OFAC Fines Foreign Company for Following Applicable Foreign Law

Posted by at 8:41 am on December 1, 2017
Category: Cuba SanctionsForeign CountermeasuresGeneralOFAC

American Express Office in Rome, image by User Mattes [CC-BY-3.0] (], via Wikimedia Commons Office of Foreign Assets Control (“OFAC”) recently announced that it has extracted $204,277 from American Express as a result of 1,818 credit card transactions in the amount of $583,649.43 for purchases made in Cuba. At issue were Mastercard and Visa corporate credit cards issued by BCC Corporate SA to corporations for use by the employees of those corporations, which cards were then used by those employees to make the Cuban purchases that were at issue.. BCC is a wholly-owned Belgian subsidiary of Alpha Card Group, another Belgian company  and a 50/50 joint venture of BNP Paribas Fortis and American Express.

The immediate question here, which OFAC can’t be bothered to answer, is how OFAC has the authority to fine a Belgian company for its dealings with Cuba. The Cuban Assets Control Regulations prohibit Cuba transactions by persons “subject to the jurisdiction of the United States.” Section 515.329 of the CACR define persons subject to the jurisdiction of the United States to include companies “owned or controlled” by a corporation organized under the laws of the United States

The CACR does not define “owned or controlled.”  That’s probably because everyone — except apparently OFAC — understands what that means, namely that the U.S. company owns 100 percent of the company or some lesser amount coupled with de jure or de facto control. In the case of a 50/50 joint venture neither party owns or controls the venture.  (Owned in this context cannot mean any interest, no matter the size, since that would render the addition of “or controlled” unnecessary).

To make matters worse, OFAC is — yet again — punishing a company for complying with applicable foreign law.   Anyone who reads this blog knows that I have pointed out time and time again that it is illegal for companies doing business in the European Union. Council Regulation (EC) No 2271/96 of 22 November 1996 prohibits companies incorporated in the E.U., such as BCC Corporate SA, from complying with the U.S. embargo on Cuba. OFAC does not, of course, mention BCC’s obligation to comply with local law or even cite it as a mitigating factor here. This is particularly egregious where the company at issue is not even subject to U.S. jurisdiction.

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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.

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Proposed CFIUS Legislation: Good News for Cattle Prod Makers, Bad News for Cows

Posted by at 3:09 pm on November 17, 2017

Cow by Kabsik Park [CC-BY-SA-2.0 (], via Flickr [cropped]On November 8, 2017, the House and Senate introduced the Foreign Investment Risk Review Modernization Act of 2017 (FIRRMA) proposing the first amendments to the CFIUS process since the Foreign Investment and National Security Act was passed in 2007. Although the bill has bi-partisan support and a good chance of passage, there are no guaranties on anything these days where Congress is concerned.

Of interest to export geeks is the proposed new definition of critical technologies to be considered by CFIUS during the review process. Section 3(a)(8) of the proposed legislation defines critical technologies to include:

(i) Defense articles or defense services included on the United States Munitions List set forth in the International Traffic in Arms Regulations under subchapter M of chapter I of title 22, Code of Federal Regulations.

(ii) Items included on the Commerce Control List set forth in Supplement No. 1 to part 774 of the Export Administration Regulations under subchapter C of chapter VII of title 15, Code of Federal Regulations, and controlled—

(I) pursuant to multilateral regimes, including for reasons relating to national security, chemical and biological weapons proliferation, nuclear nonproliferation, or missile technology; or

(II) for reasons relating to regional stability or surreptitious listening.

What that means is that items controlled solely for Crime Control or AT reasons won’t be critical technologies and that CFIUS will not get worked up if a Chinese company seeks to buy the Cowpoke Cattle Prod (ECCN 0A985) Company in Wyoming. Nor should it care much if a foreign purchaser makes a bid for Missouri-based Ferguson Sjamboks and Tonfas (ECCN 0A9678) R US, Inc.

It is, of course, unlikely that CFIUS would have, either before or after any potential passage of the proposed legislation, considered the fact that the target made cattle prods (or tonfas) even though it has routinely examined transactions where other export-controlled goods were involved. But the proposed legislation, if it becomes law, would provide a statutory basis for CFIUS to ignore issues arising from the U.S. business producing AT- or CC-controlled items.

Photo Credit: Cow by Kabsik Park [CC-BY-SA-2.0 (], via Flickr [cropped]. Copyright 2004 Kabsik Park

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When You Might Not Be Libre To Drink a Cuba Libre in Cuba

Posted by at 6:02 pm on November 9, 2017
Category: Cuba SanctionsOFAC

Tropi Cola by Markus L [CC-BY-NC-2.0 (], via Flickr [cropped and processed]One of the things that pops out from the State Department’s Naughty List of Cuban businesses is all the beverage companies on it, which seems odd. I mean, honestly, how much can American tourists spend on TropiCola? How much of that will wind up in the pockets of Cuban spies and the Cuban military? Is the Cuban military going to crumble when it can’t sell TropiCola to American tourists?

On the list are Najita (orange soda), Cachito (sparkling lemonade), TropiCola, and rum producers Ron Caney and Ron Varadero. Havana Club Rum, the gold standard of Cuban rum, is, inexplicably, not on the Naughty List.

The relevant regulation here is the new section 515.209 of the Cuban Assets Control Regulations (“CACR”) which forbids “direct financial transactions” with any entity on the Naughty List. But don’t pin your hopes on the word “direct” because we’re talking OFAC here and we’re in the Upside Down where direct actually means indirect. When you buy TropiCola from a street vendor, that’s a direct transaction in the Upside Down where OFAC lives and an indirect transaction in the normal world.

For purposes of this prohibition, a person engages in a direct financial transaction by acting as the originator on a transfer of funds whose ultimate beneficiary is an entity or subentity on the State Department’s List of Restricted Entities and Subentities Associated with Cuba (“Cuba Restricted List”) … , including a transaction by wire transfer, credit card, check, or payment of cash.

So, when you give cash to bar in Havana to purchase a Cuba Libre made with Caney Rum and TropiCola, the ultimate beneficiaries are, arguably, TropiCola and Ron Caney. Perhaps an argument could be made that since both companies have already been paid, they aren’t the ultimate beneficiary of your payment to the bar. But, if section 515.209 of the CACR only applies when you buy Tropicola or Caney Rum directly from the bottler, why include them on the Naughty List? What U.S. tourist will ever deal directly with the bottler?

And since we made a trip to the Upside Down, I am compelled to add one thing: #JusticeForBob (spoiler alert!).

Photo Credit: Tropi Cola by Markus L [CC-BY-NC-2.0 (], via Flickr [cropped and processed]. Copyright 2010 Markus L

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To Have and Have Not People-to-People Trips to Cuba

Posted by at 11:02 pm on November 8, 2017
Category: Cuba SanctionsOFAC

El Floridita by Miss Bono [CC-BY-SA-3.0 (], via [cropped]The Office of Foreign Assets Control (“OFAC”) today announced the long-awaited (or, perhaps more accurately, long-feared) amendments to the Cuban Assets Control Regulations designed to limit travel by U.S. persons to Cuba. (U.S. persons remain free to travel without restriction to the China, Russia, the Philippines, Saudi Arabia, Burma, Zimbabwe and other countries run by dictators that systematically and egregiously violate human rights, but that’s another story.)

The changes are pretty much what had been anticipated. Financial transactions with listed companies in the Cuban military, intelligence, or security services sector are forbidden, meaning that many hotels and shops in Cuba will be off-limits to U.S. travelers. The full State Department list can be found here.  The rules leave the non-travel liberalizations that occurred during the last administration pretty much in place.

Interestingly, it appears that El Floridita, the legendary daiquiri factory and Hemingway haunt in Old Havana, was spared, even though it is almost certainly owned by GAESA, the military conglomerate with tentacles throughout the Cuban economy and the target of the new restrictions. So, for the moment at least, any American who makes it to Cuba won’t go to jail for stepping inside El Floridita.

And, of course, the biggest loophole that allowed U.S. travel to Cuba – self-guided “people-to-people” tours – was closed up. Or maybe not.

The general license for people-to-people tours is still available but the travel must be conducted under the auspices of an organization. Section 515.565(b) now states that people-to-people travel is authorized provided that it occurs “under the auspices of an organization that is a person subject to U.S. jurisdiction and that sponsors such exchanges to promote people-to-people contact.” Additionally, the rule now requires that an “employee, paid consultant, agent, or other representative of the sponsoring organization accompanies each group traveling to Cuba.” This employee must “ensure that each traveler has a full-time schedule of educational exchange activities.”

Do you see where I’m going on here? I mean let’s say that you and several other U.S. friends want to go to Cuba. What would prevent you from, say, forming a non-profit in your home state with a charter saying that the non-profit’s purpose is to promote people-to-people travel to Cuba? And then draft an employment agreement between one of the friends and the new non-profit? Then, off you go, to sip daiquiris at El Floridita as long as you don’t stay in Hotel Ambos Mundos (where Hemingway finished Death in the Afternoon and started To Have and Have Not).

Certainly, you must be thinking, there must be something to prohibit this. But no, there is not. The new FAQ 16 addresses the question “[w]hat is an “organization” in the people–to-people context?” It simply repeats the definition that such an organization is subject to U.S. jurisdiction and sponsors exchanges promoting people-to-people contact. FAQ 16 also makes clear that you can’t even have your home-brew non-profit apply for an OFAC license just to make sure you’re okay.

To the extent proposed travel falls within the scope of an existing general license, including group people-to-people educational travel, organizations subject to U.S. jurisdiction may proceed with sponsoring such travel without applying to OFAC for a specific license. It is OFAC’s policy not to grant applications for a specific license authorizing transactions where a general license is available

Because the rules say that this organization sponsors “exchanges,” you’re going to have to make two trips, I suppose, but beyond that it certainly seems to me that enterprising travelers can still do people-to-people tours without having to pay a million dollars to the Smithsonian to go on one of their tours and get trapped on a tour bus with Bob and Ethel Plimsdale.

¡Buen viaje!

Photo Credit: El Floridita by Miss Bono [CC-BY-SA-3.0 (], via [cropped]. Copyright 2013 Miss Bono

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