Archive for the ‘SDN List’ Category


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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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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May

19

There’s More Than One Way to Sanction a Russian under U.S. Sanctions


Posted by at 9:09 pm on May 19, 2014
Category: Economic SanctionsOFACRussia SanctionsSanctionsSDN ListSyria

By Rakkar at en.wikipedia (Transferred from en.wikipedia) [CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3ABashar_and_Asmaa_al-Assad_in_Moscow.jpg
ABOVE: Assad in Moscow

OFAC recently announced the designation of Russian bank Tempbank and one of its Russian officials, Mikhail Gagloev, to its Specially Designated Nationals List “for providing material support and services to the Government of Syria.”  According to OFAC, Tempbank “arranged to deliver millions of dollars in cash” to a Russian airport for pickup by “cash couriers” for the Central Bank of Syria and Gagloev “personally travelled to Damascus to make deals with the Syrian regime on behalf of Tempbank.”  Six senior officials of the Syrian government and two Syrian companies were also designated for apparently unrelated reasons.

Not surprisingly, the Russian Foreign Ministry responded that Russia believes the designations of Tempbank and Gagloev are “absolutely unacceptable” and “would like to remind the U.S. side yet again that the language of sanctions is useless and counterproductive.”  To the Russian government, the basis for which a Russian individual or entity is designated as a U.S. sanctions target is, of course, irrelevant.  Russia can, moreover, understandably disregard the reason behind OFAC’s designations because the resulting sanctions against the identified Russians are effectively the same.

In light of the designations of Tempbank and Gagloev, it is reasonable to suspect that OFAC may start designating more Russians to the SDN List for reasons unrelated to Ukraine to augment the U.S. sanctions target range.  Indeed, it is peculiar that no one had been designated to the SDN List under sanctions against Syria for almost a year until this latest development.

Perhaps, OFAC is changing course from designating Russians to the SDN List for shaky reasons like being part of Putin’s “Inner Circle,” as was the justification given for targeting the likes of Gennady Timchenko, Arkady Rotenberg and Boris Rotenberg.  Targeting someone for sanctions just because he is a Putin crony may be enough under IEEPA’s broad authorization to the President, but doing so has not been met with the same enthusiasm by others, namely the EU.  The EU has, for sure, its own reasons not to tread into designating Russian businesses and businessmen with substantial ties and influence on European markets.  However, the result, which we recently pointed out, is that U.S., EU and even Canadian sanctions relating to Russia are becoming quite the confusing patchwork to follow.

 

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May

13

Russian Sanctions Creep


Posted by at 6:39 pm on May 13, 2014
Category: Economic SanctionsEURussia SanctionsSanctionsSDN List

By President of Russia [CC-BY-3.0 (http://creativecommons.org/licenses/by/3.0)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File:Volodin_V_V.jpeg?uselang=ru
ABOVE: Vyacheslav Volodin


The EU yesterday added new names to its sanctions list.  The latest additions include Russian President Putin’s deputy chief of staff, Vyacheslav Volodin, and Vladimir Shamanov, the commander of the paratroop unit that allegedly took part, despite Russian denials, in the annexation of Crimea.

Also added were a number of Crimean companies:  One is Chernomorneftegaz, a Crimean gas company; another is Feodosia, a Crimean oil supplier.

Volodin but not Shamanov and Chernomorneftegaz, but not Feodosia, are on the U.S. sanctions list. Differences like these suggest incoherence and, at the least, create compliance challenges for multinationals.

Being on a U.S. or EU sanctions list means that the assets of the listed person are frozen and dealings with them by those subject to U.S. or EU jurisdiction are prohibited.

Whether these sanctions will deter further Russian involvement in the Ukrainian crisis is anyone’s guess.  The reluctance to impose so-called sectoral sanctions, that is, prohibitions on dealings with anyone in a given sector like oil and gas, exposes concerns about the double-edged sword of sanctions:  They truly cut both ways.

Individuated sanctions are, nonetheless, a headache for companies subject to U.S. and EU law because of the broad-based shadow lists of those subject to sanctions under the U.S. rule freezing the assets of any company that is 50% or more owned by a designated person and the EU rule  freezing any assets “controlled by” a designated person.

Shadowing the shadow list means that simple screening of listed persons is not enough.

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