International Trade Law News

Today the Treasury Department's Office of Foreign Assets Control (OAFC) issued its most recent quarterly report of export licenses related to agricultural commodities, medicine and medical devices to Iran and Sudan under the Trade Sanctions Reform and Enhancement Act of 200 (commonly known as TSRA).

OFAC's report for the period October through December 2007 indicates that the average licensing time increased to 80 business days and that OFAC issued 100 licenses during the quarter. During the previous quarter (July-September 2007) OFAC issued 183 licenses with an average turnaround time of 70 business days.

By contrast, during the October-December 2005 quarter, OFAC issued 233 licenses with an average turnaround time of only 24.5 business days.

Labels: OFAC, TSRA

The Treasury Department's Office of Foreign Assets Control (OFAC) recently updated the Civil Penalties and Enforcement Information page on its website to include a scoreboard showing the total number and dollar amounts of civil penalties and settlements issued each month. So far this year, OFAC has imposed civil penalties of $401,598.

Labels: OFAC

The Treasury Department's Office of Foreign Assets Control (OFAC) today issued its monthly report of civil penalties imposed on companies and individuals for allegedly violating the sanctions regimes administered by OFAC.

OFAC's monthly penalty report indicates that the agency settled three cases involving corporations and three cases against individuals. The following is a summary of the settlements:

Entities:

• Fleet National Bank, which was acquired by Bank of America in 2005, remitted $1,337.50 to settle allegations of a violation of the former Libyan Sanctions Regulations by the Montevideo, Uruguay branch office of Fleet. The alleged violation by the Fleet branch occurred in April 2003 and prior to the June 2005 merger of Fleet into Bank of America. This matter was voluntarily disclosed to OFAC.
  

• Citigroup, N.A. remitted $16,250 to settle allegations of violations of the Cuban Assets Control Regulations. OFAC alleged that in October 2004 Citigroup acted without an OFAC license or outside the scope of its license by creating a banker’s acceptance for goods shipped by a Cuban carrier. Citigroup voluntarily disclosed this matter to OFAC.

• America Servi Express, Inc. (“ASE”), a Fort Lauderdale, Florida provider of financial and other services, was assessed a $2,465.00 civil monetary for allegedly violating the Narcotics Trafficking Sanctions Regulations by initiating a wire transfer to a U.S. life insurance company in payment of a premium on a policy issued on the life of a Specially Designated Narcotics Trafficker. ASE did not voluntarily disclose this matter to OFAC.
  

Individuals (OFAC does not release the names of individuals involved in civil penalty cases):

• OFAC imposed a $6,000 penalty on an individual for allegedly dealing in property in which Cuba has an interest. Specifically, the person allegedly engaged in financial transaction with Cuba, including the receipt of an payment for goods and services. This penalty amount is one of the largest recent penalties imposed by OFAC on an individual associated with the Cuban Assets Control Regulations.

• OFAC settled one case involving the purchase of Cuban-cigars offered for sale on the internet for $282.50.

• OFAC also settled a case for $1,063 against an individual that dealt in services with Cubans that were incident to the making of a commercial.
  

Labels: Cuba, OFAC, Sanctions

Earlier this week the Treasury Department designated Bahrain-based Future Bank B.S.C. and all its branch offices pursuant to Executive Order 13382 of June 28, 2005, “Blocking Property of Weapons of Mass Destruction Proliferators and Their Supporters.”

Future Bank was established in 2004 as a joint venture between two Iranian banks, Bank Melli and Bank Saderat, and a private bank based in Bahrain. According to the Treasury Department, Bank Melli and Bank Saderat, both of which have been designated by OFAC, hold 33.3 percent of Future Bank's outstanding shares and Future Bank is controlled by Bank Melli.

OFAC announced today that holders of valid OFAC licenses authorizing the exportation or reexportation of agricultural commodities, medicine or medical devices to Iran or Sudan are no longer permitted to engage in any transactions, directly or indirectly, with Future Bank B.S.C.

As a result of OFAC’s various actions against financial institutions to date, the following banks cannot be involved in payments associated with Ag/Med licenses issued pursuant to the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA):

* Future Bank B.S.C.
* Bank Sepah
* Bank Saderat (including, Iran Export Bank, Bank Saderat PLC)
* Bank Melli Iran Zao
* Bank Kargoshaee (also known as Kargosa’i Bank)
* Bank Melli
* Melli Bank PLC
* Arian Bank (also known as Aryan Bank)
* Bank Mellat
* Mellat Bank SB CJSC (including Mellat Bank DB AOZT)
* Persia International Bank PLC

Labels: OFAC, Sanctions; Iran, TSRA

The Treasury Department's Office of Foreign Assets Control (OFAC) has issued its monthly report of civil penalties imposed on companies and individuals for allegedly violating the sanctions regimes administered by OFAC.

OFAC's monthly penalty report indicates that the agency settled five cases involving corporations and six cases against persons. The following is a summary of the settlements:

Entities:

• Key Bank N.A., Cleveland, Ohio paid $200,000 to settle allegations of violations of the Iranian Transaction Regulations occurring between 2002 and August 2004. OFAC alleged that Key Bank acted without an OFAC license or outside the scope of its license by operating accounts for an entity and a person located in Iran. Key Bank did not voluntarily disclose this matter to OFAC.

• BankAtlantic of Fort Lauderdale, Florida remitted $7,500 to settle allegations of possible violations of the Cuban Assets Control Regulations occurring in July 2004. OFAC alleged that BankAtlantic failed to block a payment in which the Government of Cuba had an interest. OFAC noted that BankAtlantic Bank voluntarily disclosed this matter, cooperated in the investigation and has implemented corrective measures and improvements to its OFAC compliance program.

• Buehler Ltd., a Lake Bluff, Illinois manufacturer of scientific equipment and supplies for use in materials analysis, has remitted $20,000 to settle allegations of violations of the Iranian Transactions Regulations occurring between September 2002 and November 2003. OFAC alleged that Buehler acted without an OFAC license or outside the scope of its license by exporting technological equipment to entities in Iran. OFAC indicated that Buehler did not voluntarily disclose the matter to OFAC, but cooperated in the investigation.

• La Salle Bank Midwest, N.A. of Chicago, Illinois remitted $5,500 on behalf of its affiliate Standard Federal Bank to settle allegations of violations of the Iranian Transactions Regulations occurring February 2002. OFAC alleged that Standard Bank acted without an OFAC license or outside the scope of its license by initiating a funds transfers destined for a bank owned or controlled by the Government of Iran. Standard Bank did not voluntarily disclose this matter to OFAC.

• OFAC imposed a $941 civil penalty on RMO, Inc., a Denver, Colorado based manufacturer of orthodontic equipment, for violating the Cuban Assets Control Regulations. OFAC alleged that in June 2005 RMO, Inc. dealt in property in which a Cuba or a Cuban national had an interest by initiating a funds transfer involving travel to Cuba. OFAC originally proposed a $1,711 penalty on RMO, but the penalty amount was reduced after the company advised OFAC that the employee responsible for the violation was terminated , the company is instituting a compliance program for its employees and that this was RMO's first offense. RMO, Inc. did not voluntarily disclose this matter to OFAC.
  

Persons (OFAC does not release the names of individuals involved in civil penalty cases):

• OFAC settled five cases involving the purchase of Cuban-cigars offered for sale on the internet for amounts ranging from $456 to $5,213. The average settlement amount was $1,848.
  

• OFAC also settled a case for $1,000 against an individual for travel-related transactions incident to Travel with Cuba that involved the receipt of and payment for goods and services. According to OFAC, the individual traveled to and from Cuba via third countries.

Labels: Cuba, OFAC, Sanctions; Iran

The Treasury Department's Office of Foreign Assets (OFAC) control today issued the first designation pursuant to Executive Order 13460, which was issued on February 13, 2008.

The individual designated by OFAC is Rami Makhluf, Syrian President Bashar al-Asad's first cousin and brother of Syrian General Intelligence Directorate official Hafiz Makhluf (who already appears on OFAC's SDN List). According to OFAC, Makhluf is:

is a powerful Syrian businessman who amassed his commercial empire by exploiting his relationships with Syrian regime members. Makhluf has manipulated the Syrian judicial system and used Syrian intelligence officials to intimidate his business rivals. He employed these techniques when trying to acquire exclusive licenses to represent foreign companies in Syria and to obtain contract awards.

Makhluf's influence with certain Syrian government officials has led to his being able to control the issuance of certain types of profitable commodities contracts. His close business associations with some Syrian cabinet ministers have enabled him to gain access to lucrative oil exploration and power plant projects.

Makhluf is said to have a controlling interest in SyriaTel, Syria's largest mobile phone company.

E.O. 13460 targets individuals and entities determined to be responsible for or who have benefited from the public corruption of senior officials of the Syrian regime.

Pursuant to E.O. 13460, any assets that Makhluf holds under U.S. jurisdiction will be frozen, and U.S. persons are prohibited from engaging in business or transactions with Makhluf.

Labels: OFAC, Sanctions; Syria

The Treasury Department's Office of Foreign Assets Control (OFAC) today issued a document entitled "Guidance on Entities Owned By Persons Whose Property And Interests In Property Are Blocked." While this guidance applies to most of OFAC's sanctions programs, this guidance was sought by banks, exporters and importers as a result of numerous questions raised after OFAC issued a blocking order on November 13, 2007 against Belarus' Belneftekhim (commonly known as Belarusian State Concern for Oil and Chemistry) and its U.S. representative office, Belneftekhim USA.

Belneftekhim is the largest enterprise in Belarus and is the largest exporter of Belarusian products to the United States. Belneftekhim also manages operations for a large number of companies in Belarus.

OFAC's guidance states:

A person whose property and interests in propert are blocked pursuant to an Executive order or regulations administered by OFAC (a "block person" is considered to have an interest in all property and interests in property of an entity in which it owns, directly or indirectly, a 50% or greater interest. The property and interests of such an entity are blocked regardless of whether the entity itself is listed in the annex to an Executive order or other placed on OFAC's list of Specially Designated Nationals ("SDNs"). Accordingly, a U.S. person generally may not engage in any transactions with such an entity, unless authorized by OFAC. In certain OFAC sanctions programs (e.g. Cuba and Sudan), there is a broader category of entities whose property and interests in property are blocked based on, for example, ownership and control.

OFAC also noted that U.S. persons are "advised to act with caution when considering a transaction with a non-blocked entity in which a blocked person has a signficant ownership interest that is less than 50% or which a blocked person may control by means other than a majority ownership interest."

OFAC indicated that as regulations implementing new sanctions programs are issued, this guidance will be incorporated into those regulations and OFAC expects to amend existing sanctions programs to incorporate today's guidance into the implementing regulations.

The PDF version of OFAC's guidance can be found here.

Labels: Belarus, OFAC

The National Council on International Trade Development's (NCITD) February 14, 2008 meeting in Washington, DC will feature the following speakers:

Labels: ITAR, OFAC, Sanctions

The Treasury Department's Office of Foreign Assets Control (OFAC) imposed new sanctions today on two Zimbabwean entities and two individuals that, according to OFAC, "contribute to the undermining of democratic processes and institutions in Zimbabwe".

Today's designations include ZIDCO Holdings, a financial owned by the Zimbabwe African National Union (Patriotic Front), the political party of President Robert Mugabe. The ZANU-PF's publishing arm, Jongwe Printing and Publishing Company was also designated by OFAC. Both ZIDCO Holdings and Jongwe Printing and Publishing Company are owned or controlled by the Mugabe regime that have already been designated by OFAC.

Also named today are Happyton Bonyongwe and Leo Mugabe. Mr. Bonyongwe is the Director of Zimbabwe's Central Intelligence Organization (CIO), and is considered Zimbabwe's "spy chief." Leo Mugabe is a Member of the Zimbabwe Parliament and the nephew of Robert Mugabe.

These designations were made pursuant to Executive Order 13391, which prohibits U.S. persons, wherever located, or anyone in the United States from engaging in any transactions with any person, entity or organization found to: 1) be undermining democratic institutions and processes in Zimbabwe; 2) have materially assisted, sponsored, or provided financial, material, or technological support to these entities; 3) be or have been an immediate family member of a sanctions target; or 4) be owned, controlled or acting on behalf of a sanctions target. As a result of Treasury's designations, any assets of these individuals and entities that are within the United States or in the possession or control of any U.S. person must be blocked, and U.S. persons are prohibited from dealing with them.

Labels: OFAC, Zimbabwe

The Treasury Department's Office of Foreign Assets Control (OFAC) today issued its monthly report of civil penalties imposed on companies and individuals for allegedly violating the sanctions regimes administered by OFAC.

OFAC's monthly report indicates that the agency settled two cases involving corporations. The following is a summary of the settlements:

• Chevron Corporation paid a $2 million civil penalty to OFAC as part of a $30 million multi-agency settlement of alleged violations of the Iraqi Sanctions Regulations resulting from the United Nations Oil-for-Food Program. Although Chevron took certain steps designed to prevent the purchase from third parties of Iraqi oil on which illegal surcharges demanded by the Iraqi Government had been paid, OFAC found that such procedures proved inadequate and certain payments included illegal surcharges. Further details on Chevron's $30 million Oil-for-Food Program settlement can be found here. To date, the U.S. investigation on the Oil-for-Food Program violations has produced criminal cases against 12 individuals and seven entities, of which six individuals and two entities pleaded guilty, one individual was found guilty at trial, and two entities reached agreements with the Southern District of New York. The remaining cases are pending.
  

• OFAC imposed a a $2,750 civil monetary on MIC & Associates for violating the Sudanese Sanctions Regulations. OFAC alleged that MIC attempted to facilitate the exportation of goods from the Ukraine to Sudan without an OFAC license. MIC did not voluntarily disclose this matter to OFAC. A copy of OFAC’s Penalty Notice issued to MIC can be found here.

Labels: OFAC

The Treasury Department's Office of Foreign Assets Control (OFAC) today published a final rule in the Federal Register revising the Sudanese Sanctions Regulations (31 CFR Part 538) to implement Executive Order 13412 issued by President Bush on October 13, 2006 to implement the Darfur Peace and Accountability Act of 2006 (DPAA). Among other things, the DPAA called for support of the regional government of Southern Sudan, assistance for the peace efforts in the Darfur region of Sudan and provision of economic assistance in specified areas of Sudan.

The final rule issued today exempts all trade and related transactions and humanitarian assistance in specified areas of Sudan, including Southern Sudan, Southern Kordofan/Nuba Mountains State, Blue Nile State, Abyei, Darfur and four official camps for internally displaced persons (Mayo, El Salaam, Wad El Bashir, and Soba) from the sanctions imposed on Sudan in November 1997. All other areas of Sudan remain subject to the comprehensive sanctions regime.

Today's final rule also maintain two types of sanctions that apply countrywide throughout Sudan. First, all property and interests in property of the Government of Sudan remain blocked, wherever located; however, the regional government of Southern Sudan from the definition of the Government of Sudan. Second, all transactions relating to Sudan’s petroleum or petrochemical industries are prohibited, wherever in Sudan the transactions may occur.

In addition, the licensing requirements for exports of agricultural commodities, medicine, and medical devices remain in effect throughout Sudan, including for the exempt areas, because of the operation of the Trade Sanctions Reform Act of 2000 (TSRA).

Today's rule also clarifies that the prohibitions imposed by E.O. 13067 are territorial and apply to all shipments of goods, services, and technology that transit non-exempt areas of Sudan (“transshipments”) and to all financial transactions that involve, in any manner, depositary institutions either located in the non-exempt areas of Sudan or owned or controlled by the Government of Sudan.

OFAC has also issued two new general licenses applicable to Sudan. The first general license expands the exemption relating to official business of the U.S. Government and the United Nations to include transactions and activities not only of employees but also of contractors and grantees of the U.S. Government and United Nations or any of the United Nations’ specialized agencies, programmes, and funds (including, e.g., the World Bank Group and International Monetary Fund), subject to certain requirements set forth in the Regulations. The second general license authorizes humanitarian transshipments through non-exempt areas to or from Southern Sudan or Darfur; this general license is subject to annual renewal.

Labels: OFAC, Sanctions; Sudan

The U.S. Government announced today the imposition of additional financial sanctions against Iran in its long-standing effort to combat terrorism and nuclear proliferation by that country. Because of the broad scope of existing U.S. sanctions on Iran, today's action was primarily designed to put pressure on non-U.S. banks and companies that do business with Iran.

The new sanctions designate as nuclear proliferators the Islamic Revolutionary Guard Corps and the Ministry of Defense and Armed Forces Logistics and identify certain financial institutions as supporters of Iran’s military. Although anti-terrorism sanctions against designated persons in Iran have been in place since 2002, and nuclear non-proliferation sanctions against Iran were later imposed in 2005, the sanctions imposed today mark the first time the U.S. has imposed sanctions against a foreign country’s military.

The Departments of State and Treasury named a number of entities as proliferators of weapons of mass destruction. These entities were designated pursuant to its authority under Executive Order 13382 issued by President on June 28, 2005 in an effort to block the property and assets of nuclear proliferators and their supporters. The new entities include the following military organizations and financial institutions known to support Iran’s military operations:

• The Islamic Revolutionary Guard Corps (IRGC)
• Ministry of Defense and Armed Forces Logistics (MODALF)
• Bank Melli
• Bank Mellat
• Nine IRGC-controlled Companies

The Treasury Department also designated certain individuals under E.O. 13382 on the basis of their relationship to either the IRGC or Iran’s Aerospace Industries Organization:

• General Hosein Salimi, Commander of the Air Force, IRGC
• Brigadier General Morteza Rezaie, Deputy Commander of the IRGC
• Vice Admiral Ali Akhbar Ahmadian, Chief of the IRGC Joint Staff
• Brigadier Gen. Mohammad Hejazi, Commander of Bassij resistance force
• Brigadier Gen. Qasem Soleimani, Commander of the Qods Force
• Ahmad Vahid Dastjerdi, Head of the Aerospace Industry Organization
• Reza-Gholi Esmaeli, Head of Trade and International Affairs Department
• Bahmanyar Morteza Bahmanyar, Head of Finance and Budget Department

In addition to the above entities and individuals designated as supporters of Iran’s proliferation program, additional financial institutions have been designated by the Treasury Department for financing terrorism. These designations, which were made pursuant to the authority of E.O. 13224, include:

• IRGC-Qods Force
• Bank Saderat

The U.S. claims that the The Qods Force, a branch of the IRGC, provides material support to the Taliban, Lebanese Hizballah, Hamas, Palestinian Islamic Jihad and the Popular Front for the Liberation of Palestine-General Command.

As a result of the sanctions imposed today, U.S. persons are prohibited from engaging in transactions involving any of the listed designees. In addition, the assets and property of any named designees that are subject to U.S. jurisdiction will be frozen.

In a statement released today, Treasury Secretary Paulson called on "responsible banks and companies around the world to terminate any business with Bank Melli, Bank Mellat, Bank Saderat, and all companies and entities of the IRGC."

Because the scope of existing U.S. sanctions on Iran is very broad and because many of these entities, including the banks named today , are already included on OFAC's Specially Designated Nationals List (OFAC prohibited all transactions involving Bank Saderat on September 12, 2006), today's action will have a limited impact on U.S. companies and financial institutions and was intended to put pressure on non-U.S. banks and companies that do business with Iran.

USA*Engage Co-Chair and National Foreign Trade Council President William Reinsch said today that “these sanctions are extraterritorial, and as such are likely to worsen relations with our allies. Given their sweeping nature, they may ultimately end up targeting hundreds of foreign companies that are doing business legally under their national laws. Their reach is so broad that they pose real challenges when it comes to connecting the dots with other companies and entities both inside and outside Iran."

Labels: OFAC, Sanctions; Iran

The U.S. House of Representatives today passed by voice vote the International Emergency Economic Powers Act (S. 1612), a bill that will significantly increase the penalties for violating IEEPA-based export control laws. Because the Senate passed the identical bill in June, the measure will be sent to the President for signature, which is likely to take place in a matter of days.

The passage of the International Emergency Economic Powers Act ("IIEPA Act") means that the maximum civil penalty for violating IIEPA-based export control laws will increase from $50,000 per violation to $250,000 or twice the amount of the transaction that is the basis of the violation with respect to which the penalty is imposed. The maximum criminal penalties for committing willful violations of IEEPA-based export control laws will increase to $1,000,000, with a maximum jail sentence of 20 years.

The original civil penalty amount was set at $10,000 when IEEPA (P.L. 95-223) was passed in 1977. Other than an inflation adjustment raising the maximum penalty amount to $11,000, there were no increases until the renewal of the USA PATRIOT Act in 2005 (Public Law 109-177) raised the level to $50,000. Thus, once the IEEPA Act is signed into law, the maximum civil penalties for export control violations will have increased more than 2170% in two years.

The IEEPA currently serves as the legal basis for the Export Administration Regulations (EAR) and most of the sanctions regimes administered by the Office of Foreign Assets Control (OFAC). The most notable exceptions are the sanctions programs on Cuba and North Korea which were issued under the authority of the Trading With the Enemy Act.

The changes in penalties will apply to all pending enforcement actions as well as those commenced on or after the date of the IIEPA Act's enactment.

Labels: BIS, Congress, OFAC

The Treasury Department today unveiled a redesigned home page with a new look. The new site has direct links to OFAC's SDN List and summaries of OFAC's sanctions programs on the lower left hand side of the page. The URL and look of OFAC's website remains unchanged.

Labels: OFAC, Treasury Department

The Treasury Department's Office of Foreign Assets Control (OFAC) today issued a final rule in the Federal Register expanding the scope of activities allowed under the general licenses for publishing activities contained in OFAC's Cuba, Sudan, Iran and Burma sanctions regulations.

As a result of today's final rule, the general licenses relating to publishing activities permit the export and inclusion of embedded software necessary for reading, browsing, navigating or searching "written publications". In order to be eligible for the general licenses for Iran and Sudan, however, the embedded software must be classified as EAR99 under the Export Administration Regulations. The general licenses for Cuba and Burma now permit the export of such software if "the exportation is licensed or otherwise authorized by the Department of Commerce under the provisions of the EAR".

The final rule also amends the various sanctions regulations by clarifying that the term "written publications'' used in the general licenses includes manuscripts, books, journals and newspapers even if they are published solely in electronic format.

OFAC's amendment of the Iran and Sudan general licenses relating to the export of embedded software for reading or browsing written publications does not appear to be a significant change in licensing policy. This is because even the most basic software products for reading or searching written publications are not classified as EAR99. For example, Adobe's on-line product matrix confirms that Acrobat eBook Reader and Adobe Reader are classified as ECCN 5D992, since they contain encryption algorithms. Similarly, Microsoft's Internet Explorer is also classified as ECCN 5D992. Even Mozilla's Firefox is classified as ECCN 5D002.

Labels: Burma/Myanmar, Cuba, OFAC, Sanctions; Iran, Sanctions; Sudan

In response to a request by the Senate Finance Committee, the U.S. International Trade Commission last week issued a report entitled "U.S. Agricultural Sales to Cuba: Certain Economic Effects of U.S. Restrictions".

The ITC's report provides an overview of Cuba's purchases of agricultural products since 2000, an analysis of the effects that U.S. restrictions on trade and travel to Cuba by U.S. citizens have on those Cuban purchases and estimates of likely U.S. agricultural sales if such restrictions were lifted.

The major findings trade-related findings of the report include:

• Following implementation of the Trade Sanctions Reform and Export Enhancement Act (TSRA) of 2000, U.S. exports grew rapidly and by 2004 the U.S. was the largest supplier of agricultural products to Cuba.
  
• However, following OFAC's February 2005 policy change that required the seller to receive payment from the Cuban buyer prior to the departure of the vessel carrying the goods to Cuba, the value of Cuban agricultural imports from the United States dropped by 10% in 2005 and a further 4% in 2006.
• U.S. regulations, such as those requiring the Cuban government to pay for U.S. agriculture products in cash or through letters of credit drawn on third-country banks, raise the cost of U.S. goods for Cubans and likely limit U.S. sales.
  
• The ITC found that OFAC appears to have restricted business travel to and from Cuba that is necessary for U.S. exporters to effectuate sales. Particularly important are Cuban officials traveling to the United States to inspect U.S. processing facilities, U.S. port facilities, fresh produce, live animals and other products subject to sanitary and phytosanitary standards. For many of these products, the ITC found that restricting business travel effectively bars U.S. sales to Cuba.
• OFAC restrictions on maritime shipping of U.S. products to Cuba significantly increased
  freight charges for cargo to Cuba above freight charges to other Caribbean destinations.
• Overall, the ITC found that all U.S. agricultural commodity sectors would likely benefit from the lifting of the financing restrictions on U.S. agricultural exports to Cuba.

Labels: Cuba, ITC, OFAC

On July 11, 2007, the Treasury Department's Office of Foreign Assets Control (OFAC) issued its monthly report of civil penalties imposed on companies and individuals for allegedly violating the sanctions regimes administered by OFAC.

OFAC's monthly report indicates that the agency settled three cases involving corporations and three cases against persons. The following is a summary of the settlements:

Entities:

• LogicaCMG Inc. paid $220,000.00 to settle allegations of violations of the Cuban Assets Control Regulations by a predecessor corporation, CMG Telecommunications, Inc. (CMG), occurring during 2001. OFAC alleged that CMG procured, assembled, and exported a computer system, as well as provided technical support for the system after export, with knowledge that the goods and services were ultimately destined for Cuba and that such exports to Cuba were prohibited. CMG did not have an OFAC license to engage in these transactions and CMG did not voluntarily disclose this matter to OFAC.

This is the third penalty imposed on CMG as a result of prohibited transactions with Cuba. As we previously reported, in May 2007 LogicaCMG, Inc. paid $99,000 to the Bureau of Industry and Security to settle allegations that CMG violated the Export Administration Regulations by making an unlicensed export of telecommunications equipment to Cuba via Panama.

In addition, in April 2007, LogicaCMG pled guilty in federal court for violating the International Emergency Economic Powers Act for the unlicensed reexport from Panama to Cuba and was ordered to pay a $50,000 criminal fine.

• Gibson Overseas, Inc. paid $1,357 to settle allegations of violations of the Iranian Transactions Regulations occurring during January 2006. OFAC alleged that Gibson used an Iranian vessel to ship goods from China to Dubai in violation of 31 C.F.R. § 560.206, which prohibits transactions or dealings in goods or services of Iranian origin. Gibson did not voluntarily disclose this matter to OFAC.

• American Bankers Life Assurance Company of Florida remitted $1,271.50 to settle allegations of violations of the Narcotics Trafficking Sanctions Regulations occurring between October – December 2003. OFAC alleged that the insurance company processed premium payments on insurance policies on the lives of two persons who are named as Specially Designated Narcotics Traffickers. ABLAC did not voluntarily disclose this matter to OFAC.
  

Persons (OFAC does not release the names of individuals involved in civil penalty cases):

• One individual agreed to a settlement totaling $10,000 for alleged travel-related transactions incident to travel to Cuba. Specifically, OFAC alleged that from May through December 2002 the individual engaged in prohibited travel-related transactions, including the purchase of food and lodging in Cuba. The individual traveled to and from Cuba through a third country. (This is one the largest penalties imposed by OFAC on an individual for travel-related violations of the Cuban Assets Control Regulations.)
  

• Another individual agreed to pay $2,892.75 to settle charges of allegedly dealing in property in which Cuba or a Cuban national had an interest. OFAC alleged that in 2004, 2005 and 2006 the individual purchased Cuban-origin cigars on six separate occasions that were offered for sale on the Internet. The individual did not voluntarily disclose this matter to OFAC.

• An individual was assessed a penalty totaling $200.00 for making four payments in 2003 to purchase of Cuban-origin cigars offered for sale on the Internet. The individual did not voluntarily disclose this matter to OFAC.

Labels: Cuba, OFAC, Sanctions, Sanctions; Iran

Today the Treasury Department's Office of Foreign Assets Control (OFAC) posted on its website a one-page PDF document entitled "Guidelines on Transactions With the Palestinian Authority." The Guidelines are intended to assist U.S. persons in understanding the scope of OFAC's General License No. 7 that was issued on June 20, 2007.

The guidelines, which do not provide a great deal of new information, state that despite the issuance of General License No. 7 that "dealings with designated terrorist entities such as Hamas or other designated persons remain prohibited."

The Guidelines can be found at the following link: www.treas.gov/offices/enforcement/ofac/programs/terror/ns/pal_guide.pdf.

Labels: OFAC, Palestinian Authority, Sanctions

Late Tuesday, the Senate unanimously passed S. 1612, the International Emergency Powers Act. As previously reported, the bill would increase significantly the civil and criminal penalty amounts associated with violations of the International Emergency Economic Powers Act.

However, as a result of a last minute amendment introduced by Senator Salazar (D-CO) on Senator Dodd's (D-CT) behalf that was intended to change the effective date of the bill, the final version of the bill that passed the Senate and sent to the House increased the criminal penalties only.

The Senate apparently realized its mistake and, as indicated below, the Majority Leader yesterday requested the House to return the bill so it can be corrected.
-----------------------------------------------------------
[Congressional Record Page: S8638]

REQUEST FOR THE RETURN OF PAPERS--S. 1612 -- (Senate - June 27, 2007)

Mr. REID. Mr. President, I ask unanimous consent the Senate request the return of papers on the bill S. 1612 from the House of Representatives. I further ask consent that upon compliance with this request, the Secretary of the Senate be authorized to make corrections in the engrossment of this bill.

The PRESIDING OFFICER. Without objection, it is so ordered.

Labels: Congress, OFAC

The House Committee on Foreign Affairs tomorrow is scheduled to mark-up H.R. 1400, the Iran Counter-Proliferation Act of 2007. Among other things, H.R. 1400 would impose additional U.S. sanctions on Iran by:

• Authorizing the imposition of civil penalties on U.S. parent companies for violations of U.S. sanctions laws committed by certain foreign subsidiaries;
• Prohibiting OFAC to issue licenses to export or reexport goods, services or technology relating to U.S.-origin commercial passenger aircraft; and
  
• Prohibiting the importation into the U.S. of Iranian origin carpets and food (including caviar), the only Iranian origin goods currently permitted to enter the U.S.

As of today, H.R. 1400 has 273 cosponsors.

Labels: OFAC, Sanctions; Iran

In order to implement the lifting of financial sanctions on the Palestinian Authority that were announced by the Secretary of State on Monday, the Treasury Department's Office of Foreign Assets Control (OFAC) today released General License No. 7. Effective immediately, the general license reauthorizes U.S. persons to engage in all transactions otherwise prohibited by the terrorism sanctions programs with the Palestinian Authority, which for purposes of the general license is specifically defined.

The text of General License No. 7 is reprinted below:

Transactions with the Palestinian Authority authorized.

(a) U.S. persons are authorized to engage in all transactions otherwise prohibited by 31 C.F.R. parts 594, 595, and 597 with the Palestinian Authority.

(b) For purposes of this General License only, the term “Palestinian Authority” means the Palestinian Authority government of Prime Minister Salam Fayyad and President Mahmoud Abbas, including all branches, ministries, offices, and agencies (independent or otherwise) thereof.

Labels: OFAC, Sanctions

In a special briefing today, Secretary of State Condoleeza Rice announced that the U.S. intends to lift the current financial restrictions imposed on the Palestinian government under the terrorism sanctions programs.

However, the current financial restrictions, which were imposed on parts of the Palestinian Authority controlled by representatives of Hamas and other terrorist organizations organizations, will remain in effect until the Treasury Department's Office of Foreign Assets Control (OFAC) issues general licenses or takes other legal action to modify the current restrictions imposed under the Terrorism Sanctions Regulations and other regulatory provisions.

Labels: OFAC, Sanctions

This week Senator Christopher Dodd (D-CT) introduced the International Emergency Economic Powers Act (S. 1612) (IEEPA Act), legislation that would increase the civil penalty amounts associated with violations of the International Emergency Economic Powers Act. The bill would increase the maximum civil penalties for violations of sanctions and dual-use export control laws (EAR violations are currently subject to IEEPA penalty provisions) from $50,000 to $250,000, or twice the amount of the transaction that is the basis of the violation with respect to which the penalty is imposed. The IEEPA Act would increase criminal penalties to $1,000,000 with a maximum jail sentence of 20 years.

One major cause of concern with this proposed legislation is that, in its current form, the bill would apply the increased penalties to any "enforcement action [that] is pending or commenced on or after the date of the enactment of this Act." This retroactive effect is a significant change from previous laws that have increased maximum civil and criminal penalties for violations of sanctions and export control laws.

This proposed legislation, which has the support of the Treasury Department, has been previously been approved by the Senate Banking, Housing and Urban Affairs Committee. The bill has been placed on the Senate calendar for consideration in the near future.

Labels: Congress, OFAC, Sanctions

An article published yesterday on Newsweek magazine's Daily Edition states that Michael Moore's production company credentialed the subjects of his film that he took to Cuba as journalists.

The article states:

The multimillionaire-dollar question is: under what auspices did Moore get his people to Cuba? Moore, producer Harvey Weinstein and attorney David Boies claim that the group traveled on a legal “journalistic endeavor,” presumably under a license granted to members of the press who can provide evidence to the Treasury that they are regularly employed by a news organization. (Moore's spokesman, Chris Lehane, insists that Moore's group traveled legally, yet he wouldn't say if they actually attained any license from Treasury.) But the subjects of “Sicko” aren’t "regularly employeed" as journalists. NEWSWEEK has learned that Moore’s production company, Dog Eat Dog productions, credentialed the interviewees itself—in essence, knighting them as journalists—and then flew them from Miami to Cuba on a charter flight reserved for licensed travelers. Is that good enough? “Moore is not allowed to travel with companions unless they’re also licensed by the Treasury to travel to Cuba as journalists,” says David Cibrian, international trade attorney at Strasburger & Price. “ Journalists don’t bring people from elsewhere to interview in Cuba. People go to Cuba to interview Cubans.”

The article also notes that:

One final mystery is what documentation Moore’s party presented to U.S. Customs and Border Protection personnel in order to legally board a flight from Miami. Treasury claims, in a May letter to Moore, that it has “no record” of issuing the necessary paperwork for Moore to travel. But Angel Marques, public affairs liaison in the Miami Office of Customs and Border Protection, says no one gets on a flight from Miami to Cuba without showing a Treasury license. “I don’t know what charter service Moore used, but it’s safe to say that he would have been asked for paperwork before boarding,” Marques says.

[Full disclosure: The attorney quoted above is my law partner.]

Labels: Cuba, OFAC

In a speech today made at the Council on Foreign Relations in New York, U.S. Treasury Secretary Henry Paulson outlined the U.S. effort to cut off weapons proliferators, terrorists and money launderers from the global financial system. He also called on U.S. allies need to enact legislative and regulatory changes that would enable better targeting of financial sanctions in the fight against global threats and facilitate coordination of actions with related multilateral efforts. Specifically, he stated that:

Nations must implement the laws necessary to give their finance ministries the authority to access and use intelligence, and they must move to integrate financial and security functions. This will enable further cooperation and multilateral action, which is in the world's best interest. And, these authorities must be available for use against terrorist financing, money laundering and the dangerous, emerging practice of proliferation financing.

The text of Secretary Paulsen's speech and a related fact sheet can be found here and here.

Labels: OFAC, Treasury Department

Today the Treasury Department's Office of Foreign Assets Control (OFAC) issued its monthly report of civil penalties imposed on companies and individuals for allegedly violating the sanctions regimes administered by OFAC.

OFAC's monthly report indicates that the agency settled three cases involving corporations and three cases against individuals. The following is a summary of the settlements:

• ACME Furniture Industry, Inc. of City of Industry, California remitted $31,336 to settle allegations that it violated the Cuban Assets Control Regulations in 2004 and 2005 by shipping merchandise from China to Cuba. OFAC noted that ACME did not voluntarily disclose this matter.

• EPMedsystems, Inc. of West Berlin, New Jersey remitted $33,000 to settle allegations that it violated the Iranian Transactions Regulations between October 1999 and March 2004. EPMedsystems voluntarily disclosed this matter to OFAC, but OFAC did not give any further details on the nature of the violations. In November 2006 EPMedSystems paid a $244,000 civil penalty to the Bureau of Industry and Security to settle allegations that it had exported medical devices to Iran without the required OFAC licenses and other alleged violations of the Export Administration Regulations.

• Hecny Transportation (USA) Inc. d/b/a Hecny Shipping of Jamaica, NY 11434 was assessed a $2,800 civil monetary penalty for its violation of the Weapons of Mass Destruction Trade Control Regulations occurring on January 14, 2004. OFAC alleged that Hecny served as the delivery agent for the importation of insect killer and tubes produced by a designated foreign person. Hecny did not voluntarily disclose this matter to OFAC. OFAC’s Penalty Notice issued to Hecny can be found at the following link: www.treas.gov/offices/enforcement/ofac/civpen/penalties/hecny_pn.pdf.

• OFAC issued penalties in the amounts of $856, $1,311 and $2,304 against three individuals for purchasing Cuban-origin cigars offered for sale on the Internet. OFAC does not release the names of individuals involved in civil penalty cases and, not surprisingly, none of the cases involved voluntary disclosures.

Labels: OFAC

The Treasury Inspector General for Tax Administration (TIGTA), which provides independent oversight of IRS activities, recently issued a report finding that the Internal Revenue Service does a poor job in identifying tax-exempt groups that may have links to terrorists.

In its report, TIGTA found that:

The IRS does not systemically match filing data of tax-exempt organizations against a comprehensive list of potential terrorists to identify instances in which charitable and other nonprofit organizations may be linked to terrorist activities. Instead, IRS personnel manually review all tax-exempt documents and compare information from them to a United States Department of the Treasury terrorist watch list. This list, however, is incomplete compared to the more comprehensive terrorist watch list available for use by all Federal Government agencies. As a result of using a manual process and a limited terrorist watch list, the IRS provides only minimal assurance that tax-exempt organizations potentially involved in terrorist activities are being identified.

As a result of its review, TIGTA recommended that the IRS develop and implement a long-term strategy to automate the matching of information provided by charitable organizations against a consolidated terrorist watch list to initially identify potential terrorist activities related to tax-exempt organizations. In addition, TIGTA recommended that the IRS should evaluate whether more comprehensive terrorist watch lists should be used in conjunction with the Treasury Department's SDN List "to improve the identification of organizations and/or individuals potentially involved in terrorist-related activities."

The PDF version of the report can be found at the following link: www.treas.gov/tigta/auditreports/2007reports/200710082fr.pdf.

Labels: OFAC

The Lawyers’ Committee for Civil Rights of the San Francisco Bay Area (LCCR) today filed a lawsuit against the U.S. Treasury Department under the Freedom of Information Act (FOIA) for denying access to records concerning the Specially Designated Nationals and Blocked Persons List (SDN List) maintained by Treasury's Office of Foreign Assets Control (OFAC). The lawsuit was filed in the U.S. District Court for the Northern District of California.

As a result of complaints from U.S. consumers that were wrongly associated with names appearing on the SDN list, in 2005 the LCCR filed a request under the Freedom of Information Act (FOIA) with Treasury seeking access to specific information regarding the SDN List, including calls made to OFAC's compliance "hotline" regarding SDN-related issues, procedures for individuals to remove their names from the SDN List and the number of complaints from individuals that were erroneously included on the SDN List.

In response to the FOIA request, OFAC said that the agency did not track complaints from individuals, maintained no complaint mechanisms for consumers mistakenly flagged by the watchlist and would not provide policies or procedures since such records were not covered by FOIA. To date, OFAC has yet to release any of the requested documents.

LCCR's lawsuit requests the court to find that OFAC violated FOIA and demands immediate disclosure of the requested documents.

In March 2007, the LCCR published a report entitled "The OFAC List: How a Treasury Department Terrorist Watchlist Ensnares Everyday Consumers" which cited numerous examples of individuals who were denied consumer transactions because of erroneous matches to the SDN List. The report mentions the names of prominent individuals, including Barack Hussein Obama, Alberto Gonzales, Muhammad Ali, etc. whose first, middle or last names appear on the SDN List and therefore may be confused with a restricted person.

A copy of the LCCR's Complaint and accompany attachments (including the LCCR's FOIA request letter and correspondence from Treasury) can be found at:
http://www.lccr.com/5%2016%2007%20OFAC%20FOIA%20Complaint.pdf
(Note: This is a large file).

Labels: OFAC

Michael Moore's response to OFAC's May 2, 2007 letter requesting information on his recent trip to Cuba can be found be found at the following link on his website.

Somehow, I don't think that OFAC will find his letter to be responsive, particularly since he requested OFAC to terminate the investigation, rather than answering the specific questions asked by OFAC.

Labels: Cuba, OFAC

BAWAG P.S.K., an Austrian commercial bank that will soon be majority owned by New York-based Cerberus Capital Management, recently announced that it has reversed course and will revoke its previous decision to close accounts held by Cuban nationals.

The bank has been wrestling with the scope of U.S. sanctions ever since Cerberus announced that it would purchase the bank at the end of 2006. On April 13, 2007, BAWAG P.S.K. stated that as a result of its new ownership, the bank would be required to "terminate business relationships with clients of Cuban nationality" in order to comply with "American laws on economic sanctions administered by the U.S. Department of Treasury's Office of Foreign Assets Control."

On April 15th, the bank issued a statement that it "is not terminating or limiting its business relations with Iranian citizens in Austria" and the "the claims to this effect in the Sunday edition of the daily newspaper "Österreich" are misleading."

On April 25th, the bank "promised that in connection with the termination of the business relationships with Cuban Nationals no fees or charges will be levied from the affected customers. In addition to that BAWAG P.S.K. will also reimburse any costs incurred incurred in connection with the transfer of an account to another banking institution."

At the end of April, the Government of Austria announced that it commenced administrative criminal procedures against BAWAG P.S.K. for refusing to deal with Cuban customers. The bank subsequently sought and apparently obtained from OFAC a license permitting it to conduct business with Cuban nationals in Austria.

In its most recent announcement, the bank stated that it "offers its apologies to its customers for the problems and irritations in connection with the measures taken earlier. All costs eventually incurred by the customers concerned will of course be reimbursed" and that "the management board wishes to stress that the numerous critical statements of public and private parties received by it and addressing the matter in the last weeks were taken very seriously by BAWAG P.S.K. and were seen as support in the decision process."

Labels: Cuba, OFAC, Sanctions

On May 4, 2007, the Treasury Department's Office of Foreign Assets Control (OFAC) issued its monthly report of civil penalties imposed on companies and individuals for allegedly violating the sanctions regimes administered by OFAC.

OFAC's monthly report indicates that the agency settled five cases involving corporations and three cases against persons. The following is a summary of the settlements:

Entities:

• PSL Energy Services paid a civil penalty of $164,006.50 to settle allegations of violations of the Cuban Assets Control Regulations in 2004. PSL voluntarily disclosed to OFAC that it may have violated the Cuban Assets Control Regulations by engaging in the unlicensed exportation and re-exportation of oilfield servicing equipment and related skilled services to Cuba.
  

• Polek & Polek, a Fairfield, NJ distributor of imaging products, paid $3,350 to settle allegations of violations of the Iranian Transactions Regulations in 2004. OFAC alleged that Polek & Polek acted without an OFAC license or outside the scope of its license by exporting goods to Iran. Polek & Polek did not voluntarily disclose this matter to OFAC.

• Fleet National Bank on behalf of Suretrade, Inc. remitted $7,277 to settle allegations of violations of the Iranian Transactions Regulations in 2000. OFAC alleged that Suretrade acted without an OFAC license or outside the scope of its license by operating an account for a person located in Iran. This matter was not voluntary disclosed to OFAC.

• ACRA-CUT, Inc., an Acton, Massachusetts-based manufacturer of medical devices, paid $808 to settle allegations of violations of the Iranian Transactions Regulations occurring in February 2002. OFAC alleged that ACRA-CUT acted without an OFAC license by exporting goods to Iran. ACRA-CUT did not voluntarily disclose this matter to OFAC.

• Turkish Airlines was assessed a $2,226.24 civil monetary penalty for its violation of the Iranian Transactions Regulations occurring on July 28, 2004. OFAC imposed the penalty because of Turkish Airlines’ involvement in the transportation of photocopy machine parts to an individual located in Iran. Turkish Airlines did not voluntarily disclose this matter to OFAC. In an unusual move, OFAC provided the URL of OFAC’s penalty notice issued to Turkish Airlines, which shows that the airline did not respond to the agency's prepenalty notice.
  

Persons (OFAC does not release the names of individuals involved in civil penalty cases):

• An individual agreed to pay $485 for allegedly engaging in transactions with an entity previously identified as a Specially Designated Narcotics Trafficker (SDNT). OFAC alleged that the individual made payments by cash and credit card to the SDNT for rent involving the use of a trailer. The individual did not voluntarily disclose this matter to OFAC.

• One individual has agreed to pay $6,088.85 to settle charges of allegedly dealing in property in which Cuba or a Cuban national had an interest. Specifically, OFAC alleged that the individual purchased Cuban-origin cigars offered for sale on the Internet. The person did not voluntarily disclose this matter to OFAC, however the person later provided information to OFAC concerning additional purchases of Cuban-origin cigars.

• Another individual has agreed to a settlement totaling $1,261.00 for purchasing Cuban-origin cigars offered for sale on the Internet. The individual did not voluntarily disclose this matter to OFAC.

Labels: OFAC, Sanctions, Sanctions; Iran

The recently issued June issue of Cigar Aficionado magazine is dedicated to Cuba.

According to the magazine's website, the issue "delves into the island nation from all angles. We sit down with top U.S. politicians, both Democrat and Republican, as well as government insiders, from Cuba and the United States, to examine the policy divide that splits Washington along party lines and two nations separated by a 90-mile stretch of sea."

"We follow that up with a comprehensive travel guide t