Abra-OFAC-A-Dabra: Now You See Them, Now You Don’t

Posted by Clif Burns at 8:35 am on February 22, 2014
Category: General

Associated Shipbroking HQ via Google Maps [Fair Use]
ABOVE: Associated Shipbroking HQ

Monaco-based Associated Shipbroking was, earlier this week, quietly removed from the Office of Foreign Assets Control’s List of Specially Designated Nationals and Blocked Persons, fondly known simply as the SDN List. As is normally the case with these removals, OFAC declined to give a reason for the company’s removal from the list, either because of its aversion for admitting mistakes or because it is disinclined to offer any guideposts to others on the list about avenues for removal.

This is exceedingly odd given everything that was said by the U.S. Government when it whacked Associated Shipbroking with these ultimate sanctions in the first place. It all started on May 24, 2011, when the Department of State sanctioned seven companies, including Associated Shipbroking, under the Iran Sanctions Act. Three of these companies –Tanker Pacific (Singapore), Ofer Brothers Group (Israel), and Associated Shipbroking — were added to the State Department’s Sanctioned Entity List because they were said to have dealt with a front company used by the Islamic Republic of Iran Shipping Lines (“IRISL”) to buy an $8.65 million dollar tanker.

Tanker and Ofer were sanctioned for failure to exercise due diligence to discover that they were dealing with an IRISL front company. Accordingly, they were prohibited from receiving Ex-Im Bank loans, obtaining loans over $10 million from U.S. financial institutions or receiving U.S. export licenses. Associated Shipbroking was sanctioned more severely because it was deemed to have acted knowingly and was aware that the company was an IRISL front. As a result, it was prohibited from “U.S. foreign exchange transactions, U.S. banking transactions and all U.S. property transactions.” On the same day, OFAC added Associated Shipbroking — but not Ofer or Tanker — to the SDN List which, in addition, would block all property of Associated that comes into the control of U.S. persons.

Several months later Ofer was removed from the State Department list, apparently because the Ofer family convinced the State Department that they were not responsible for the decisions made by their affiliate Tanker Pacific. Somewhat later, Tanker Pacific got itself removed from the State Department list after promising the State Department that it would behave in the future. Then about a week before the OFAC action, the State Department removed Associated Shipbroking from its sanctions list stating, somewhat oddly, that Associated “is no longer engaging in sanctionable activity.” That is odd because since Associated was sanctioned for a single transaction, it was no longer engaging in sanctionable activity the day after that transaction closed.

So, although OFAC does not state a reason for removing Associated Shipbroking from the SDN list, it presumably was simply following the State Department’s lead in removing the company a week earlier. It still leaves open the question as to why a company caught “knowingly” dealing with IRISL through a front company got a get-out-of-jail-free card from OFAC.  Of course, it can’t be ruled out that this delisting is based on larger diplomatic considerations in the context of ongoing discussions with Iran about dismantling its nuclear program.


Permalink Comments (1)

Bookmark and Share



Zealous Screening Software Nabs Random Characters

Posted by Clif Burns at 6:19 pm on February 20, 2014
Category: General

Monkey Typing via Wikimedia Commons http://commons.wikimedia.org/wiki/File:Monkey-typing.jpg [Public Domain]A reader and colleague sent me an email with a great story (and the wire documents to back it up) about OFAC screening software gone bad. At issue was a relatively small wire transfer that was blocked because the SWIFT message referenced Sudan. What was the reference? Well in SWIFT message field 59, which contains the beneficiary account number, the account number was shown as XDQSUDAN13DE4. (For obvious reasons, I have munged all the alphanumeric characters of the actual account number except for S, U, D, A and N).

Now, I realize that being given an account number with the words Sudan, Iran, Cuba or some SDN name is about the same as the chance of a chimp randomly typing out in its entirety Hegel’s Phenomenology of Spirit (although there are some who might suggest that is precisely what happened), this amusing incident indicates that screening software is stupid and relentless and that you need to check everything about a transaction to avoid unexpected glitches. It makes me wonder how Mark Cuban can conduct any business at all these days.

Permalink Comments Off

Bookmark and Share



OFAC Expands License for Personal Communications Items to Iran

Posted by Clif Burns at 1:24 pm on February 14, 2014
Category: Iran Sanctions

By Alireza Javaheri (http://www.panoramio.com/photo/50249960) [CC-BY-3.0 (http://creativecommons.org/licenses/by/3.0)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3ATehran_-_Azadi_Tower.jpgLast week, the Office of Foreign Assets Control issued General License D-1 relating to provision of personal communications software, services and hardware to Iran.  This general license amends and replaces, as of February 7, 2014, General License D on the same subject. The following changes are made by the amendment

  • The amended license now permits exports of covered software, services and hardware by non-U.S. persons to Iran.
  • Additionally, hardware and software that is not subject to the EAR, because it is located outside the United States or otherwise, can be exported to Iran by U.S. and foreign persons.
  • The amendment also cleans up an embarrassing drafting error. General License D permit exports to “persons in Iran” rather than “to Iran,” meaning that it did not authorize persons traveling to Iran to carry covered hardware and software with them for personal use when traveling to Iran. General License D-1 makes clear that exports are authorized “to Iran” and that this covers travelers to Iran.
  • Exports of publicly available, no-cost services and software to the Iranian Government are now authorized.
  • A footnote makes clear that payments can involve indirect dealings with Iranian financial institutions blocked only under Executive Order 13599 (as opposed to Iranian banks like Bank Saderat and Bank Melli that are sanctioned under terrorism and WMD sanctions).

The FAQs on General License D-1 provide some insight into why this General License, rather unusually, permits dealings with the Government of Iran. They note that the authorization includes the Government of Iran “to further ensure that the sanctions on Iran do not have an unintended chilling effect” on companies seeking to make available publicly available, no-cost personal communications tools to persons in Iran. What this means, I think, is that when no-cost software or services are at issue, it is impossible for the provider to tell whether the recipient is an Iranian government official or not. This exception is limited to no-cost software and services presumably because when payment is required the provider will at least have a name of the supposed end-user of the software and services. Even then, it’s not clear how a company providing fee-based personal communications software to, say, Edward Casaubon in Tehran can tell whether Mr. Casaubon is an Iranian government official or simply a tiresome and frustrated author bearing an uncanny resemblance to John Locke.

Permalink Comments (1)

Bookmark and Share



OFAC Filches Professor’s Good Name

Posted by Clif Burns at 8:17 pm on February 12, 2014
Category: OFACSanctionsSDN List

Sources:http://stephenlaw.blogspot.com/ and http://magwayfootballclub.com/images/stories/group/u_tun_myint_naing.jpg [Fair Use]Stephen Law is a distinguished scholar, a philosopher and a senior lecturer at Heythrop College, University of London. Steven Law, on the other hand, is a Burmese man, also known as Tun Myint Naing, who helps to run his father’s drug trafficking empire as Managing Director of Asia World Co., Ltd. Guess which one of these men is on the Office of Foreign Assets Control’s List of Specially Designated Nationals and Blocked Persons? Guess which one on these men pays the price for this and is unable to conduct basic business transactions? If you guessed Steven and Stephen, respectively, then you were right.

Professor Stephen Law recounted his travails at the hands of OFAC in this recent blog post.

I have discovered that, as a result of this listing, US Customs block shipments of goods to me here in the UK. Also when people try to wire me money from abroad (not just from the US, but from anywhere), for e.g. occasional travel expenses for academic conference attendance, the payment is interrupted and various checks are made before the funds are released. This became so bad during one period (a series of payments every single one of which triggered a block) that I had to switch to a different bank account. At no point was I told why this was happening (i.e. that you, OFAC, are responsible). The banks concerned believe they must keep this information from me (I was told this by my bank branch). Hence it took me many months to figure out what the source of the problem was: OFAC/US Treasury.

Long-time readers will know that we’ve been highlighting for quite some time the injustice caused to innocent people by OFAC designations of similarly named individuals. Back in 2007, we described in one post cases of people who had mortgages and car loans denied, PayPal accounts closed, and basic consumer transactions refused because they had a name similar, in whole or in part, to someone else on the SDN list.

The irony, then and now, is that kingpin Steven Law, the narcotics trafficker, has a right to seek removal from the SDN List but that, according to OFAC, a non-designated individual, such as Professor Stephen Law, has no right to request any relief from OFAC, whether it be a clearance letter or the inclusion on some kind of white list. OFAC officials have said that the reason for not providing such documentation is that the person involved might later need to be designated, a foolish and unconvincing rationale at best.

Of course, there is a recent development that suggests that OFAC’s rule might not be so hard and fast with respect to collateral victims of OFAC designations. In June 2011, OFAC designated Tidewater Middle East Co., which is the company in charge of managing seven of Iran’s ports and which was accused by OFAC of facilitating Iran’s export and imports of arms and materiel. Oddly, however, the announcement designating Tidewater went out of its way to say this:

There is no relationship between today’s target, Tidewater Middle East Co., and Tidewater (US), an international shipping company headquartered in the United States, listed on the New York Stock Exchange as TDW.

It seems to me that OFAC’s special concession to a similarly named U.S. company erodes its already risible reason for not providing some assistance to collateral victims of the designation process and that if the innocent Stephen Law demanded that OFAC distinguish him from the other Steven Law, OFAC would find it harder to tell him to change his name if he didn’t like being treated like an SDN. This is not to say it wouldn’t do so, just that it would be even more shameless than it used to be and that such a position would possibly be more vulnerable now to challenge by litigation.

Permalink Comments (5)

Bookmark and Share



With All Eyes on Sochi, Russian Ears Are on Ukraine

Posted by George Murphy at 8:49 pm on February 11, 2014
Category: BISCCLExport ReformSurreptitious Listening Devices

Kremlin.ru [CC-BY-3.0 (http://creativecommons.org/licenses/by/3.0)], via Wikimedia Commonshttp://commons.wikimedia.org/wiki/File%3AVladimir_Putin_at_the_Millennium_Summit_6-8_September_2000-19.jpg

The continuing violence and political instability in Ukraine have raised concerns around the world, especially within the United States and the EU.  Whether some form of sanctions against current officials in the Ukrainian government should be imposed has been debated over the past several weeks, including reports that the Obama administration began preparing financial sanctions against current Ukrainian government officials last month.

Sanctions against Ukrainian officials are, of course, a delicate diplomatic endeavor for EU countries that not only trade extensively with Ukraine but also recognize the effects to EU-Russian relations with any rancor that develops by proxy in former Soviet states.  Such targeted EU or U.S. sanctions, moreover, amount to blocking funds that are unlikely to be found in large amounts in Western banks and a travel ban on individuals who were not likely to travel to the West in the near future in any event.

The telephone conversation posted to YouTube late last week between U.S. Assistant Secretary of State Victoria Nuland and Geoffrey Pyatt, U.S. ambassador to Ukraine, however, exposed just how heated a resolution in Ukraine is becoming between the United States and the EU.  In discussing how officials from the United Nations may assist in reaching a resolution between the current Ukrainian government and opposition leaders, Nuland has now infamously said, “f**k the EU,” presumably an expression of her view that EU involvement thus far to address the situation in Ukraine has been inadequate.  As if that were not enough for diplomatic missteps, it has also been reported that Nuland and Pyatt each used unencrypted cell phones during the conversation.

While the fallout of Nuland’s comments and the Obama Administration’s finger-pointing at Russia for its involvement in hacking the phone call will garner the headlines, the issue also presents an interesting juncture for a shadowy subject of U.S. export controls: surreptitious listening devices.

As we first reported over seven years ago, BIS has not always been sufficiently clear on its standards for classifying surreptitious listening devices that are subject to the EAR’s control under section 742.13.  In Export Control Reform materials presented by BIS last year, BIS articulated five questions to assist exporters in answering the ultimate question, “Is my item subject to the 742.13 Communications Interception policy?”  Those questions, however, don’t help advance the ball much in improving a U.S. exporter’s ability in classifiying surreptitious listening devices short of seeking clarification or a license from BIS.

The United States may never determine what devices were involved in intercepting the Nuland-Pyatt conversation.  Moreover, the “tradecraft,” as Nuland described the interception, may very well continue to develop in ways that outpace any technical specifications that BIS affixes to surreptitious listening devices.  Without further clarity, however, U.S. exporters will still be mostly in the dark about what items require a U.S. export license at the same time that BIS will likely crank up the breadth of its controls over exports of surreptitious listening devices.  But if clarity is a hallmark of Export Control Reform, a little more with respect to surreptitious listening devices would go a long way.

Permalink Comments (1)

Bookmark and Share

« Previous posts | Next posts »