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Sep

12

Maybe Their Phones Aren’t Working

Posted by Clif Burns at 3:27 pm on September 12, 2014

By CFTC via https://www.flickr.com/photos/cftc/4406624868/sizes/z/ [Public Domain] Both the Commodity FuturesÂ TradingÂ Â 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. Â 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,Â 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 OFACÂ compliance purposes at the time of the apparent violations. This failure was the result of a lackÂ 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. Â 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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Sep

12

New Russian Sanctions Add Parties to SSIL and SDN Lists

Posted by Clif Burns at 1:48 pm on

Category: Russia Designations

This morning OFAC added a number of Russian entities to the SSIL and SDN Lists. Â Those new designations are the following:

The following entities have been added to OFAC’s SDN List:

JOINT STOCK COMPANY ALMAZ-ANTEY AIR DEFENSE CONCERN MAIN SYSTEM DESIGN BUREAU NAMED BY ACADEMICIAN A.A. RASPLETIN (a.k.a. A.A. RASPLETIN MAIN SYSTEM DESIGN BUREAU; a.k.a. ALMAZ-ANTEY GSKB; a.k.a. ALMAZ-ANTEY GSKB IMENI ACADEMICIAN A.A. RASPLETIN; a.k.a. ALMAZ-ANTEY MSDB; a.k.a. ALMAZ-ANTEY PVO ‘AIR DEFENSE’ CONCERN LEAD SYSTEMS DESIGN BUREAU OAO ‘OPEN JOINT-STOCK COMPANY’ IMENI ACADEMICIAN A.A. RASPLETIN; a.k.a. GOLOVNOYE SISTEMNOYE KONSTRUKTORSKOYE BYURO OPEN JOINT-STOCK COMPANY OF ALMAZ-ANTEY PVO CONCERN IMENI ACADEMICIAN A.A. RASPLETIN; a.k.a. JSC ‘ALMAZ-ANTEY’ MSDB; f.k.a. OTKRYTOE AKTSIONERNOE OBSHCHESTVO NAUCHNO PROIZVODSTVENNOE OBEDINENIE ALMAZ IMENI AKADEMIKA A.A. RASPLETINA; a.k.a. “GSKB”), 16-80, Leningradsky Prospect, Moscow 125190, Russia; Website http://www.raspletin.ru/; Email Address [email protected]; alt. Email Address [email protected] [UKRAINE-EO13661].

JSC V. TIKHOMIROV SCIENTIFIC RESEARCH INSTITUTE OF INSTRUMENT DESIGN (a.k.a. JSC NIIP; f.k.a. OTKRYTOE AKTSIONERNOE OBSHCHESTVO NAUCHNO ISSLEDOVATELSKI INSTITUT PRIBOROSTROENIYA IMENI V.V. TIKHOMIROVA), 3 Ul. Gagarina, Zhukovski, Moskovskaya Obl 140180, Russia; Gagarin Str, 3, Zhukovsky 140180, Russia; Website http://www.niip.ru; Email Address [email protected]; Registration ID 1025001627859; Government Gazette Number 13185231 (Russia) [UKRAINE-EO13661].

KALININ MACHINE PLANT JSC (a.k.a. KALININ MACHINE-BUILDING PLANT OPEN JOINT-STOCK COMPANY; a.k.a. KALININ MACHINERY PLANT-BRD; a.k.a. MASHINOSTROITEL’NYI ZAVOD IM. M.I. KALININA, G. YEKATERINBURG OAO; a.k.a. MZIK OAO; a.k.a. OPEN-END JOINT-STOCK COMPANY ‘KALININ MACHINERY PLANT. YEKATERINBURG’; a.k.a. OTKRYTOE AKTSIONERNOE OBSHCHESTVO MASHINOSTROITELNY ZAVOD IM.M.I.KALININA, G.EKATERINBURG), 18 prospekt Kosmonavtov, Ekaterinburg, Sverdlovskaya obl. 620017, Russia; Email Address [email protected] [UKRAINE-EO13661].

MYTISHCHINSKI MASHINOSTROITELNY ZAVOD, OAO (a.k.a. JSC MYTISHCHINSKI MACHINE-BUILDING PLANT; a.k.a. OTKRYTOE AKTSIONERNOE OBSHCHESTVO ‘MYTISHCHINSKI MASHINOSTROITELNY ZAVOD’), 4 ul. Kolontsova Mytishchi, Mytishchinski Raion, Moskovskayaobl 141009, Russia; UL. Koloncova, d.4, Mytishi, Moscow region 141009, Russia; Website www.mmzavod.ru; Email Address [email protected]; Registration ID 1095029003860 (Russia); Government Gazette Number 61540868 (Russia) [UKRAINE-EO13661].

OAO ‘DOLGOPRUDNY RESEARCH PRODUCTION ENTERPRISE’ (a.k.a. DOLGOPRUDNENSKOYE NPP OAO; a.k.a. DOLGOPRUDNY; a.k.a. DOLGOPRUDNY RESEARCH PRODUCTION ENTERPRISE; a.k.a. OTKRYTOE AKTSIONERNOE OBSHCHESTVO DOIGOPRUDNENSKOE NAUCHNO PROIZVODSTVENNOE PREDPRIYATIE), 1 Pl. Sobina, Dolgoprudny, Moskovskaya obl. 141700, Russia; Proshchad Sobina 1, Dolgoprudny 141700, Russia; Email Address [email protected]; Registration ID 1025001202544; Tax ID No. 5008000322; Government Gazette Number 07504318 [UKRAINE-EO13661].

The following entities have been added to OFAC’s Sectoral Sanctions Identifications List pursuant toÂ the directives that can be foundÂ here.Â
Â

â€‹AK TRANSNEFT OAO (a.k.a. AKTSIONERNAYA KOMPANIYA PO TRANSPORTUNEFTI TRANSNEFT OAO; a.k.a. OAO AK TRANSNEFT; a.k.a. OIL TRANSPORTING JOINT-STOCK COMPANY TRANSNEFT; a.k.a. TRANSNEFT; a.k.a. TRANSNEFT OJSC; a.k.a. TRANSNEFT, JSC), 57 B. Polyanka ul., Moscow 119180, Russia; 57 Bolshaya. Polyanka, Moscow 119180, Russia; Website www.transneft.ru; Email Address [email protected]; Executive Order 13662 Directive Determination – Subject to Directive 2; Registration ID 1027700049486; Tax ID No. 7706061801; Government Gazette Number 00044463; For more information on directives, please visit the following link: http://www.treasury.gov/resource-center/sanctions/Programs/Pages/ukraine.aspx#directives.[UKRAINE-EO13662].

LUKOIL OAO (a.k.a. LUKOIL; a.k.a. LUKOIL OIL COMPANY; a.k.a. NEFTYANAYA KOMPANIYA LUKOIL OOO; a.k.a. NK LUKOIL OAO), 11 Sretenski boulevard, Moscow 101000, Russia; Website www.lukoil.ru; Email Address [email protected]; Executive Order 13662 Directive Determination – Subject to Directive 4; Registration ID 1027700035769; Tax ID No. 7708004767; Government Gazette Number 00044434; For more information on directives, please visit the following link: http://www.treasury.gov/resource-center/sanctions/Programs/Pages/ukraine.aspx#directives.Â [UKRAINE-EO13662].

OJSC GAZPROM NEFT (a.k.a. GAZPROM NEFT OAO; a.k.a. JSC GAZPROM NEFT; a.k.a. OPEN JOINT-STOCK COMPANY GAZPROM NEFT; f.k.a. SIBIRSKAYA NEFTYANAYA KOMPANIYA OAO), Let. A. Galernaya, 5, ul, St. Petersburg 190000, Russia; Ul. Pochtamtskaya, 3-5, St. Petersburg 190000, Russia; 3-5 Pochtamtskaya St., St. Petersburg 190000, Russia; 125 A. Profsoyuznaya Street, Moscow 117647, Russia; Website http://www.gazprom-neft.com/; Email Address [email protected]; alt. Email Address [email protected]; alt. Email Address [email protected]; alt. Email Address [email protected]; Executive Order 13662 Directive Determination – Subject to Directive 2; alt. Executive Order 13662 Directive Determination – Subject to Directive 4; Registration ID 1025501701686; Tax ID No. 5504036333; Government Gazette Number 42045241; For more information on directives, please visit the following link: http://www.treasury.gov/resource-center/sanctions/Programs/Pages/ukraine.aspx#directives.Â [UKRAINE-EO13662].

OPEN JOINT STOCK COMPANY GAZPROM (a.k.a. GAZPROM OAO; a.k.a. OAO GAZPROM), 16 Nametkina St., Moscow, Russia GSP-7, 117997, Russia; 16 Nametkina ul., Moscow 117991, Russia; Website www.gazprom.ru; Email Address [email protected]; Executive Order 13662 Directive Determination – Subject to Directive 4; Registration ID 1027700070518 (Russia); Tax ID No. 7736050003 (Russia); Government Gazette Number 00040778 (Russia); For more information on directives, please visit the following link: http://www.treasury.gov/resource-center/sanctions/Programs/Pages/ukraine.aspx#directives.Â [UKRAINE-EO13662].

ROSTEC (a.k.a. ROSTEC STATE CORPORATION; a.k.a. RUSSIAN TECHNOLOGIES; a.k.a. RUSSIAN TECHNOLOGIES STATE CORPORATION FOR ASSISTANCE TO DEVELOPMENT, PRODUCTION AND EXPORT OF ADVANCED TECHNOLOGY INDUSTRIAL PRODUCT; a.k.a. STATE CORPORATION FOR ASSISTANCE TO DEVELOPMENT, PRODUCTION AND EXPORT OF ADVANCED TECHNOLOGY INDUSTRIAL PRODUCT ROSTEKHNOLOGII; a.k.a. STATE CORPORATION ROSTECHNOLOGII; a.k.a. STATE CORPORATION ROSTEKHNOLOGII), 24 Usacheva ul., Moscow 119048, Russia; 21 Gogolevsky Blvd., Moscow 119991, Russia; Website www.rostec.ru; Email Address [email protected]; Executive Order 13662 Directive Determination – Subject to Directive 3; Registration ID 1077799030847 (Russia); Tax ID No. 7704274402 (Russia); Government Gazette Number 94137372 (Russia); For more information on directives, please visit the following link: http://www.treasury.gov/resource-center/sanctions/Programs/Pages/ukraine.aspx#directives.Â [UKRAINE-EO13662].

SBERBANK OF RUSSIA (f.k.a. OTKRYTOE AKTSIONERNOE OBSHCHESTVO SBERBANK ROSSII; a.k.a. SBERBANK ROSSII; f.k.a. SBERBANK ROSSII OAO), 19 ul. Vavilova, Moscow 117997, Russia; SWIFT/BIC SABRRUMM; Website www.sberbank.ru; Email Address [email protected]; Executive Order 13662 Directive Determination – Subject to Directive 1; For more information on directives, please visit the following link: http://www.treasury.gov/resource-center/sanctions/Programs/Pages/ukraine.aspx#directives.[UKRAINE-EO13662].

SURGUTNEFTEGAS (a.k.a. OPEN JOINT STOCK COMPANY SURGUTNEFTEGAS; a.k.a. OTKRYTOE AKTSIONERNOE OBSHCHESTVO SURGUTNEFTEGAZ; a.k.a. SURGUTNEFTEGAS OAO; a.k.a. SURGUTNEFTEGAS OJSC; a.k.a. SURGUTNEFTEGAZ OAO), ul. Grigoriya Kukuyevitskogo, 1, bld. 1, Khanty-Mansiysky Autonomous Okrug – Yugra, the city of Surgut, Tyumenskaya Oblast 628415, Russia; korp. 1 1 Grigoriya Kukuevitskogo ul., Surgut, Tyumenskaya oblast 628404, Russia; Street Kukuevitskogo 1, Surgut, Tyumen Region 628415, Russia; Website www.surgutneftegas.ru; Email Address [email protected]; Executive Order 13662 Directive Determination – Subject to Directive 4; For more information on directives, please visit the following link: http://www.treasury.gov/resource-center/sanctions/Programs/Pages/ukraine.aspx#directives.Â [UKRAINE-EO13662].

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Sep

9

Export Fugitive Ends Life on the Lam, Pleads to Lesser Charge

Posted by Clif Burns at 9:06 pm on September 9, 2014

Category: Arms Export • Criminal Penalties • DDTC • Extradition

A little over five years ago, we reported on a settlement agreement pursuant to which Air Shunt, Inc., agreed to pay DDTC a penalty of $100,000 in connection with three unlicensed exports of military aircraft parts. These same three violations were alleged in an indictment of an Air Shunt Vice-President, John Nakkashian, who was at the time of the settlement nowhere to be found and presumed to be a “fugitive from justice.”

For reasons not entirely clear, Nakkashian was arrested in June of this year by ICE agents at the Los Angeles International Airport. I suspect that this was not because Nakkashian was trying to sneak back into the country to vacation at Disneyland. More likely it was part of a carefully negotiated deal, because Nakkashian and the prosecutors just submitted a plea agreement to the court under which Nakkashian pleaded to one false statement count (18 U.S.C. Â§ 1001) in connection with one of the three illegal exports set forth in the original indictment. The false statement at issue was Nakkashian’sÂ statement in the export documents that no license was required for the export. The government, in return, agrees to a base offense level of 8 under the Sentencing Guidelines which would mean, if Nakkashian has no prior criminal history, a sentence of zero to six months. Compare this to the original indictment where each of the three counts had a base offense level of 26, meaning a sentence of at least 63-78 months for a defendant with no prior criminal history.

That’s a sweet deal and you have to wonder how a former “fugitive from justice” got this deal until you realize that Armenia, which is where we suspected Mr. Nakkashian (by virtue of his surname) was hiding out, has no extradition treaty with the United States. Moreover, given that this was not a crime of violence, it is unlikely that Armenia would voluntarily cooperate in returning Mr. Nakkashian to the United States for trial. That gave Nakkashian a potent bargaining chip which it would seem he used to maximum benefit with the U.S. preferring to impose some penalty rather than none at all.

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Sep

4

Lost in Translation

Posted by Clif Burns at 5:24 pm on September 4, 2014

Category: OFAC • SDN List

By Uris at en.wikipedia [GFDL (http://www.gnu.org/copyleft/fdl.html) or CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0/)], from Wikimedia Commons http://commons.wikimedia.org/wiki/File%3ACitibank_Chinatown.jpg Yesterday the Office of Foreign Assets Control (“OFAC”) announced that it had fined Citigroup $217,841 in connection with its processing certain transactions involving Iran and one involving a Syrian entity on the Specially Designated Nationals and Blocked Persons List (the “SDN List”).

The SDN List issue is particularly interesting because the SDN List had what may be an incorrect name for the SDN involved and Citigroup, which had what appears to be the correct name, failed to block the transaction. At issue is Syria’s Higher Institute for Applied Science and TechnologyÂ (“HIAST”) which appears on the SDN List as the Higher Institute of Applied Science and Technology. When Citibank ran a computer program to screen the name”Higher Institute for Applied Science and Technology” it didn’t pick up the “Higher Institute of Applied Science and Technology” because it was not an exact match.

Notwithstanding OFAC arguably getting HIAST’s name wrong,* it is fairly clear that screening procedures need to employ at least some fuzzy logic and not insist on exact word-for-word, letter-for-letter matches, particularly where many of the names on the SDN List have been transliterated or translated into English. The OFAC announcement indicated that Citigroup had “implemented a programmatic fix” of some kind, one which would apparently allow “of” to match “for” and vice versa.

*HIAST’s Facebook page uses “Higher Institute for Applied Science and Technology” as does Wikipedia and most other sources. Oddly, HIAST’s webpage uses “Higher Institute of Applied Sciences and Technology.” Only OFAC appears to be using “Higher Institute of Applied Science and Technology.” Given OFAC’s almost comical reliance on AKAs for many other listings, there is no reason for it to fail to add all the known variants in HIAST’s listing. That way even stupid systems would pick up the match

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Aug

21

Posted by Clif Burns at 8:23 pm on August 21, 2014

Category: Cuba Sanctions • OFAC

Back in April 2013, Jay-Z and BeyoncÃ© took a trip to Cuba, which provoked a round of wailing, teeth gnashing and threats of jail time from the usual suspects on the Hill, namely, certain South Florida members of Congress, including Rep. Ileana Ros-Lehtinen and Rep. Mario Diaz-Balart, who exhibit a near Pavlovian response anytime they hear the word Cuba. Jay-Z rapped back something to the effect that going to Cuba wasn’t a real crime like buying a kilo for Chief Keef. (If you don’t get the Chief Keef reference, just remember that Wikipedia is your friend in such matters.)

OFAC agreed with Jay-Z and not with Reps. Ros-Lehtinen and Diaz-Balart. Â The trip was, OFAC said, a properly licensed “people-to-people” educational exchange tour and, therefore, violated no U.S. laws.

Apparently, the two representatives kept making a commotion about the trip, perhaps believing Â that BeyoncÃ© and Jay-Z didn’t qualify for the license because they either weren’t people or weren’t educational. Â So the Treasury Department’s Inspector General was called in to review OFAC’s determination that the the famous couple were both people and educational.

In making the determination that OFAC properly declined to fine Jay-Z and BeyoncÃ© for the trip, the Inspector General actually reviewed what BeyoncÃ© and Jay-Z did in Cuba (your tax dollars at work!) and concluded:

Our review found these activities were consistent with the activities for which OFAC authorized the people-to-people license. For example, one article reported the trip included a visit to a children’s theater group and several clubs, where the couple heard live music and occasionally took to the dance floor. According to the article, they also toured Cuba’s top art school, where they met with young artists, and ate at some of Havanaâ€™s privately run restaurants, known as â€œpaladares.â€ One of the city’s leading architects led the couple on an architectural tour of the Old City of Havana, during which the article stated the couple was mobbed by Cuban spectators.

Okay, so let’s suppose that Jay-Z and BeyoncÃ© did nothing in Cuba but lounge on the beach and sip mojitos. What would be the problem with that? Does anyone believe that a regime that has withstood fifty years of U.S. sanctions was on the verge of crumbling but managed to hang on because two pop music stars vacationed in Cuba instead of, say, Aruba?

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