Archive for the ‘SDN List’ Category


Sep

10

Sen. Landrieu Attempts to Clarify the Record … But Doesn’t


Posted by at 8:28 pm on September 10, 2014
Category: Economic SanctionsOFACSDN ListVenezuela

Sen. Landrieu [Official Portrait, Public Domain]

On Sunday, in Lafayette, LA, The Advertiser printed an opinion from Sen. Mary Landrieu entitled, “Sanctions, as written, will hurt La. workers.”  While we hoped Sen. Landrieu was writing to clarify the record in response to our post last week, she was writing instead to respond to an earlier opinion in The Advertiser written by Sen. Marco Rubio and Rep. Bill Cassidy.

Sen. Landrieu began by referring to the Lake Charles, LA oil refinery as “owned by Citgo, a Venezuelan company with a strong and respected reputation in Louisiana.”  Citgo, however, is quite clearly a U.S. company, founded and incorporated in the United States over a hundred years ago.  It became wholly owned U.S. subsidiary of Petróleos de Venezuela, the Venezuelan national oil company, in 1990, but remained a U.S. company.  The hawkish view on U.S. sanctions is, of course, that Citgo, even though a U.S. company employing U.S. persons, is not immune from the conduct of its foreign parent if, in this case, Petróleos de Venezuela’s conduct were found to be at variance with U.S. economic sanctions and was added to the SDN List, its subsidiary Citgo would be equally blocked and unable to employ U.S. workers.

In her opinion, Sen. Landrieu continued to defend her opposition to the Venezuela Defense of Human Rights and Civil Society Act of 2014 because she believed that “the legislation as written was too vague” and “will continue to oppose it unless the language of this resolution makes crystal clear that there will be no threat to the [Lake Charles] refinery.”  But, as we pointed out last week, Sen. Landrieu’s references to amending the Act have led to no clear (crystal or otherwise) suggestions on how to do so.  We think we can help her out.

The Act, like other sanctions bills, already permits the President to waive the application of sanctions against a person if he determines that such waiver is necessary for the “national security interests of the United States.”  The amendment we recommend to Sen. Landrieu is to rewrite the waiver in Section 5(c)(1) to read, “The President may waive the application of sanctions under subsection (b) with respect to a person if the President determines that such a waiver is in the national security or economic interests of the United States.”  By adding simply “or economic” to the waiver condition, the President has another avenue to defend not imposing sanctions against otherwise sanctionable foreign persons.  Again, as we pointed out last week, the President would not take lightly a decision to block Citgo’s assets in Louisiana or anywhere else in United States.  Congress, moreover, would be hard-pressed to oppose a waiver if the President were able to show that imposing sanctions would have tremendous economic ramifications.

If Sen. Landrieu wants to take the position that U.S. economic sanctions against human rights violators can’t come with a cost that significantly harms the U.S. economy, there is a way to protect that interest.  Whether or not her position wins the day on the Senate floor, we think the only practical way to do so is to give the President more discretion in how he may choose not to impose sanctions.  A tidy addition of the two words “or economic” should do the trick and put to bed another odd episode of “How a Bill Becomes a Law.”

 

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Sep

6

Bizarre Sanctions Battle Brews in the Bayou


Posted by at 9:34 am on September 6, 2014
Category: Economic SanctionsOFACSanctionsSDN ListVenezuela

By User:Lunarsurface (Own work) [GFDL (http://www.gnu.org/copyleft/fdl.html), CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0/) or CC-BY-SA-2.5-2.0-1.0 (http://creativecommons.org/licenses/by-sa/2.5-2.0-1.0)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3ACitgo_sign_and_Yawkey_way.jpg

With the calendar turning to September, Sen. Mary Landrieu will be displayed prominently in election media coverage as an incumbent in the proverbial hot seat.  The most intriguing fodder her opponents have used against her has been her curious opposition to the Venezuela Defense of Human Rights and Civil Society Act of 2014.  The House passed its version by voice vote in May, but the Act has stalled in the Senate principally because Landrieu’s opposition has derailed others from bringing the Act to vote through unanimous consent.

The Act includes sanctions against individuals and entities associated with the Venezuelan government that the President determines committed, directed or “materially assisted, sponsored, or provided significant … support for” those who have committed or directed human rights abuses against anti-government protestors in that country.  Like many similar sanctions bills, Congress would give the President wide discretion in determining whether persons meet standards like “materially assisted” or provided “significant” support.  The Act would certainly not require the President to designate any company affiliated with the Venezuelan government as an SDN and, as a result, block their U.S. assets.

Sen. Landrieu, however, has opposed the bill out of fear that 2,000 workers at a Citgo oil refinery in Louisiana may be at jeopardy.  She has said that “once a simple sentence that protects these hard working Louisianans is added to the bill, I will be happy to support the legislation.”  So, what would Sen. Landrieu’s “simple sentence” look like?  It can’t possibly be a carve out for 2,000 workers at a Louisiana Citgo refinery; then every member of Congress with a Citgo presence in their state would want similar protection for their constituents.  It can’t possibly be a carve out to protect any U.S. companies owned by a Venezuelan parent, like Citgo is; then the sanctions would be bereft of any heft to affect possible change in Venezuela.

This week, Sen. Marco Rubio entered the fray in a letter to Sen. Harry Reid to ensure the Act is brought to the Senate floor for a vote over Sen. Landrieu’s opposition.  In his letter, Sen. Rubio described the Act as “target[ing] individuals only and pose[] no threat to American jobs or Venezuelan firms.”  Not so fast, Marco, the Act includes sanctions against “persons.”  Someone forgot to tell Sen. Rubio that every OFAC sanctions regime defines persons to mean individuals and entities.  Someone also forgot to tell him about the three Citgo storage facilities, hundreds of gas stations and thousands of affiliated jobs the company has in Florida.

One upshot of this situation is that members of Congress don’t understand how U.S. economic sanctions work.  It is odd that Sen. Landrieu has stuck her political neck out in a situation where the President would be the one under the Act who would have to designate Petróleos de Venezuela, Citgo’s Venezuelan parent, as an SDN if he determined it met the conditions under the Act.  Doing so would not be a decision taken lightly and would have repercussions beyond just Louisiana (ask any Boston Red Sox fan about what would happen to the Citgo sign above left field).  It is also odd that Sen. Rubio would put his name to a letter that declares no U.S. jobs would be threatened by these sanctions.  The fact is that threat remains under the Act, no matter how unlikely, and the President, not Congress, would be in control of imposing sanctions.

A simple moral to this story is a classroom adage: Read Carefully and Think Critically.  Here’s hoping politicians start doing a little bit more of both.

Clif adds: In my somewhat more cynical view, the likelihood that members of Congress will ever “Read Carefully and Think Critically” is exactly equal to the likelihood that I will ever debut as Wotan in a production of The Ring Cycle at the Met.

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Sep

4

Lost in Translation


Posted by at 5:24 pm on September 4, 2014
Category: OFACSDN List

By Uris at en.wikipedia [GFDL (http://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%3ACitibank_Chinatown.jpgYesterday the Office of Foreign Assets Control (“OFAC”) announced that it had fined Citigroup $217,841 in connection with its processing certain transactions involving Iran and one involving a Syrian entity on the Specially Designated Nationals and Blocked Persons List (the “SDN List”).

The SDN List issue is particularly interesting because the SDN List had what may be an incorrect name for the SDN involved and Citigroup, which had what appears to be the correct name, failed to block the transaction. At issue is Syria’s Higher Institute for Applied Science and Technology (“HIAST”) which appears on the SDN List as the Higher Institute of Applied Science and Technology. When Citibank ran a computer program to screen the name”Higher Institute for Applied Science and Technology” it didn’t pick up the “Higher Institute of Applied Science and Technology” because it was not an exact match.

Notwithstanding OFAC arguably getting HIAST’s name wrong,* it is fairly clear that screening procedures need to employ at least some fuzzy logic and not insist on exact word-for-word, letter-for-letter matches, particularly where many of the names on the SDN List have been transliterated or translated into English. The OFAC announcement indicated that Citigroup had “implemented a programmatic fix” of some kind, one which would apparently allow “of” to match “for” and vice versa.


*HIAST’s Facebook page uses “Higher Institute for Applied Science and Technology” as does Wikipedia and most other sources. Oddly, HIAST’s webpage uses “Higher Institute of Applied Sciences and Technology.” Only OFAC appears to be using “Higher Institute of Applied Science and Technology.” Given OFAC’s almost comical reliance on AKAs for many other listings, there is no reason for it to fail to add all the known variants in HIAST’s listing. That way even stupid systems would pick up the match

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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

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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