the suspicion that it was carrying an arms shipment to the Gaza Strip. The U.S. Navy boarded and searched the ship with the permission of its captain. According to U.S. military officials, the search uncovered “small munitions.”

Adm. Mike Mullen, the chairman of the U.S. Joint Chiefs of Staff, said his country had done all it could to intercept the ship’s suspected arms shipment to Hamas militants in the Gaza Strip, but its hands were tied. …

“The United States did as much as we could do legally,” Mullen said Tuesday. “We were not authorized to seize the weapons or do anything like that.”

Mullen’s statement is consistent with U.N. Resolution 1747 which requires the U.S. to prohibit U.S. citizens from procuring arms from Iran and from using U.S.-flag vessels to carry U.S. arms, both of which are already prohibited under U.S. law by the Iranian Transactions Regulations and the International Traffic in Arms Regulations (“ITAR”). Nothing in 1747 authorizes the U.S. to seize the weapons or the ship; instead the ship was escorted by the U.S. Navy to Cyprus

Cyprus, on the other hand, can do a bit more. Resolution 1747 forbids Cyprus from using a Cypriot-flagged vessel from carrying Iranian arms or related materiel. That would, in theory, permit Cyprus to require the ship to offload any prohibited Iranian cargo in Cyprus. Cyprus, however, is asking the U.N for guidance on what to do. The Cyprus Mail quoted the Cypriot Foreign Minister Markos Kyprianou on the affair:

Cyprus filed a report to a United Nations sanctions committee on Tuesday and would await a verdict before taking further action, Foreign Minister Markos Kyprianou said.

He declined to specify what the Cypriot report said, saying it was confidential.

“There is an issue because of the origin of the cargo, and there should be an assessment on whether the specific cargo falls within the prohibitions of the (Security Council) resolutions. That is where we are expecting guidance from the United Nations,” Kyprianou told reporters.

He said the vessel, anchored off the southern port of Limassol from January 29, would remain there until a definitive decision is taken.

It’s not clear why Kyprianou needs guidance whether the cargo consists of “arms or related materiel.” Even if the ship only contains small munitions, as stated by U.S.-military officials, those clearly fall within the definition. The Jerusalem Post claims that the cargo includes “propellant and casings for artillery and tank rounds.” Debka File, not always an entirely credible source, claims that ship is carrying “10 containers of Iranian rockets.” If any or all of this is true, Kyprianou can’t let a Cypriot-flagged ship carry this cargo.

Permalink Comments Off

Bookmark and Share


Oct

23

Thursday Sanctions Grab Bag

Posted by Clif Burns at 9:37 pm on October 23, 2008
Category: Sanctions

Grab BagSome interesting news today on the sanctions front, so it’s time for another Export Law Blog grab bag:

  • The Iranians aren’t very happy about the sanctions imposed yesterday by the Treasury Department on the Export Development Bank of Iran (“EDBI”), so they issued a press release decrying the sanctions. According to the Iranians, the sanctions were imposed “as a propaganda move in order to cover up the consequences of the recent American economic crisis.” That, I guess, would explain why yesterday’s entire news cycle was dominated by the sanctions on EDBI and absolutely no coverage was given at all to to the the decline of the Dow Jones or other economic news. The Iranians also threatened to file complaints with unnamed “relevant authorities.” Let’s see how well that works out for them.
  • At the same time the U.S. is tightening sanctions on Iran, the U.S. continues to lay the groundwork for a U.S. “interests section” in Tehran. This would be the first time the U.S. has had a diplomatic presence in Tehran since the 1979-81 hostage crisis. According to this report by McClatchey Newspapers, the Bush administration intends to announce these plans in mid-November. No word yet on whether Iran is on board with this idea, although Iranian President Mahmoud Ahmadinejad said last month that he’d consider the idea.
  • Cuba has announced that its recently-discovered oil reserves have 20 billion barrels of oil instead of the 5-10 billion previously estimated. To put this number in context, the U.S. has estimated reserves of 29 billion barrels. This has caused some skeptics to scoff that the new estimate is “off the charts” and might simply be a ploy to rekindle investor interest despite falling oil prices. Even so, there are reports of proposals on the Hill to exempt U.S. oil companies from the embargo so that they could get a piece of the action. Embargo hardliners are countering with proposals to prevent executives of foreign companies that drill in Cuba from visiting Disneyland.
Permalink Comments Off

Bookmark and Share



« Older Entries