Archive for the ‘Zimbabwe Sanctions’ Category


Apr

8

The Best Question on Burma Sanctions Is Still Unanswered


Posted by at 6:28 pm on April 8, 2014
Category: Burma SanctionsCompliance Programs and ProceduresEconomic SanctionsGeneralOFACSDN ListZimbabwe Sanctions

By Bild von Stefan Grünig, CH-3752 Wimmis (de:Benutzer:Sgruenig)Sgruenig at de.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%3ABurma06.jpg

OFAC announced last week that it issued additional Frequently Asked Questions and respective answers relating to what remain of U.S. sanctions against Burma.  None of the additional questions or answers is surprising or resolves an issue that is not otherwise answered by other OFAC guidance or applicable general licenses.

The questions and answers are, for the most part, a helpful recitation of the current landscape of sanctions involving Burma that summarize in one place the state of sanctions based on an assortment of scattered statutes, executive orders, regulations and licenses.  But one question stands out along with its non-responsive answer, in part, as follows:

What are the plans to update the SDN List for Burma?

Listings and any potential delistings under our Burma authorities will be pursued as appropriate to meet changing conditions in Burma.

The question itself has a colloquial quality to it as if the frequently asked question really put to OFAC has been along the lines of “What’s going on here?”

As other questions and answers describe, a number of banks remain on the SDN List but General License 19 authorizes U.S. persons to conduct most transactions with the banks.  In a similar situation about a year ago dealing with Zimbabwean banks, we posted about OFAC’s decision to keep those banks on the SDN List but, through a general license, to authorize almost all transactions with them.  At that time, I termed both the Burmese and Zimbabwean banks as SDN-lite designations and warned of the potential compliance difficulties such situations presented.

Keeping an entity on the SDN List would have the effect of blacklisting it from possible business with U.S. persons who rely solely on software to screen names on the SDN List to decide with whom to do business.  The results, of course, would create false positives because most transactions with these Burmese and Zimbabwean entities are permissible under U.S. law.  In fact, running these banks through OFAC’s SDN Search tool produces hits with no mention of any general license permitting dealings with them.

Delisting would, of course, be one option to correct the problem, but that would unblock any currently blocked assets, something OFAC might not wish to do.  Failing that, OFAC should at least put some annotation on the SDN List to denote that these very few entities are to be treated very differently than the thousands of others on the SDN List with whom U.S. persons may have no dealings.  At the moment, the question is back to OFAC, “What are the plans to update the SDN List?”

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Aug

27

Mugabe Lobbyists in U.S. Indicted


Posted by at 8:44 pm on August 27, 2013
Category: OFACZimbabwe Sanctions

U.S. Navy photo by Mass Communication Specialist 2nd Class Jesse B. Awalt/Released (DefenseImagery.mil, VIRIN 090202-N-0506A-310) [Public domain], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3ARobert_Mugabe%2C_12th_AU_Summit%2C_090202-N-0506A-310.jpg
ABOVE: Robert Mugabe

One way to make sure someone is sentenced to life on the SDN list is to make it illegal for anyone to argue for removal of an SDN from the list. Of course, that would be blatantly unfair, you say, in a nation dedicated to due process and the rule of law. We would never do that. Well, think again.

Earlier this month, a federal district court in Illinois unsealed a criminal complaint filed against Prince Asiel Ben Israel and C. Gregory Turner. The two defendants are charged with violating U.S. sanctions by providing “lobbying services” to Mugabe and other Zimbabweans on the SDN list without a license from OFAC. The 55-page affidavit attached to the complaint describes a number of innocuous actions by the defendants who had been engaged to lobby of the removal of Mugabe and friends from the SDN list. These actions included speaking to U.S. legislators about the Zimbabwe-based sanctions and attempting to obtain a speaking engagement for a Zimbabwean official in the United States. Helping to arrange visas for Zimbabweans to travel to the United States was also singled out as one of the illegal activities by the defendants.

What is odd is that buried within the criminal complaint are activities that go far beyond lobbying and seem clearly to have stepped over the line, including efforts to set up a diamond mining joint venture with SDNs in the Zimbabwean government. It’s hard to understand why the prosecution would focus on and call out what most people would see as First Amendment activities when the government has a much more supportable, and much less controversial, case involving a proposed business venture with the officials in Zimbabwe.

The affidavit mentions that the defendants sought to obtain compensation for their services. However, there is no requirement under the sanctions regulations that services must be compensated to be illegal. Free services are still services and potentially covered by the sanctions.

To make sure that I don’t get indicted for writing this post, let me be clear: I think Mugabe is a terrible person who truly deserves his spot on the SDN list. Forever. And I think the same thing about his cronies on the list as well. Seriously. I’m not just saying this to stay out of trouble with the Feds. Still, if I thought otherwise, I should be able to say that without worrying about getting indicted.

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Apr

30

The Bad News Is You’re Still on the SDN List


Posted by at 6:37 pm on April 30, 2013
Category: Burma SanctionsEconomic SanctionsOFACSanctionsSDN ListZimbabwe Sanctions

U.S. Navy photo by Mass Communication Specialist 2nd Class Jesse B. Awalt/Released (DefenseImagery.mil, VIRIN 090202-N-0506A-310) [Public domain], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3ARobert_Mugabe%2C_12th_AU_Summit%2C_090202-N-0506A-310.jpg
ABOVE: Robert Mugabe

OFAC last week issued its first general license for U.S. sanctions relating to Zimbabwe. The license authorizes for the most part “all transactions involving Agricultural Development Bank of Zimbabwe and Infrastructure Development Bank of Zimbabwe.” Both banks, however, are on OFAC’s SDN List.

Since the two banks have been and remain on the SDN List, the license does not unblock the banks’ property interests that had been blocked as of the date of the license. OFAC issued a similar general license in February of this year authorizing dealings with four banks in Burma but kept the banks on the SDN List and continue to block the banks’ property interests blocked prior to the license. A major development from these licenses is, of course, giving U.S. exporters local banking options that were previously unavailable and without them likely stymied business development in those countries.

Exporters should also take note, however, of how OFAC’s easing of sanctions through these licenses has an onerous side-effect on U.S. companies. If a company’s policy is to determine whether to deal with entities or individuals based on their presence on the SDN List or other relevant sanctioned party lists, the authorization granted to deal with listed banks through these general licenses would go unnoticed. Exporters now must check all the lists they routinely do as well as stay on top of licenses issued by OFAC to know whether someone has, from most exporters’ perspectives, been in effect delisted.

If these SDN-lite designations continue, exporters will either need to monitor closely OFAC’s daily activity or make sure their screening software is doing so for them, at least if they want to be sure they are not unnecessarily limiting their export opportunities.

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Nov

15

Diamonds Are An Ogre’s Best Friend


Posted by at 2:13 pm on November 15, 2012
Category: OFACZimbabwe Sanctions

Robert Mugabe
ABOVE: Robert Mugabe

A report in the Zimbabwe Herald, the state-owned mouthpiece for the Mugabe dictatorship, provides an entertaining, if somewhat fictive, account of the recently concluded Zimbabwe Diamond Conference in Victoria Falls. The purpose of the conference was to provide some support for the diamond industry in Zimbabwe which, although free of Kimberly Process Certification issues, is severely crippled by economic sanctions imposed by the U.S. Office of Foreign Assets Control against the Mugabe regime.

The pro-Mugabe news outlet had this to say:

KIMBERLEY Process Certification Scheme chairperson Mrs Gillian Milovanovic yesterday came under fire from delegates attending the inaugural Zimbabwe Diamond Conference here for failing to protect Zimbabwe’s diamond industry from America. Delegates expressed concern that Zimbabwe’s diamond sector continues to face obstacles despite the country receiving the KP’s nod to trade its gems.

They unanimously agreed that the American approach towards Zimbabwe’s gems sought to promote conflict diamonds.

During an open session, delegates said Mrs Milovanovic, who is American, should recuse herself from chairing the KP because she was failing to protect Zimbabwe from America’s Office of Foreign Assets Control sanctions.

This blog has noted before that the Kimberly Process certification and OFAC sanctions against the Zimbabwe Mining Development Corporation (“ZMDC”), which has a monopoly on sales of Zimbabwe diamonds, deal with completely separate issues.

The Kimberly Process certification is limited to finding that the certified diamonds are not conflict diamonds, which are defined as ‘“rough diamonds used by rebel movements or their allies to finance conflict aimed at undermining legitimate governments.” Obviously, Zimbabwe diamonds aren’t being used to undermine a legitimate government; indeed, they are being used to prop up the existing dictatorial regime in Zimbabwe.

The OFAC sanctions, however, arise not from any insurgency or rebel conflict in Zimbabwe. Instead, they are premised on human rights abuses by the Zimbabwe dictatorship. In the case of ZMDC, OFAC sanctions are presumably a response to documented reports of torture and forced labor in the diamond fields run by ZMDC.

Just because something isn’t a conflict diamond under the Kimberly Process, doesn’t mean it isn’t a blood diamond.

[For extra added amusement, unrelated to export issues, look carefully at the caption to the picture illustrating the Herald story.]

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Jun

7

Not All Blood Diamonds Are Conflict Diamonds


Posted by at 6:59 pm on June 7, 2012
Category: Zimbabwe Sanctions

Robert Mugabe
ABOVE:Robert Mugabe


Press reports from Zimbabwe suggest that Chicago-based insurance broker giant Aon may have gotten in hot water with the Office of Foreign Assets Control (“OFAC”) by assisting in the provision of insurance to Mbada Diamonds, one of the two Zimbabwe diamond mining companies that was put on the SDN list by OFAC in December 2011. When adding Mbada to the SDN list, OFAC clarified that trading with Mbada had been illegal ever since the agency designated the Zimbabwe Mining Development Corporation in 2008 given ZMDC’s controlling interest in Mbada. Obviously, many people had been trading with Mbada without knowledge of ZMDC’s interest in the company, although anyone familiar with Zimbabwe should have been concerned about possible ownership by ZMDC given ZMDC’s pervasive involvement in all aspects of Zimbabwe’s natural mineral resources.

Although OFAC did not say as much, the issuance of this “clarification” with respect to Mbada Diamonds and Mrange Resources was likely prompted by reports of torture and forced labor in the diamond fields of Zimbabwe. Ironically, Zimbabwe had just received in November 2011 Kimberly Process certification permitting sales of some $2 billion of diamonds from the Mrange fields where the human rights abuses were alleged to have taken place. The Mbada Diamonds website now trumpets this certification along with claims of its own social responsibility and its support for the country’s national soccer team.

Before you bring out the scythes and pitchforks and head off after the Kimberly certification process, it is important to understand what it does and does not do. The goal of the KP certification is to prevent trade in conflict diamonds which are defined as “rough diamonds used by rebel movements or their allies to finance conflict aimed at undermining legitimate governments.” Obviously, whatever one may think of the human rights violations involved, these diamonds aren’t being used by rebels to undermine legitimate governments. Indeed, they are being used to prop up a legitimate, albeit loathsome, regime.

According to the previously cited press reports, unnamed officials in Aon conceded that they had been providing insurance services to Mbada Diamonds. Of course, if this was being done through a company incorporated outside the United States and without the participation of U.S. persons, this would not have been prohibited by the Zimbabwe Sanctions Regulations. Although the Zimbabwe sanctions do not have the facilitation prohibitions which are found in many other OFAC regulations and which prohibit actions by U.S. persons that facilitate actions by foreign persons that would be illegal if done by U.S. persons, the regulations do have a provision that penalizes actions that evade the regulations. These evasion provisions are often interpreted broadly by OFAC to implicate U.S. companies for the activities of their foreign subsidiaries.

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