Sep

30

BIS Kicks Dirt in Face of Utah Dirt Bike Dealer


Posted by at 9:35 pm on September 30, 2014
Category: BIS

Xtreme Motors via Google Maps [Fair Use]Like many Washingtonians, I have grown weary of marauding packs of dirtbags on dirt bikes and ATVs that terrorize drivers and pedestrians by speeding down the wrong side of streets and on sidewalks defying the police to chase them down. So it was with a slight frisson of Schadenfreude when I read that BIS today issued a Temporary Denial Order against X-TREME Motors, a dirt bike and ATV dealer in Utah. According to BIS, the TDO was based on a number of unlicensed exports of items requiring licenses, such as rifle scopes, which X-TREME misdescribed in export documents as ATV parts. It seems that the dirt bike and ATV business might have been a cover to smuggle controlled items from Utah to Russia and China, among other places

The dirt bike dealer, as you can still tell from its web site, had a side eBay business in which it sells a number of items that don’t seem particularly related to dirt bikes and ATVs, like rifle stocks, rifle scopes, ammo magazines and rifle barrels, and which will in many cases require export licenses. The BIS press release said that X-TREME was selling “crime control” equipment to China and Russia. It does not say what that equipment was, but I found two pairs of handcuffs for sale on X-TREME’s eBay site. After all, what fun is riding a dirt bike if you don’t have a few pairs of handcuffs along for the ride.

Between when I first looked at X-TREME’s eBay site and just now, someone has added at the top, in big red letters, this legend:

Hello we will not be offering any international shipping at this time. Please check back soon

Duh.  But “soon” might be a tad optimistic.

UPDATE:  As a commenter noted, and as I forgot when I wrote this post, riflescopes are also controlled for crime control reasons.

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Sep

24

Get Smart: Chinese Spy Edition


Posted by at 4:51 pm on September 24, 2014
Category: Arms ExportCriminal PenaltiesDDTCTechnical Data Export

By General Artists Corporation-GAC-management. [Public domain], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3ADonAdams.jpgMeet Charlie and Alice, two self-professed PRC spies who branched out from smuggling crystal meth into the United States to attempting to export airplanes and military technology from the United States to the PRC. Things did not turn out so well for Charlie and Alice who probably should have stuck with drug trafficking. So, find a comfortable chair, grab a bag of popcorn, and prepare to be entertained by the story that unfolds in the Criminal Complaint filed against them and to which they just pleaded guilty.

It was a dark and stormy evening in Manila when a counterfeit cigarette smuggler introduced two undercover agents working for the United States to Hui Sheng Shen, a/k/a “Charlie,” and Huan Ling Chang, a/k/a “Alice.” According to Mr. Counterfeit Cigarette Guy, Alice and Charlie could help the UCs obtain methamphetamine.

Alice and Charlie, explaining to the UCs that email was insecure, set up a drop email account, gave the UCs the credentials for the account, and said that they should communicate via messages left in the draft folder. (This method is not particularly effective in hiding communications from the government when you’re dealing with undercover agents but, whatever, it’s the trendy spycraft du jour.) Using this method, a deal for a kilo of meth was consummated and shipped to the UCs in tea bags hidden in computer towers. (Of course, no customs inspector would ever be suspicious of tea bags in computer towers so this is yet another example of top notch spycraft by Charlie and Alice.)

Emboldened by their world-class narcotics deal, Charlie and Alice decided to move on to bigger things and just kinda casually dropped into a subsequent conversation with the UCs that they would, oh, by the way, like to buy a military aircraft. Because, naturally, guys who buy drugs normally have a warehouse of military aircraft that they can sell to the people they buy drugs from.  And Charlie and Alice wanted not just any airplane but a honking huge E-2 Hawkeye reconnaisance aircraft. “Sure, Charlie, I’ll leave one for you at the front desk of your hotel after you wire me $100 million dollars.”

Of course, knowing the sensitivity of such an operation, Charlie and Alice wanted to refer to the Hawkeye in code as the “Big Toy.” That way, they could always claim, if caught, that they were really talking about a 12-ton toy Tonka truck. At this point, one of the UCs hits comedy gold when he says to Charlie and Alice:

“Do you guys realize what this thing is?.. . This thing is like a um 757 plane — it’s on aircraft carriers. Those things don’t just disappear.”

Undeterred, Charlie and Alice still kept negotiating to buy the “big toy,” stating that their buyer, which they described as the “Chinese C.I.A.,” could afford it. The UCs, however, managed to steer them to something more manageable, something that could fit in a backpack, namely, a Raven RQ 11B UAV. Charlie and Alice explained that they could smuggle the UAV out of the United States by having scuba divers or remote-controlled submersible vehicles carry the items to an off-shore Chinese ship. They also planned to get the manuals out by taking pictures of the manuals, deleting the pictures from the memory cards and then having their friends in China recover the deleted images.

There were, of course, two problems with the deleted image trick. First, everyone (even Customs) knows about it and can easily detect and recover deleted images on digital camera memory cards. Second, Charlie and Alice were arrested while taking the pictures.

For those who want to try at home the recovering deleted images trick, here’s a quick guide on how to do that.

 

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Sep

22

Texas Man Charged with Smuggling for Forwarding One Email


Posted by at 10:10 pm on September 22, 2014
Category: Criminal PenaltiesIran SanctionsOFAC

BlackBerry email on the BB 8330 by Ian Lamont(Own work) [CC-BY-SA-2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Flickr https://www.flickr.com/photos/ilamont/4329363938/A criminal information was filed last week against Patrick Jean Zuber, a U.S permanent resident and former Weatherford International Vice-President, charging him with conspiracy to violate the anti-smuggling statute, 18 U.S.C. § 554. How did he get into such trouble? Actually, he didn’t do anything more than push the forward button to send an email from a company in Thailand seeking to purchase equipment for an oil project in Iran. That’s right: he is being charged not with sending any equipment to Iran; he is being charged with sending an email forwarding that inquiry from the potential customer in Thailand.  Zuber forwarded that inquiry to a Canadian employee of Weatherford.  This cold-blooded and heinous act of clicking “forward”  was deemed to be facilitation of an illegal export to Iran. The criminal information is silent as to whether any export actually occurred

Whether the Canadian to whom the email was sent was employed by a U.S. or foreign subsidiary of Weatherford is not made clear by the criminal information. If it was a foreign subsidiary, then at the time Zuber forwarded the email, it would have been perfectly legal, under section 560.205 of OFAC’s Iranian Transactions and Sanctions Regulations, for the Canadian citizen at a foreign company to export EAR99 items to Iran even if they were originally manufactured in the United States. In that case, showing criminal intent by Zuber, who may well have thought that Canada could legally fulfill the order he forwarded, is going to be extremely difficult.

Of course, there may be other facts not mentioned in the criminal information which justify this prosecution. But if the basic crime here is forwarding an email to someone that Zuber thought could legally fulfill the order, this really seems more suited for a civil, rather than a criminal, penalty. After all, section 560.205 of OFAC’s requlations does prohibit a U.S. person from facilitating a transaction by a foreign person that would be illegal if done by a U.S. person and so OFAC would clearly have the authority to fine Mr. Zuber for pushing the forward button.

Photo Credit: In 30 Minute Guides

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Sep

17

Turkish Citizen Indicted For Foreign Downloads of Submarine Drawings


Posted by at 7:11 pm on September 17, 2014
Category: Arms ExportCriminal PenaltiesDDTCITARUSML

By U.S. Navy via http://www.navy.mil/view_image.asp?id=16778 [Public Domain]Alper Calik — a Turkish citizen and co-owner of Clifton, New Jersey based Clifmax LLC — has been arrested based on a criminal complaint, dated September 12, charging him, among other things, with violating the Arms Export Control Act by exporting without a license certain drawings relating to the NSSN (Virginia) class submarine. (And, no, I am not reporting this case simply because the company is named Clifmax, although that is, leaving the alleged criminal conduct aside, an awesome name for a company.)

At the heart of the allegations are two drawings that Calik downloaded from a DoD database after signing the Military Critical Technical Data Agreement which must be signed in order to gain access to the DoD drawing database at issue. The criminal complaint alleges that Calik downloaded these images while in Turkey and attempts to assert that Calik knew doing this was illegal because he had signed the Military Critical Technical Data Agreement.

However, the Military Critical Technical Data Agreement is hardly specific about what is or is not permitted with respect to the drawings, saying only this:

[The undersigned] acknowledge[s] all responsibilities under applicable U.S. export control laws and regulations (including the obligation, under certain circumstances, to obtain an export license from the U.S. Government prior to the release of militarily critical technical data within the United States) or applicable Canadian export control laws and regulations, and (2) agree[s] not to disseminate militarily critical technical data in a manner that would violate applicable U.S. or Canadian export control laws and regulations.

Suffice it to say that this certification is poorly drafted and confusing, mentioning an export license only in the context of releasing the data “within the United States.” Nor does the certification that he would not “disseminate” the data clearly prohibit him from downloading the information for his own personal review in a foreign country. Obviously, such downloads do in fact violate U.S. exports if the downloads include ITAR-controlled technical data, but this certification neither makes that clear nor establishes that Calik had the necessary criminal intent when he downloaded the documents

The complaint alleges that there were legends restricting export on the drawings involved, but does not quote those legends. Whether these legends are enough of a predicate to support the criminal intent necessary for conviction on the export charges depends on what those legends said and that remains to be seen.

UPDATE:  Two commenters make an excellent point about using the legends on the drawings as indicia of criminal intent: Calik would have only seen the legends after he downloaded the drawings in Turkey.  The significance of this point is magnified even further when you consider this statement from the criminal complaint:

Beginning in or around 2009 to the present time, ALPER CALIK downloaded approximately one hundred thousand drawings. some of which were subject to U.S. export control regulations without obtaining export licenses from the U.S. Department of State. ALPER CALIK was not in the United States when the majority of the drawings were downloaded.

At issue are only two of these one hundred thousand downloaded drawings, which would have revealed the legends only after being downloaded.  The overwhelming portion of the remainder of the drawings not having any indication that the downloading of these or other drawings might be problematic.

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Sep

12

Maybe Their Phones Aren’t Working


Posted by at 3:27 pm on September 12, 2014
Category: Iran SanctionsOFACSudanSyria

By CFTC via https://www.flickr.com/photos/cftc/4406624868/sizes/z/ [Public Domain]Both the Commodity Futures Trading  Commission and the Office of Foreign Assets Control announced settlement agreements under which they imposed fines of $150,000 and $200,000 respectively on the oddly named Zulutrade, an online foreign exchange broker.  Zulutrade has nothing to do with Africa but is located in Pireaus, Greece, incorporated in Delaware and registered with the CFTC (which is how OFAC and CFTC got their hooks into a company located in Greece). The OFAC announcement is here and the CFTC announcement is here.

The reason for the fines is that Zulutrade allegedly maintained accounts for over 400 persons in Iran, Sudan, and Syria. On this much, the CFTC and OFAC agree. Beyond that the two agencies have different stories about how the violations, which were not voluntarily disclosed by Zulutrade, occurred. OFAC’s explanation is simply that Zulutrade had no idea it needed to comply with U.S. sanctions, perhaps not surprising in the case of a company sitting in Greece even if incorporated in Delaware.

Zulutrade failed to screen or otherwise monitor its customer base for OFAC compliance purposes at the time of the apparent violations. This failure was the result of a lack of awareness regarding U.S. sanctions regulations.

But to listen to CFTC the problem was that Zulutrade was aware of its responsibilities, tried to comply with them and botched it.  The Zulutrade compliance program, according to CFTC, provided that Zulutrade

may delegate implementation to third party service providers or agents. The procedure also says that if implementation is delegated, “Zulutrade shall have a written agreement with the other entity outlining the other entity’s responsibilities, and shall actively monitor the delegation to assure that the procedures are being conducted in an effective manner.” However, Respondent did not follow its procedure for OF AC screening. Specifically, Respondent relied entirely upon third parties to implement its procedures but Respondent did not have written agreements with all such third parties and OF AC screening was not performed.

I do not see any way to read these two narratives as consistent. OFAC says Zulutrade had no idea it needed to comply, but CFTC says that Zulutrade knew it need to comply but delegated the responsibility to third parties, although not in the fashion required by its compliance program and, apparently, without checking to see if the third parties were in fact screening. It’s hard to explain these two different accounts of what happened other than by the fact that OFAC and CFTC are in different parts of Washington and their telephones must not be working.

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