Archive for the ‘SDN List’ Category



Another Reason not to Hire the Russian Mob

Posted by at 11:09 pm on January 29, 2018
Category: OFACSanctionsSDN List

Hotel Vesna via [Fair Use]This story is on some month-old news that I missed at the time of the announcement. But without much else going on right now, I thought it worthy of a belated mention. Back in December, OFAC designated Thieves in Law («Вор в закoне»), a Russian organized crime group, under the agency’s Transnational Criminal Organization Sanctions Regulations (“TCO Sanctions”). The Thieves in Law apparently originated in the Russian gulags after the Russian Revolution. Unlike the Mafia, you could not belong to the group unless you had already been in jail. And like the Boy Scouts, they have their own code of conduct which, unlike the Boy Scout Code, forbids marriage and work. They sound like The Lost Boys in Peter Pan, except with tattoos and machine guns.

On one level, it seems somewhat odd to designate an organized crime organization since it is more a concept than a legal entity. It is not like the Thieves in Law own property, want to open a checking account for the group, or want to enter into legal contracts (as opposed to, say, the hit “contracts” often entered into by criminal gangs). Designating an unorganized group is rather like designating, say, the Beliebers, although on further reflection I might actually be completely in favor of blocking the Beliebers.

Of course, at the same time that OFAC designated Thieves in Law, it also designated some of the groups more visible adherents and supporter, which seems more logical since they will own property that can be blocked and may seek to do business with others. As a result, the Vesna Hotel and Spa, which is in Sochi and which is owned by Ruben Tatulian, was also blocked and added to the SDN List. Tatulian was designated for allegedly providing material support to Thieves in Law.

Although I doubt many Americans are traveling to Sochi these days, this designation might create a trap for unwary travelers. Executive Order 13581, which serves as the basis for the TCO Sanctions, was promulgated under the International Emergency Economic Powers Act, meaning that the travel exemption in section 1702(b)(4) of that Act would apply.  The travel exemption permits “any transactions ordinarily incident to travel to or from any country.” It seems to me that, even though the exemption would on its face cover travel by U.S. persons which involved staying in that hotel, it could also be argued that staying at that hotel is not ordinarily incident to travel to Russia.  This would be because there are plenty of other places to stay in Sochi not to mention within Russia. Moreover, a broad reading of the travel exemption would completely negate the designation of the hotel, so there is a good chance that OFAC would take the position that the exemption would not apply.

Permalink Comments Off on Another Reason not to Hire the Russian Mob

Bookmark and Share

Copyright © 2018 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)



Mugabe Leaves, Mnangagwa Arrives, Sanctions Remain

Posted by at 6:27 pm on November 27, 2017
Category: OFACSDN ListZimbabwe Sanctions

Emmerson Mnangagwa via [Public Domain - Work of USG employee]
ABOVE: Emmerson Mnangagwa

Last Tuesday, while you were thinking about the upcoming Thanksgiving holiday, Robert Mugabe, who has been dictator of Zimbabwe for the last 37 years, resigned.  Then while you were storming the doors of a local brick and mortar on Black Friday to cart off a new 4k flat screen TV, former Zimbabwean First Vice-President Emmerson Mnangagwa was sworn in as the new President, er, dictator of Zimbabwe.

So, you ask, whither the U.S. sanctions on numerous persons and companies in  Zimbabwe?  Here’s a hint:  Mnangagwa’s nickname is “The Crocodile” and he’s been Mugabe’s right hand man for years until the opportunity to replace Mugabe presented itself and Mnangagwa shoved him aside.  Here’s another hint:  Mnangagwa is, like Mugabe, on the SDN list, mostly for himself being knee-deep in everything that got Mugabe on the list and kept him there, including the notorious military massacre of the Ndebeles in Matabeleland.

The denial of bail for jailed political opponents of Mnangagwa, Ignatius Chombo and Kudzanai Chipanga, does not give much reason to hope that democratic reforms — a prerequisite to any sanctions reform for Zimbabwe — will occur in the near future.

Even though many of the member of Zimbabwe’s ruling class and associated companies and agencies are under sanctions, and will likely remain so for the near future, Zimbabwe is a major recipient of U.S. foreign aid, recently receiving $220 million from the United States. As you probably know, that could change if Mnangagwa is determined to have taken power through a coup. Section 508 of the Foreign Assistance Act, as continued through various subsequent appropriations bills, prohibits foreign aid to countries where a duly elected head of government is deposed by military coup or decree. Whether or not Mugabe was “duly elected” remains, I suppose, open to doubt, but even so State Department spokesman Heather Nauert declined to answer questions as to whether Mnangagwa’s takeover was even a coup. “I’m not going to take that bait,” was what she said to worm out of answering that question.

Permalink Comments Off on Mugabe Leaves, Mnangagwa Arrives, Sanctions Remain

Bookmark and Share

Copyright © 2017 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)



The Jeweller of Kingpins

Posted by at 11:41 pm on October 3, 2017
Category: OFACSDN List

Cartier Store Cannes via [Fair Use]French retailer Cartier agreed to pay the Office of Foreign Assets Control $334,800 to settle allegations that it made four sales of jewelry in a United States store to a an individual designated under the Foreign Narcotics Kingpin Sanctions Regulations. In announcing the settlement, OFAC did not reveal the value of the jewelry sold by Cartier to Shuen Wai Holding Limited but did note that the ship-to address for Shuen Wai was the same as the address shown on the SDN List.

This is the first penalty that I am aware of levied against a retail operation in the United States. This, no doubt, will send shock waves through the retail community. Technically speaking, if an SDN walks into McDonald’s and orders a Happy Meal, McDonald’s would be in violation of OFAC’s rules if it sold the Happy Meal to the SDN and it did not keep any money for the Happy Meal that the SDN had handed to the cashier. Does this mean that McDonald’s can’t sell you a Happy Meal or a Big Mac now without checking your ID and running it against the SDN List?

For the moment at least, the answer is you won’t have to make sure you have your driver’s license with you before you purchase a Big Mac. The OFAC announcement pointed out several things that lead to its decision to seek a fine from Cartier. First, it noted, that this was an international transaction. So unless you’re planning on asking them to send the Big Mac to some foreign country for you, there’s one difference. OFAC also noted that the luxury jewelry business was an “industry at high risk for money laundering.” This is a little puzzling since OFAC is not in the business of enforcing money laundering laws and regulations but, be that as it may, Big Mac’s are probably not a good vehicle for money laundering. (Viewers of Breaking Bad will remember, car washes are good for that.)   Another important fact, not mentioned by OFAC, is that this was a third-party transaction.   Unlike a party using its own U.S.-issued credit card, where the bank would presumably have screened the customer, no one would have screened the recipient of the Cartier merchandise in this instance.

In any event, OFAC reaffirmed that compliance programs should be “risk-based” and should take into account the company’s “products and services, frequency and volume of international transactions and shipments, client base, and size and geographic location(s).”  It is a bit difficult to determine what that means in a practical matter for retail stores beyond meaning that restaurants, grocery stores, and dog grooming parlors do not need to screen all their customers against the SDN List.  But it is probably the case that other retail businesses, particularly where the transaction involves international shipments of merchandise paid for by third parties, should consider screening those customers receiving merchandise.

Permalink Comments Off on The Jeweller of Kingpins

Bookmark and Share

Copyright © 2017 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)



Rafa Marquez Shown Red Card By OFAC

Posted by at 1:08 pm on August 10, 2017
Category: Narcotics SanctionsOFACSDN List

By F. Vera | (Own work) [CC BY-SA 3.0 (] via Wikimedia Commons [cropped and color corrected]
ABOVE: Rafael Márquez Alvarez

Yesterday the Office of Foreign Assets Control (“OFAC”) designated legendary Mexican footballer Rafael Márquez under the Foreign Narcotics Kingpin Sanctions Regulations. According to the press release accompanying the designations Márquez allegedly acted as a front man for, and held assets for, Flores Hernandez and his “drug trafficking organization.”

The press release takes specific note, if not some scarcely concealed glee, that Márquez is a “Mexican professional soccer player.” In fact, Rafa Márquez is not just any professional player. He is arguably the best defender in Mexican history and certainly its most decorated. He currently plays for the Mexican club Atlas and captains the Mexican national soccer team. All of which makes you wonder why on earth he would waste time fronting for a drug kingpin and whether OFAC’s charges that he did so are even credible.  Tom Brady may have deflated a few footballs but it is unimaginable that he would ever go full Walter Heissenberg and involve himself with a methamphetamine distribution network.

Márquez, as you have probably guessed, is vigorously denying these charges.

So by now you’re probably wondering this: where’s the red card that OFAC has shown Márquez? We all know, don’t we, that blocking an employee doesn’t block the organization. The Mexican national team isn’t blocked just because Márquez is on it. When Mexico and the United States play in the 2018 World Cup, the U.S. team won’t get in trouble, will they, if Márquez is playing for Mexico?

Well, that’s not clear. Section 598.406 of the Foreign Narcotics Kingpin Sanctions Regulations prohibits any U.S. person from providing any “services . . . for the benefit of” Márquez. You can’t play soccer without two teams, so the U.S. players are performing a service for Márquez by playing (and not just if they lose). Maybe even Mexico will insist on playing Márquez in that game hoping that the U.S. will have to forfeit the game.

Of course, there’s always the possibility that OFAC will issue a general license — analagous to Iran General License F which permits U.S. athletes to compete in professional sporting events in and with Iran (although even that license carves out blocked persons). Or maybe OFAC will issue a specific license for the World Cup.

Another possibility is that by the time of the World Cup Márquez will have successfully challenged the designation and will have been unblocked. Márquez is unlikely to prevail if his argument before OFAC is that he didn’t have anything to do with Flores. OFAC will no doubt say that it has evidence that he did and that such evidence is classified because disclosing it would reveal intelligence sources and methods. The more fruitful course for Márquez, and the one most often used for getting OFAC to undesignate a party, would be to argue to OFAC (if true) that he no longer has any dealings with Flores and that he will commit not to have any in the future. He might propose a compliance monitor to the agency to back up that promise. And he could promise to use his megastar status to make PSAs and visit schools and engage in other good works.

Another possibility is that Mexico will impose blocking sanctions on Buster Posey, Bryce Harper, and Anthony Rizzo, and promise to lift them only if the sanctions on Rafa are lifted by OFAC. Stay tuned. ¡El miedo no anda en burro!

Photo Credit: By F. Vera | (Own work) [CC BY-SA 3.0 (] via Wikimedia Commons [cropped and color corrected]. Copyright 2011 F. Vera

Permalink Comments Off on Rafa Marquez Shown Red Card By OFAC

Bookmark and Share

Copyright © 2017 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)



ExxonMobil Fined Two Million Dollars for Two Milliliters of Ink.

Posted by at 7:11 am on July 21, 2017
Category: OFACRussia SanctionsSDN List

By Dyor, (Own work) [CC BY 3.0 (], via Wikimedia Commons [cropped]
ABOVE: Igor Sechint

Yesterday the Office of Foreign Assets Control (“OFAC”) announced that it was fining ExxonMobil $2 million in connection with contracts signed by ExxonMobil with Rosneft in violation of the Ukraine Related Sanctions Regulations. The basis for the fine was not dealing with Rosneft itself; rather, OFAC premised the fine on the fact that Igor Sechin, an individual designated under Executive Order 13661 and the Ukraine Sanctions, signed the contracts. Simultaneously with the OFAC announcement, ExxonMobil filed suit in federal court in Texas seeking to overturn the penalty.

The OFAC announcement is unusual in that rather than simply announcing the fine and going through its usual analysis of how it calculated the penalty, OFAC responds to arguments made by ExxonMobil that it did not violate the sanctions.  ExxonMobil argued that OFAC had designated Sechin in his private capacity and not in his capacity as an official of Rosneft. OFAC harrumphs, as if it were completely obvious, that there is no private/official distinction in designations. According to OFAC, it is completely clear that there will be a problem if the blocked officer signs any agreement with a U.S person. It supports this with a Burma FAQ that deals with a different situation, that was contained in a section dealing with the Burma regulations and that OFAC has removed from its website.

OFAC’s glib rejection of a public/private distinction is not founded in any analysis of the regulations at issue. In fact, as everyone has known for quite some time, the rules do not clearly address situations where an officer of a company is designated and blocked by OFAC but the company itself is not. The Ukraine regulations refer to Executive Order 13661 as defining what activities are illegal. That relevant part of the order is Section 4 which prohibits

the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any person whose property and interests in property are blocked pursuant to this order

It also prohibits the “receipt … of funds, goods, or services” from any such blocked person.

So how does Sechin’s signature of the Rosneft deals step over a line? Certainly ExxonMobil wasn’t providing any funds, goods or services for his benefit. The contracts were for the benefit of Rosneft. Nor did ExxonMobil receive any “funds, goods, or services” from Sechin in the contract. Unless perhaps OFAC thinks that Sechin provided a service to ExxonMobil when he whipped out his pen and spent three seconds spreading ink over the signature line.

If that is the illegal service that was being provided, and it seems that it is because OFAC is drawing a line at the signature line, it’s not very defensible. Let’s say that Sechin hid in a closet and told another company official to sign. That’s a service too. In fact, there is no way to imagine a scenario where a top official of a company does not ultimately approve a major contract, which is also a service, meaning that OFAC’s effort to maintain a distinction between sanctioning Rosneft and sanctioning its officers falls completely apart.

The FAQ relied on by OFAC does not help its position either. Because OFAC has disappeared this crucial guidance (in fact the only guidance from OFAC anywhere on the signature issue) from its website, I’ve retrieved it from the Wayback Machine:

285. If a Burmese Government minister is an SDN, how does that impact the ministry he leads?

A government ministry is not blocked solely because the minister heading it is an SDN. U.S. persons should, however, be cautious in dealings with the ministry to ensure that they are not, for example, entering into any contracts that are signed by the SDN. [03-18-13]

Significantly, guidance on the minister of a government ministry is not necessarily relevant to a situation involving an official of a private company. Additionally, it is hard to justify punishing a company for violating the Ukraine sanctions because it did not read a web document about another set of sanctions.  Not to mention that this guidance no longer exists at all.

It’s easy to see what ExxonMobil sued. I’ll be watching the lawsuit closely. Pass the popcorn.

UPDATE:  FAQs 398 and 400 released after the Rosneft contracts that caution against entering into contract signed by SDNs.  Both of these concern OFAC’s 50-percent guidance and not the Ukraine sanctions.  Neither explains how an SDN signing a contract in his or her official capacity actually violates a rule that OFAC has promulgated and published in the Federal Register and the Code of Federal Regulations.


Photo Credit: By Dyor, (Own work) [CC BY 3.0 (], via Wikimedia Commons [cropped]. Copyright 2009 Dyor,

Permalink Comments Off on ExxonMobil Fined Two Million Dollars for Two Milliliters of Ink.

Bookmark and Share

Copyright © 2017 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)