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Jul

23

ETS Stops Administering TOEFL in Iran

Posted by at 9:23 am on July 23, 2010
Category: Iran Sanctions

ETS HQThe New-Jersey-based Educational Testing Service recently put up an announcement on its website indicating that it had, at least temporarily, stopped administering the “Test of English as a Foreign Language” (“TOEFL”) in Iran.

The United Nations Security Council has passed a resolution affecting banks and financial institutions that conduct business in Iran. As a result of this resolution, ETS is currently unable to process payments from Iran and has had to temporarily suspend registration and all paid services until alternative arrangements can be made. ETS is working on a solution that will allow us to reopen registration as soon as possible. This message will be updated when we have more specific information to share.

U.S. colleges and universities typically require that Iranians, and other foreign students, demonstrate English proficiency through satisfactory scores on the TOEFL prior to admission, and the cessation of the TOEFL in Iran will make it more difficult for Iranian students to study in the United States.

It’s more than a little embarrassing for a company that tests others for their knowledge to make a n avoidable mistake on their website. The recently passed UNSCR 1929 does not prevent banks from processing payments from students taking TOEFL unless processing those payments “contribute[s] to Iran’s proliferation-sensitive nuclear activities, or the development of nuclear weapon delivery systems” in contravention of Paragraph 21 of the resolution.

ETS may have meant to refer to recently passed U.S. sanctions on Iran, but even then those sanctions don’t prohibit banks from processing TOEFL payments. Section 104(c)(1) of the Comprehensive Iran Sanctions, Accountability and Divestment Act of 2010 requires Treasury to promulgate regulations (which has not yet occurred) to forbid foreign banks from opening correspondent accounts with U.S. banks if the foreign bank has aided Iran’s efforts to acquire weapons of mass destruction or to support foreign terrorist organizations. Processing TOEFL payments from Iranian students is several steps short of that.

The New York Times weighs in on the situation with this:

Karim Sadjadpour, an Iran expert at the Carnegie Endowment for International Peace, said E.T.S. was exactly the kind of organization that should be exempt from the sanctions.

“Prohibiting Toefl from operating in Iran is counterproductive to the spirit of smart sanctions,” he said, noting that the exam is often a path to the outside world for young Iranians.

“The government is not being hurt by Toefl not operating in Iran,” he said. “It’s the people, and precisely the people we’re hoping to empower.”

Neither the new U.N. or U.S. sanctions are prohibiting ETS from administering tests in Iran. At most, foreign banks, spooked by potential due diligence obligations that may be imposed by not yet adopted Treasury regulations, have decided to stop doing business with all Iranian banks.

(For those of you wondering what ETS is doing providing testing services in Iran, the company is probably exploiting the loophole in section 560.314 of OFAC’s Iranian Transaction Regulations that would permit its Dutch subsidiary to operate in Iran.)

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Copyright © 2010 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)
Jul

21

Nork iPod Sanctions Being Upgraded to iPad Sanctions

Posted by at 9:14 pm on July 21, 2010
Category: North Korea Sanctions

Kim Jong-ilAccording to this report on the BBC website, Secretary of State Hillary Clinton announced today that the United States is preparing new economic sanctions against North Korea. The new sanctions are clearly a response to a report blaming North Korea for sinking a South Korean naval vessel with a torpedo.

[Secretary Clinton] said the measures would target Pyongyang’s sale and purchase of arms and import of luxury goods, and would help prevent nuclear proliferation.

An international inquiry blamed North Korea for sinking the Cheonan warship in March, with the loss of 46 lives, but Pyongyang has denied any involvement.

Speaking at a news conference in Seoul, Mrs Clinton said the measures would increase Washington’s ability to “prevent North Korea’s proliferation, to halt their illicit activities that help fund their weapons programmes, and to discourage further provocative actions.”

It is less than entirely clear how exports of cognac and mink stoles to North Korea assist the Norks in developing nuclear weapons unless, of course, Kim Jong-il provides moral support to his nuclear engineers by getting tanked on Rémy and prancing around Pyongyang* wearing a mink stole.

It’s equally unclear what Secretary Clinton is contemplating here. Under section 746.4 of the Export Administration Regulations, exports of most U.S. origin items to North Korea require an export license. Most items are subject to a licensing policy of case-by-case review except for luxury items (and arms and materiel), which are subject to a general policy of denial. Perhaps the idea is to expand the list of examples of luxury items. But I have a prediction, which you can probably figure out. What’s missing from this list?

(f) Electronic items, as follows:

(1) Flat-screen, plasma, or LCD panel televisions or other video monitors or receivers (including high-definition televisions), and any television larger than 29 inches; DVD players

(2) Personal digital assistants (PDAs)

(3) Personal digital music players

(4) Computer laptops

Do you see what’s missing? It’s the gadget of the moment — the iPad. If Kim Jong-il can’t get an iPad without renouncing nuclear proliferation, well, it’s going to be bye-bye Taep’o-dong and hello iBooks app.

*For readers that are thinking of forming a rock band, “Prancing around Pyongyang” would make an excellent name for the group.

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Copyright © 2010 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)
Jul

20

BIS Adopts Final Rule on Crime Control Devices

Posted by at 10:04 pm on July 20, 2010
Category: BIS

Electric ChairLast week the Bureau of Industry and Security (“BIS”) adopted, with a few minor revisions, a rule that it had proposed in August 2009 imposing new controls on execution equipment, torture devices, law enforcement restraint devices and law enforcement striking weapons. This blog reported on the proposed rules here.

One of the most significant changes between the proposed rule and the final rule is its treatment of shock sleeves, stun cuffs, and shock belts. The proposed rule would have added shock sleeves to ECCN 0A983, which covers torture implements, stun cuffs to ECCN 0A985, which covers discharge devices, and did not address shock belts at all. In the final rule, all three devices are classified as ECCN 0A982, which covers law enforcement restraint devices. BIS apparently decided that shock sleeves have some legitimate law enforcement use and therefore should be classified under ECCN 0A982, which under EAR § 742.7, has a licensing policy under which license applications are “generally … considered favorably on a case-by-case basis unless there is civil disorder in the country.” Torture implements under ECCN 0A983, on the other hand, are subject to a general policy of denial under EAR § 742.11.

The final rule also added a clarifying note to ECCN 0A982 which covers law enforcement restraint devices. The note points out that the ECCN doesn’t cover child automobile safety seats or seat belts. Although an unobjectionable clarification, somebody was really thinking outside the box when thinking that child seats might be seen as law enforcement restraint devices. Frankly, at least if 4-year-olds are to be believed, those seats would be more adequately classified as specially designed implements of torture.

One commenter on the proposed rule stated that ECCN 0A981, which covers equipment designed for the execution of human beings, should also cover parts for such equipment. BIS wisely decided to reject this suggestion stating,

Identifying parts that may be appropriate for an export license requirement without imposing an export license requirement on general parts that, although usable in equipment
designed for the execution of human beings, have many other uses as well would require both research by BIS and public comment.

That seems just a long way of saying that BIS isn’t interested in getting involved in licensing the export of ropes.

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Copyright © 2010 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)
Jul

18

OFAC Nails UN Bank For Dealing With Cuban Diplomats to the UN

Posted by at 11:13 am on July 18, 2010
Category: Cuba Sanctions • OFAC

UN HQThe latest monthly release of civil penalty information by the Office of Foreign Assets Control (“OFAC”) describes a penalty “settlement’ with the United Nations Federal Credit Union, which agreed to pay $500,000 to settle charges that the UNFCU “dealt in property in which Cuba or a Cuban national had an interest’ — as they quaintly say it in OFAC-speak. In ordinary English this means that UNFCU engaged in banking transactions with Cubans, likely with Cuban diplomats to the United Nations.

Of course, we have to say the transactions were likely with Cuban diplomats because, given OFAC’s longstanding aversion to providing anything but the most minimal details about its penalty settlements, the notice leaves out such crucial details as whether the Cubans involved were diplomats, non-diplomatic Cuban officials, ordinary Cubans, or herds of Cuban cattle. Nor were the types of transactions involved mentioned or their amounts.

In this case, the absence of details makes OFAC look foolish by suggesting the possibility that OFAC is penalizing the UNFCU for providing banking services to Cuban diplomats posted to the U.N. Apparently, such diplomats need to travel with suitcases of Cuban pesos and pay for their meals in the U.N. cafeteria with their national currency.

If that’s what OFAC is doing, it would be in direct contravention of the U.N. Headquarters Agreement, particularly given that the UNFCU is located in the U.N. Headquarters area. Article V, Section 15(4) of that agreement provides that even with respect to diplomats from countries not recognized by the United States, such as Cuba, the U.S. must accord them the same privileges and immunities as other diplomats while within the headquarters district. If a diplomat from France can bank at the UNFCU located in the U.N. Headquarters district, so can Cuban diplomats, no matter how much OFAC hates Castro and his diplomatic lackeys.

The UNFCU website has this statement (click on “Account Restrictions”) about its ability to deal with Cuban diplomats:

Please be aware that UNFCU, under authorization from the US Treasury Department, is only permitted to operate accounts for actively employed UN staff stationed in Cuba, Iran, Burma, and for Cuban citizens who are stationed in the United States.

Based on this, perhaps what was going on — and again OFAC forces us to speculate — was that the UNFCU was providing banking services to Cubans at U.N. locations outside the United States. The UNFCU website’s branch listing shows that the UNFCU has branches in Geneva, Vienna, Rome and Nairobi. Of course, the UNFCU’s extra-territorial application of U.S. sanctions could create a new problem for itself because these sanctions could well violate local laws that prohibit discrimination based on national origin.

Additionally, and more significantly, the UN could always solve the problem by only providing office space to financial institutions that do not, like UNFCU, discriminate against UN members based on national origin.

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Copyright © 2010 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)
Jul

15

Nigel Malpass Redux

Posted by at 9:38 pm on July 15, 2010
Category: Iran Sanctions • U.N. Sanctions
Nigel Malpass
ABOVE: Nigel Howard Malpass

This blog reported back in June on the shenanigans of Nigel Howard Malpass, who assisted the Islamic Republic of Iran Shipping Lines (“IRISL”) in evading U.S. sanctions on IRISL vessels by re-naming, re-registering and re-flagging those vessels. As we noted, Malpass accomplished this by setting up, and serving as a director of, shell companies in the Isle of Man and elsewhere that then became the “new” owners of the IRISL vessels.

Malpass, when his participation in the IRISL scheme was discovered by the New York Times, tried to run away from it as fast as he could, telling the Times (falsely) that he had ended all association with IRISL. But it’s not only the New York Times that took an interest in Mr. Malpass. The BBC’s investigative program “File on 4” took an interest in Mr. Malpass after the Israelis boarded an IRISL vessel registered to one of Mr. Malpass’s Isle of Man companies and discovered the vessel was carrying hundreds of tons of weapons disguised as civilian cargo. And now Mr. Malpass has (surprise, surprise!) a brand new story to tell the Beeb’s File on 4 when they asked him why he was setting up, and serving on, shell companies in the Isle of Man that owned gun-running IRISL vessels.

Malpass has now stopped trying to push the canard that he is no longer associated with IRISL. Now he is claiming instead that everything he did, and is doing, for IRISL is completely legal. And he’s enlisted the government of the Isle of Man to back him up on this dubious story:

Captain Malpass would not be interviewed by the BBC but said the companies had been formed at the request of a German bank which holds a mortgage on all of the ships.

In a statement he said the transactions were governed by English law and the way companies were set up was “the absolute norm in the business of ship ownership”.

He added that the Manx authorities approved his business dealings which were arranged some years before the sanctions came into force.

Captain Malpass did not address whether these arrangements are also helping the Iranians evade the sanctions.

Even if you believe the German bank story or you believe Malpass’s claim that IRISL decided to set up shell companies as new owners of its vessels and to re-register and re-name them long before the thought of sanctions on IRISL had crossed anyone’s mind, the rest of his story is no defense. Paragraph 19 of UN Security Council Resolution 1929 requires member states to freeze the assets of persons, like Mr. Malpass, acting on behalf of IRISL, whether or not those actions might have previously been legal.

The Isle of Man is also busy trying to whitewash Mr. Malpass’s ongoing activities on behalf of IRISL:

Concerns were raised last month in the Manx Parliament but the island’s chief minister Tony Brown maintained that an investigation had revealed no wrongdoing and he denied that island had aided any breach of the sanctions.

“We have to be realistic we can’t do any more, we shouldn’t be expected to do any more.”

He added: “Why should we shut down legitimate businesses…. we shouldn’t be expected to take action the rest of the world won’t.”

Actually, that’s exactly what the “rest of the world” required in the UNSCR 1929 and that is exactly what the “rest of the world” is expected to do. Malpass might have been within his legal rights to set up the shell companies for IRISL prior to the passage of UNSCR 1929. That doesn’t mean he can continue to serve as a director on the boards of shell companies that act on behalf of IRISL after the passage of UNSCR 1929, at least as long as the Isle of Man, which is not a member of the UN, purports nonetheless to follow UN Security Council Resolutions.

[Thanks to my colleague Anita Esslinger for catching the Beeb report.]

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Copyright © 2010 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

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