Archive for the ‘Sanctions’ Category


Jul

24

Mugabe’s Scottish Castle in the Sky


Posted by at 6:16 pm on July 24, 2014
Category: Economic SanctionsOFACSanctionsZimbabwe Sanctions

By User:Bigwikiaal (Own work) [CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3AEilan_Donan_Castle%2C_Scotland_2013-09-12_12-29.jpg

The Herald, a Mugabe mouthpiece owned by the Zimbabwean government, recently criticized former British Prime Minister Tony Blair in two articles for reported comments the UK made to justify the imposition of sanctions against Zimbabwe.  Referring to “illegal sanctions,” The Herald cited an article in the “Journal of African Studies” that quoted former South African president Thabo Mbeki as saying that UK officials told him, presumably sometime in the early 2000s, that Zimbabwean president Robert Mugabe owned a Scottish castle and had UK bank accounts that the UK intended to freeze, only to allegedly tell Mbeki later that the UK could not locate the Scottish castle or the accounts but still intended to impose sanctions in any event. (Perhaps the UK momentarily confused Mugabe with Idi Amin who once offered to be the King of Scotland.)

The article in question appeared in the June 2014 edition of the Journal of Southern African Studies and was by Blessing-Miles Tendi a frequent writer on UK-Zimbabwe relations and lecturer at Oxford.  Professor Tendi did in fact cite to a discussion he had with Mbeki in 2011, during which Mbeki said that “Britain” and “Tony’s people” made such statements about Mugabe’s assets and that the British later admitted to finding no castle in Scotland or Mugabe accounts in the UK.  Tendi went on to describe a UK decision to freeze Mugabe’s assets as “devoid of rationality” inasmuch as the UK knew these assets did not exist.  (Interestingly, Tendi also asserts that Mbeki claims that British plans to invade Zimbabwe were thwarted by Mbeki’s decision not to let Britain use South Africa as a staging point for the invasion.)

Tendi and The Herald are misinformed about the UK sanctions.  In addition to freezing any current or future Mugabe’s assets in the UK, the sanctions also prohibit anyone from making any economic resources available to Mugabe or his co-sanctioned cronies.  If the UK believed that Zimbabwe was engaged in human rights abuses and suppression of democracy, as most countries and international organizations still believe, it would not be “devoid of rationality” to conclude that prohibiting financial assistance and freezing future assets are warranted to end such abuses and suppression.

Although Tendi and The Herald are misinformed as to the scope of UK economic sanctions law, the more important take-away from this curious vignette is the allegation that a country like the UK may have hastily taken to other countries its case for sanctions, even in small part, based on its own misinformation.  Imposing economic sanctions on identified targets are swift government decisions with immediate effects that are many times based on information that the target itself can’t readily confirm or deny.  The only administrative due process afforded to a foreign sanctions target in the United States is an “administrative reconsideration” of OFAC’s decision by … OFAC.  As we noted earlier this year, OFAC reconsiderations are no easy task and some petitioners are taking claims to U.S. courts to obtain removal from the SDN list.  Although Mugabe does not have a strong case for reconsideration and not likely to make one, other sanctions targets may, and should at least try, if the circumstances warrant.

 

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Jul

2

OFAC Gores Red Bull for Skateboarding in Havana


Posted by and at 6:45 pm on July 2, 2014
Category: Cuba SanctionsEconomic SanctionsOFACSanctions

Ryan Scheckler Skateboards in Havana via http://www.redbull.com/cs/Satellite/en_INT/Gallery/Ryan-Sheckler-shreds-Cuba-and-Panama-021242761792131#/image-12 [Fair Use]

Last Friday, OFAC announced that Red Bull North America, Inc. (“RBNA” or, when we’re feeling informal, “Red Bull”) agreed to pay $89,775 to settle allegations that “seven representatives” of RBNA traveled to Cuba in order to “film a documentary” in 2009 without OFAC authorization but with the approval of RBNA’s “management.”  RBNA is the U.S. subsidiary of Red Bull GmbH, the Austrian elder statesman of excessively caffeinated energy drinks.  Although OFAC provided no details about the film itself, it is likely a 2009 documentary, described by Red Bull here, which the company made about Ryan Sheckler skateboarding in Havana.  Apparently there is no place left in the world that is safe from skateboarders other than, perhaps, some interior stretches of Antarctica.

Of course, there is a general license for journalistic activities in Cuba, which would seem to cover making documentaries, as opposed to, say, filming Transfomers LVIII: The Final (And We Really, Really Mean It This Time) Apocalypse.  But OFAC’s general license is restricted to “persons regularly employed as journalists by a news reporting organization.”  As we’ve noted before OFAC has not applied this limitation in a consistent fashion, suggesting that Michael Moore wasn’t a journalist but Charlize Theron was. Although Red Bull seems quite active in the documentary business, OFAC apparently viewed them as simply a commercial marketing endeavor in a country where Red Bull is undoubtedly sold.  In fact, judging from the Red Bull Cliff Diving World Series event held in Havana this May, a good amount of Red Bull is being consumed in Cuba.

In considering the penalty amount, OFAC said it determined and took into account that “RBNA did not voluntarily self-disclose” and that “RBNA had prior knowledge of U.S. sanctions on Cuba and took steps to conceal the transactions.”  Of course, we don’t quite understand how you conceal a documentary, particularly where Red Bull posted extensive information about it on the Internet, which is where OFAC likely discovered this transaction. On the other side of the equation, OFAC cited  RBNA’s institution of an OFAC compliance program, no other sanctions violation from 2004 to 2009 and the “non-egregious” nature of the violation.

We have over the past few years called attention to the confusion and lack of information in OFAC’s enforcement action announcements.  Last April, we highlighted what we thought was one of the more egregious “non-egregious” settlements that OFAC has announced.   The latest settlement with RBNA, furthers the confusion by imposing a fine on the low scale even after OFAC finds, albeit wrongly, that Red Bull concealed the documentary.

While OFAC makes up for its small-ish RBNA fine in its hefty enforcements against banks (à la the almost $1 billion settlement OFAC reached with BNP Paribas this week), most U.S. companies’ dealings with Cuba are going to be more on par with isolated occurrences like the one involving RBNA.  In the end, the RBNA settlement is good news for RBNA, its Red Bull parent and any other U.S. company in a similar situation.  If a U.S. company ever finds itself in the future before OFAC in an isolated situation like RBNA, the first thing to do is to pull out RBNA’s settlement announcement and try negotiating from there.

 

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Jun

23

Seeing Through the Smoked-Filled Rooms of Sanctions


Posted by at 6:37 pm on June 23, 2014
Category: Economic SanctionsGeneralOFACRussia SanctionsSanctionsSDN List

By Erifnam at en.wikipedia [GFDL (www.gnu.org/copyleft/fdl.html) or CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0/)], from Wikimedia Commons http://commons.wikimedia.org/wiki/File%3AK_Street_NW_at_19th_Street.jpg

The Canadian newspaper The Globe and Mail reported last week that lobbying records made public this month show the CEO and a lobbyist for Kinross Gold Corp., a Canadian gold mining company and one of the world’s largest, “have had numerous communications” with Prime Minister Stephen Harper’s foreign affairs policy adviser, Canada’s deputy minister of foreign affairs and the Canadian ambassador to Russia in order to discuss “policies and regulations related to the imposition of economic sanctions.”

With almost a third of Kinross’s global gold production reportedly coming from its two mines in Russia, Kinross has good reason to to try to find out, to the best extent possible, whether the Canadian government plans to impose sanctions relating to Russia that may affect Kinross business in that country.

Canadian sanctions against Russia, like U.S. and EU laws, involve prohibitions on dealings with targeted persons and give government authorities wide latitude to designate individuals and entities with essentially no public notice or consultation.  Under U.S. law, for example, OFAC can designate an SDN at any time without having to comply with public notice and review requirements imposed on almost all government agencies so long as the person meets the often broad criteria of a sanctions target under an executive order.

Moreover, OFAC deems any entity owned 50% or more by an SDN to be treated as an SDN itself.  As we previously reported, the so-called 50% rule has caused a variety of compliance conundrums relating to Russia as a few individuals, like Gennady Timchenko, Arkady Rotenberg and Boris Rotenberg, own major companies in many sectors of the Russian economy.  To boot, Kinross may have gotten understandably skittish when, south of the border, President Obama issued his latest Russian sanctions-related executive order in late March permitting imposition of sanctions on those operating in various sectors of the Russian economy, including metals and mining.  Under that criteria, Kinross itself might later be designated an SDN.

Sanctioning governments have, of course, reasons for their secrecy.  Intended targets can’t be announced prior to sanctions being imposed and, therefore, given a head start in transferring their property and money to safe haven countries.  But with little guidance and a lot at stake, Kinross has every reason to reach out to government officials to gain any clarity possible and do one’s best to make sure business can continue as usual or, if not, how to adjust its operations to comply with applicable laws.

Kinross is not alone.  U.S. federal lobbying records for this year’s first quarter are now publicly available.  For example, Coca-Cola, Xerox and Citgo are among the variety of companies that have reported lobbying efforts relating to sanctions against Russia.  Because sanctions against Russia weren’t imposed until the end of the first quarter in March, we expect to see disclosures in subsequent quarters from more companies involved in such efforts.

If there are smoke-filled rooms in economic sanctions, the smoke is mostly from government cigars (and maybe Cuban-origin for the Canadians).  The smoke arises where statutes, regulations and executive orders give government agencies dangerously broad discretion in identifying the sanctions targets and enforcing sanctions laws in ways that are not readily apparent from the laws themselves.

Future economic sanctions laws are not likely to be written any clearer.  Much of their effectiveness lies in not knowing who will be targeted and, as a result, the better chance there is that companies and individuals will police themselves in order to avoid possible violation.  In such an uncertain environment, finding people who can get as much information as possible from government officials enforcing sanctions will always be an invaluable resource.

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Jun

16

It’s A Small World After All, Even For Economic Sanctions


Posted by and at 8:02 pm on June 16, 2014
Category: ChinaEconomic SanctionsEURussia SanctionsSanctionsSudan

It's A Small World by Darren Wittko https://www.flickr.com/photos/disneyworldsecets/2767829714/ CC BY 2.0 [https://creativecommons.org/licenses/by/2.0/] (cropped)G-7 countries recent meeting in Brussels understandably grabbed global headlines for their unified message that they “stand ready to intensify targeted sanctions and to implement significant additional restrictive measures to impose further costs on Russia should events so require.”

While sanctions imposed by G-7 countries, as well as the EU, drive the engine of global sanctions enforcement, there are almost 200 other countries in the world and many of them want to have their position on sanctions known.  Last week, for example, Serbian President Tomislav Nikolić surprised no one on Earth (or anywhere else for that matter) when he told Serbian media, “It’s impossible to imagine Serbia imposing sanctions on Russia.”  Of course, Nikolić’s pronouncement is hardly going to cause the E.U. to rethink, even for a fraction of a nanosecond, its position on Russian sanctions.  On the other hand, the E.U. sanctions may cause Serbia, given that Russia is one of it’s largest trading partners, to rethink the wisdom of its application to become a member of the E.U.

Besting Serbia’s population by over a billion, China is emerging as a critical Russian ally and the most important country that is not imposing sanctions against it.  As with Serbia, economic self-interest and the volume of China’s trade with Russia may be at the heart of this.  In fact, reports on the recent $400 billion, 30-year deal for Gazprom to supply natural gas to China suggest the deal would be based on a ruble-yuan exchange and bypass Western financial systems altogether.

With developed countries like China and Serbia using economic self-interest to justify trading with Russia despite its shenanigans in Ukraine, some developing countries may be acting against their own economic self-interest in imposing sanctions to deal with regional conflicts.  Reuters reported this week, for example, that members of the Intergovernmental Agency for Development, an East African trade group made up of Djibouti, Eritrea, Ethiopia, Kenya, Somalia, South Sudan, Sudan and Uganda, have threatened sanctions against South Sudan if warring factions do not cooperate to end conflict in that country.  The United States imposed sanctions in early May against military leaders involved in the conflict, but they likely will provide no meaningful impact.  However, when everyday trade with your neighboring countries starts to become restricted, sanctions are far more likely to achieve the goal of ending conflict.  If East African sanctions succeed against South Sudan while E.U and U.S. sanctions have no impact on Ukraine,  then we will certainly have a situation where it’s the mice that roar while the elephants squeak.

Sanctions news runs on the front page when it involves the United States and Europe but also on the back pages as it involves the rest of the world.  You have to read the whole paper to make sure you have the full story.

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May

30

Having Baggage Is Not A Crime


Posted by at 5:10 pm on May 30, 2014
Category: Criminal PenaltiesDoJEconomic SanctionsIran SanctionsSanctions

Please Report Any Unattended Luggage by Kenneth Lu https://www.flickr.com/photos/toasty/2619866851/in/photolist-DLUFQ-5z9X21-K3Ta2-4Zvv98-JHpPQ-AEW4c CC BY 2.0 [https://creativecommons.org/licenses/by/2.0/] (cropped)

A federal jury in Ft. Lauderdale, Florida recently acquitted Patrick Campbell on charges that alleged he attempted and conspired to violate U.S. economic sanctions against Iran.  As we reported at the time of his arrest last year, Campbell, who is from Sierra Leone, was detained at JFK Airport as soon as he cleared customs and was found to have uranium inside shoes packed in his luggage.  Prior to his U.S. arrival (and immediate arrest), according to the government, Campbell had been communicating with an undercover ICE agent in Ft. Lauderdale in order to arrange the sale of uranium from Sierra Leone to Iran.

We surmised at the time of his initial charging that Campbell had arguably done nothing in the United States that constituted an attempt or conspiracy to commit a U.S. sanctions violation simply by entering the United States.  Because the Iran Transactions and Sanctions Regulations cover only exports from the United States (which this was not) or exports by a U.S. person (which Campbell was only by virtue of being physically present in the United States), he could only be convicted for what he actually did while in the United States.  The Justice Department tested those boundaries, and a jury wasn’t convinced.  A great deal of credit should be given to Campbell’s attorney, Richard Serafini.

We spoke with Mr. Serafini about the case and the arguments he made to the jury in Campbell’s defense.  Mr. Serafini said that he emphasized to the jury that the Justice Department had not shown beyond a reasonable doubt that Campbell had done anything with the specific intent to violate U.S. sanctions.  In addition, he said that he told the jury that Campbell should not be considered to have committed any criminal acts as a U.S. person simply because he was lured to enter the United States by law enforcement.  Mr. Serafini said that he finally impressed upon the jury that, regardless of any criminal act that may have been committed, Campbell had been entrapped by the ICE agent to do so.

While no one can know what may have led the jury to acquit, it is certainly noteworthy that one or more of those arguments possibly resonated with jurors.  The jury instructions shed a little more light in that the court explained an attempt must be “more than simply preparing” and have a ”substantial step … that would normally result in committing the offence.”  What did Campbell do in the United States to meet that requirement?  Having uranium in your luggage could be seen by a jury as “simply preparing.”  As for conspiracy, the jury rightfully asked the court during deliberation whether the undercover agent could be part of the conspiracy.  The court responded simply, “No, a government agent cannot be a co-conspirator.”  In sum, it looks like the facts didn’t fit the crime and a well-marshaled defense portrayed that.

In so far as Campbell’s case has a bearing on subsequent sanctions prosecutions, we may have been clairvoyant in our warning last September:

As the stretch of sanctions includes more foreign individuals and their subsequent imprisonment, the United States may find itself retreating from expanding prosecution after a successful defense or even international criticism that U.S. sanctions as so applied are too attenuated for a reasonable interpretation of the sanctions’ purpose or the laws themselves.

Campbell’s acquittal sends the Justice Department back to the drawing board to reconsider future prosecutions based on undercover operations targeting foreign persons and inviting them to the United States for their unbeknownst arrest.  As we reported in the case of a Russian caught up a similar operation last year, the resulting arrest stirred U.S.-Russian diplomatic waters and resulted in his return to Russia after pleading guilty.  Be careful what you do on the Internet, and that goes for the government too.

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