Yes, We Have No Bananas!

Posted by at 5:33 pm on August 16, 2016
Category: Economic SanctionsOFAC

Bananas by Anthony Easton [CC-BY-SA-2.0 (], via Flickr [cropped and processed]

The problem with many economic sanctions, particularly those aimed at drug lords, is that they wind up hurting the wrong people. Consider the case of the designation of the inaccurately named John Angel Zabaneh by the Office of Foreign Assets Control (“OFAC”) as detailed in this excellent Reuters news story. OFAC put Zabaneh on the SDN List based on its belief that Zabaneh is connected with Joaquin “El Chapo” Guzman, head of Mexico’s Sinaloa drug cartel, although Zabaneh denies this.

Because drug lords do not live by drugs alone, targeted narcotics kingpins in Central America often have other, and sometimes quite significant, legitimate business interests. In this case, Zabaneh was also a banana farmer in Belize and his farms contributed a significant portion of Belize’s banana exports. It should probably come as no surprise that bananas constitute about 20 percent of all of Belize’s exports.

So when OFAC designated Zabaneh, it ultimately resulted in shutting down his banana farms when his customers became unwilling to deal with him. This resulted, according to the Reuters article, in a 13.5 percent plunge in banana exports from Belize and the loss of 900 jobs previously held by workers on the Zabaneh farms.

There is no evidence that this caused Mr. Zabaneh to exit the drug trade, if he ever was in it, or crimped his lifestyle in any fashion. The only effects, it would appear, of the OFAC sanctions was that it allowed the U.S. government to feel good about itself and caused a bunch of people in Belize, with no connection to any drug trade, to wonder where there next meal might be coming from.

Photo Credit: Bananas by Anthony Easton [CC-BY-SA-2.0 (], via Flickr [cropped and processed]. Copyright 20xx Sami Keinanen

Permalink Comments Off on Yes, We Have No Bananas!

Bookmark and Share

Copyright © 2016 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)



Friday Round-Up

Posted by at 4:28 pm on August 12, 2016

Bumper Cars on the Boardwalk

Here are a few recent odds and ends that are worth a mention (and to catch up on a few things I missed while on vacation):

  • The Directorate of Defense Trade Controls (“DDTC”) issued guidance as to which activities are “gunsmithing” that do not require registration under part 122 and which are “manufacturing” and do require registration. This guidance defines “gunsmithing” and “manufacturing” completely differently from the definitions used by the Bureau of Alcohol, Tobacco and Firearms (“ATF”). For example, assembling kits into guns is “manufacturing” according to ATF but not according to DDTC. On behalf of lawyers everywhere: Thanks, DDTC, for keeping us busy!
  • More revisions to the TAA Guidelines, which are longer and less interesting than all six volumes of Proust, were announced. These mostly take into account the new definitions of export, re-export and retransfer that were recently adopted as an interim final rule by DDTC. I’ve said it before, and I’ll say it again, true export reform would get rid of the ridiculous TAA process entirely and make it similar to the  process used by the Bureau of Industry and Security (“BIS”) for licensing technology exports.
  • The United States Marshals Service (“USMS”) is auctioning off 2,719.32669068 bitcoins. You will be, I’m sure, relieved to know that the auction notice explicitly states that the USMS won’t accept any bids from anyone on OFAC’s SDN List. I wouldn’t want Eliot Ness going after Rooster Cogburn, even if it would make a better movie than Batman v. Superman.

Photo Credit: Bumper Cars on the Boardwalk by Clif Burns, via Flickr Copyright 2016 Clif Burns

Permalink Comments (2)

Bookmark and Share

Copyright © 2016 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)



Gone Fishin’ (Again)

Posted by at 11:49 pm on August 9, 2016
Category: BISCuba SanctionsOFAC

Boat in Ernest Hemingway International Billfishing Tournament via [Fair Use]Longtime friend and blog reader Pat had a good catch (so to speak) with respect to yesterday’s post on the Ernest Hemingway International Billfishing Tournament in Cuba. The post noted that participation in the tournament by U.S. persons might be covered by the new OFAC General License in section 515.567(b) relating to participation in competitions in Cuba. Whether that license would apply depends upon whether Cubans could participate in the tournament, something which I thought was perhaps affected by the high cost of participation in the tournament.

Even if the OFAC license applied, U.S. participants who wanted to take their own boats into Cuban waters would need to deal with the temporary export of the boat into Cuban territorial waters, an export controlled by BIS. I noted that BIS had granted such licenses, but Pat pointed out in a comment to yesterday’s post that last September BIS amended license exception AVS to permit temporary sojourns of less than 14 days by U.S. recreational boats in Cuban waters as long as it was pursuant to travel authorized by a general or specific license from OFAC.

That’s a great point, and I had forgotten about the amendment to License Exception AVS. It also, given the 14 day sojourn limitation, raises the issue of the OFAC rule in section 515.207 that prohibits a boat that has entered Cuban waters and purchased goods (in this case, think live bait) from entering a U.S. port for 180 days.

OFAC does have an exception in section 515.550 for return in advance of this date by “vessel used solely for personal travel (and not transporting passengers)” and where the export was covered by BIS’s license exception AVS. As usual, OFAC’s drafting leaves much to be desired given that the distinction between personal travel and transporting passengers may not always be clear. Probably the distinction rests on whether the other passengers are paying or not, excluding, I suppose, personal friends sharing expenses. But I’m not sure I would want to run the risk of overstepping this not very well drawn line.

What about chartering a fishing boat in Miami to participate in the tournament? Although that would still probably be a “recreational vessel” covered by license exception AVS, it’s not clear whether that would be personal travel (by the charterers) or transporting passengers (by the captain and crew). I, for one, would want specific guidance from OFAC before getting on that boat.

Permalink Comments (2)

Bookmark and Share

Copyright © 2016 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)



Gone Fishin’

Posted by at 8:12 pm on August 8, 2016
Category: BISCuba SanctionsOFAC

Camellia George via [Fair Use]
ABOVE: Messrs. Wilkins and
Whitlock in Cuba

[See update to this post here.]

Every year Cuba has an internationally famous sport fishing tournament. Fisherman from the United States have always cast envious eyes at the tournament just a short hop a way from U.S. territorial waters, but, obviously, the U.S. embargo on Cuba poses just a few tiny problems.

Stan Wilkins, a Kansas City lawyer just published an article in the Kansas City Star detailing his participation in the tournament with his friend Bob Whitlock, both pictured to the right with Havana in the background. This provides a good opportunity to discuss the regulatory requirements in play, particularly since Mr. Wilkins says little about how he actually managed to fish the tournament, other than to say, quite incorrectly, that “[f]ishermen may qualify for travel under the new ‘general license’ category.”

Given that there is no general license for “fishermen,” the general license that would most likely be relevant and available here is the one set forth in section 515.567(b). That general license covers “athletic and other competitions.” No offense to any fisherman out there, but I’d say that the fishing tournament is an “other.” (This is probably because when I go fishing it’s not terribly athletic. My arms mostly get used to carry the beer can to my mouth and almost never to pull an actual fish out of the water. For some reason, incomprehensible to me, fish always turn their noses up at my bait and lures.) Certainly, the people-to-people general license won’t work unless Cuban fish count.

There is, however, a significant qualification to the General License for athletic and other competitions: the competition must be “open for attendance, and in relevant situations participation, by the Cuban public.” I’d say that since you can’t attend a fishing tournament by, say, sitting in lawn chairs on the beach, this is one of those “relevant situations” where the tournament must be open to participation by Cubans.

The official website registration form does have “Cuba” listed as a country in its drop down list, so Cubans can, at least in theory, register and participate. But the site also lists a registration fee of 450 CUC (or about US$450). Given the average salary of Cubans is approximately $20 CUC per month, it seems fair to wonder if an event that requires an amount equal to 2 years salary is really open to Cubans. But I suppose setion 515.567(b) could be read to say that putting Cuba in the drop down list on the registration form is enough.

Readers of this blog, particularly those who remember the sad saga of a ship called Lethal Weapon, probably recognize another procedural hurdle to participation by U.S. fishermen, at least fishermen who want to use their own boats and equipment (which is, of course, more or less the point). Sailing into Cuba for the tournament is an export, albeit temporary, of the boat and requires a license from BIS. BIS has granted them in the past, with conditions, so this part is doable, even if it is another layer of red tape.

Permalink Comments (5)

Bookmark and Share

Copyright © 2016 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)



Oh Noes! Another Post on UCC Article 4A and Blocked Wire Transfers

Posted by at 11:01 am on July 24, 2016
Category: OFAC

Industrial Bank Clock by Clif Burns via Flickr [All Rights Reserved]

My apologies for yet another post arising out of Receivers of Sabena v. Deutsche Bank, but there is one more important point to be made if you’ll bear with me. (For background, here are links to the first post and the second post.)

Last week, in the second post on this subject, I talked about a transfer made by a hypothetical Sally Jones Heavy Machinery LLC which was blocked by the intermediary bank because of the SDN Listing for Sakinah Hussain a.k.a. Sally Jones. In that hypothetical, the intermediary bank’s maximum damages to Sally Jones Heavy Machinery LLC were limited to interest on the blocked funds if the bank blocked when it should not have. On the other hand, penalties to OFAC would have been up to $1 million if the bank did not block and should have. In that light, it was easy to figure out why the intermediary bank had little interest in hearing whether Sally Jones’s company and Sakinah Hussain were related.

But what if the funds transfer had been initiated by Sally Jones as an individual consumer? Would things have been different? Section 4A-108 exempts from its coverage wires covered by the Electronic Fund Transfer Act of 1978, 15 U.S.C.§ 1693. This means that wires with an individual consumer on either end, with some exceptions such as wires initiated in person at a money transfer agency, are exempted from Article 4A and are covered by the EFTA instead. So in this instance, this would mean that the liability limitations set forth in section 4A-305 would not govern the liability of the intermediary bank.

But that’s not the end of the story. Section 1693h sets forth the liability of financial institutions, and it does provide for damages that are the proximate result of a financial institutions failure to execute properly instructions received from the consumer. That, however, doesn’t cover the intermediary bank because it has not received instructions from the consumer, just instructions from the consumer’s bank. So the EFTA neither establishes nor disclaims liability. And the limitation on liability doesn’t apply.

Or does it? Look at this in the Official Comment to section 4A-108

A court might, however, apply appropriate principles from Article 4A by analogy in analyzing any part of the funds transfer that is not subject to the provisions of EFTA or other law, such as the obligation of the intermediary bank to execute the payment order of the originator’s bank (Section 4A-302)

And, of course, if a court did that (as the banks and their lawyers that drafted Section 4A clearly hope), all that the intermediary bank owes to Sally is interest on the blocked account which conveniently is sitting in that account already. So once again, it may be better to be the bank than to be Sally Jones, which probably comes as no big surprise.

Photo Credit: Copyright Clif Burns 2013 (

Permalink Comments Off on Oh Noes! Another Post on UCC Article 4A and Blocked Wire Transfers

Bookmark and Share

Copyright © 2016 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

« Previous posts | Next posts »