March 15, 2010
Last week the United States Department of the Treasury Office of Foreign Assets Control (“OFAC”) issued updates to the list of service providers authorized to provide air, travel and remittance services to Cuba. The list of these companies can be found here: List of Cuba Service Providers.
Service providers on the list are allowed to provide air, travel, and remittance services to Cuba despite the prohibitions found in the Cuban Assets Control Regulations (“CACR”). Any person subject to U.S. jurisdiction who provides services akin to those of a travel agent must be specifically licensed as a Travel Service Provider prior to providing any of these services. A traveler should not use any travel agent or tour operator in the United States that is not a Travel Service Provider. The same is true for providers of direct flights or vessel voyages.
The same prohibitions are true for Remittance Forwarders. Any person subject to U.S. jurisdiction, other than a depository institution, who seeks to provide services in connection with collecting, forwarding domestically, or transferring internationally authorized remittances must be specifically licensed as a Remittance Forwarder prior to providing any of these services. Depository institutions, as defined in 31 C.F.R. 515.333, are authorized by general license to forward remittances. To facilitate this, depository institutions are permitted to set up testing arrangements and exchange authenticator keys with Cuban financial institutions to forward authorized remittances. However, Depository institutions may not open or use direct correspondent accounts with Cuban financial institutions.
There have been a few changes to this list over the past year. OFAC is not only adding service providers, however. They are also revoking service providers’ authorizations. If you have been using a particular service provider for forwarding of remittances to Cuba or for your travel arrangements, make sure to check the newly updated list first.
Douglas McNabb, Erich Ferrari and other members of the firm practice and write extensively on matters involving Federal Criminal Defense, International Extradition and OFAC litigation.
The author of this blog is Erich Ferrari, a Partner in the Washington, DC office. If you have any questions please contact him at 202-351-6161 or ferrari@mcnabbassociates.com.
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Posted by McNabb Associates, P.C.
March 11, 2010
On Tuesday, I wrote about the general license issued by the United States Department of the Treasury Office of Foreign Assets Control (“OFAC”) which lifted restrictions on the exportation of internet based personal communications software. I also pontificated at some length about the conflict created in requiring the software or services to be publicly available at no cost while prohibiting exportation to the governments of Iran, Cuba, or Sudan. This in my opinion would obviously cause problems in compliance, because it would make the end users incredibly difficult to ascertain. Therefore, it would seem nearly impossible for an exporter to ensure compliance by not allowing exportation to the governments of Iran, Cuba, or Sudan, while simultaneously making the software or services publicly available at no cost.
However, upon further review of the regulations it seems that point that I had discussed is moot. Clif Burns over at Exportlawblog.com pointed out to me that there is a knowledge requirement in the regulations, which states that the exporter “must know or must have reason to know” that the software or services are being exported to the governments of Iran, Cuba, or Sudan. Therefore, there is a knowledge requirement attached to that prohibition, which makes a lot more sense.
I do not recall seeing this in the 21 page document that OFAC released via its website on Tuesday. I tried to revisit the link this morning, however, it no longer points to that document, but rather to the section of the Federal Register where the the general license regulations are announced. The regulations clearly state this knowledge requirement.
Parsing the language of and interpreting OFAC administered sanctions regulations can be a complex matter. It just goes to show that when dealing with any OFAC issue, you have to always go back to the regulations. Don’t trust everything you read, unless you can verify it through the appropriate regulations. That’s why in dealing with these types of issues it always pays to retain counsel that understands the way OFAC and the regulations work.
Douglas McNabb, Erich Ferrari and other members of the firm practice and write extensively on matters involving Federal Criminal Defense, International Extradition and OFAC litigation.
The author of this blog is Erich Ferrari, a Partner in the Washington, DC office. If you have any questions please contact him at 202-351-6161 or ferrari@mcnabbassociates.com.
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Posted by McNabb Associates, P.C.
March 10, 2010
Yesterday, the United States Department of the Treasury Office of Foreign Assets Control (“OFAC”) issued the long awaited Personal Communications Services General License, which will allow for companies such as Google, Yahoo, and MSN to provide internet based communication technologies (i.e., Google Talk, Yahoo Messenger, MSN Messenger, etc.) to Iran, Cuba, and Sudan.
This general license was recommended by the U.S. Department of State back in December and many people have criticized OFAC for not issuing the license earlier. Generally, this type of software is listed on the Commerce Control List (“CCL”). As such, OFAC is precluded from issuing any type of license–general or specific–to allow for its export. However, the President can utilize his waiver authority under section 1606 of Iran-Iraq Arms Non-Proliferation Act of 1992. This waiver authority was delegated to the Secretary of State in 1994. This waiver authority was used by the Department of State in December at the time it recommended for the issuance of the general license.
The issuance of this general license is codified in the Sudan Sanctions Regulations at 31 C.F.R. 538.533 and in the Iranian Transactions Regulations at 31 C.F.R. 560.540. These sections now provide a general license for exportation of certain services or software incident to the exchange of personal communications over the Internet. Some examples of such services or software are: instant messaging, email, social networking platforms, sharing of photos and movies, web browsing, and blogging tools. Also, it should be noted that in the Cuban Assets Control Regulations this general license is codified at 31 C.F.R. 515.578.
As wonderful as all of this sounds there is a requirement: the services or software must be publicly available at no cost to the user. In addition, to qualify under this general license, the software must either be not subject to the Export Administration Regulations, classifed as EAR99 under the Export Administration Regulations, or classified as mass market software by the Department of Commerce. Also this general license does not permit the exportation of such services or software to the Government of Iran, Government of Sudan, or to the Cuban Communist Party.
On one hand the prohibition on exportation to the Governments of Iran, Sudan, and Cuba in the general licenses quells critics concerns about providing these services and/or software to nations which might use them to monitor or censor its own people, it does present another problem. That problem is for the exporter of the services and/or software. Since the general licenses require that the software be publicly available at no cost to the end user, how are they supposed to put restrictions on who can access the software or service?
I believe this is an area where we will be seeing one of two things take place: 1) either further clarification from OFAC in the form of interpretative guidance, or 2) a number of violations. It seems a daunting task to prevent exportation of a publicly available, free software to any particular party, especially a governmental entity or an agent of a governmental entity.
Douglas McNabb, Erich Ferrari and other members of the firm practice and write extensively on matters involving Federal Criminal Defense, International Extradition and OFAC litigation.
The author of this blog is Erich Ferrari, a Partner in the Washington, DC office. If you have any questions please contact him at 202-351-6161 or ferrari@mcnabbassociates.com.
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Posted by McNabb Associates, P.C.
March 8, 2010
The United States Department of the Treasury Office of Foreign Assets Control (OFAC) maintains a list of persons who they believe are engaged in activity detrimental to U.S. national security interests. This list is known as the Specially Designated National (SDN) List. These persons can be either individuals or corporate entities and the evidence in support of OFAC’s decision is often unavailable to those who seek removal. Many times one finds themselves on the SDN list with no idea as to what they have done wrong.
The effect of these designations can be crippling. Not only will a designated person lose access to its assets under U.S. jurisdiction, they will also be denied access to the U.S. financial systems. Moreover, U.S. persons will not be able to engage in any sort of transaction with a person placed on the SDN list. The consequences of a U.S. person violating such a prohibition can have devasting consequences such as multi-million dollar fines and up to twenty years in imprisionment.
When persons have been placed on the SDN list, they are often confused as how to challenge the designation. This is because there is much confusion about what sanctions are, who issues them, and who enforces them. For this reason, designated persons spend many years trying to challenge a designation by going through the wrong channels. For example, when challenging an OFAC designation I have seen individuals try to challenge it through the State Department, through the Department of Justice, through the United Nations, and through the European Commission. Many times designated persons try to challenge their designation everywhere except the most logical choice: OFAC. OFAC is responsible for administering the SDN List, and OFAC is where one needs to challenge their designation.
Challenging these designations can be a long and arduous process. First, counsel must understand and learn every aspect of the designated person’s financial activities and his/her business relationships. Then a discovery process must be undertaken to uncover evidence to support the arguments as to why the designated person should be removed. Once, this is done these arguments should be set forth in a Petition for Review, also known as a Request for Reconsideration. In this Request for Reconsideration, one has the right to ask for a hearing before OFAC to discuss their designation, however, OFAC is not required to provide one. Whether or not OFAC agrees to a hearing, the Request for Reconsideration could take a very long time for them to consider. This process can take anywhere from six months up to several years.
OFAC has designated hundreds of individuals and companies over the last year alone. In addition, there are thousands of designated persons on the SDN List. If you are on thr SDN List, then you need to challenge that designation before anymore harm comes to your financial well being and your reputation. There are ways to do this, but you need to consult with legal counsel who has done this before and understands both the removal process and how OFAC operates.
Our Firm offers representation in SDN List Removal. We have worked on a number of these matters before and have fought vigorously for our clients. In addition, we also handle a number of other matters before OFAC, including representation on compliance issues, licensing, and investigations. We know how OFAC works and how to get you the best result in challenging a removal.
Douglas McNabb, Erich Ferrari and other members of the firm practice and write extensively on matters involving Federal Criminal Defense, International Extradition and OFAC litigation.
The author of this blog is Erich Ferrari, a Partner in the Washington, DC office. If you have any questions please contact him at 202-351-6161 or ferrari@mcnabbassociates.com.
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Posted by McNabb Associates, P.C.
March 8, 2010
The New York Times is reporting that today, March 8, 2010, the United States Department of the Treasury will announce the issuance of a general license to export certain internet technologies, otherwise prohibited by U.S. economic sanctions, to the countries of Iran, Cuba, and Sudan. The technologies to be allowed will be for free personal internet services and software. In other words, the general license will cover mass market technologies such as MSN messenger, Google Talk, and Yahoo Messenger. It will not allow for the export of encryption software or other software which will make it easier for the end user to hide their activities from a governmental authority. That is not to say that one can not still apply for a specific license to export such technologies. Indeed, the New York Times article went on to quote a Treasury official who said that license applications for such technologies would be looked up on favorably.
Specific licensure would still need to be the course of action for the Haystack software I have written about so frequently. The Haystack software allows for end users to circumvent the Islamic Republic of Iran’s firewalls and censorship measures. As such, it will not fall under the general license, however, its creators are currently awaiting word on whether or not their exportation of such software will be granted specific licensure from OFAC.
The U.S. Department of State recommended to the United States Department of the Treasury Office of Foreign Assets Control (“OFAC”) to issue this general license back in December of 2009, however, OFAC never indicated whether they would or not issue such a license. It seems surprising that now, at a time when the U.S. is circulating new Iran sanctions in the United Nations and the U.S. Congress has passed tough new sanctions against Iran, that a general license easing the sanctions would be forthcoming.
What this general license will entail remains to be seen. While the New York Times reports that the issuance of the general license will be announced today, there have yet been no announcements from OFAC or from Treasury regarding it. So on an advisory note, do not start exporting any free mass market personal Internet software until you see the general license information posted on OFAC’s website, or until you have consulted with an attorney experienced in U.S. economic sanctions and with OFAC in particular.
Since the original posting of this blog entry the OFAC general license has been issued. It can be found here. It’s a 21 page document. I will be devoting more time to it later this week, so check back with an update on this very important development.
The New York Times article can be found here.
Douglas McNabb, Erich Ferrari and other members of the firm practice and write extensively on matters involving Federal Criminal Defense, International Extradition and OFAC litigation.
The author of this blog is Erich Ferrari, a Partner in the Washington, DC office. If you have any questions please contact him at 202-351-6161 or ferrari@mcnabbassociates.com.
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March 5, 2010
The Department of the Treasury Office of Foreign Assets Control (OFAC) earlier this week issued its Calendar Year 2009 Eighteenth Annual Report to the Congress on Assets in the United States of Terrorist Countries and International Terrorism Program Designess (Terrorism Assets Report). It’s a 34 page report and rather than drone on about its findings, I would just like to acknowledge some of its key points:
1. Implementation of terrorism related sanctions programs has led to the blocking of approximately $19 million of assets in which there exists an interest of an international terrorist organization or related party.
2. Over $560 million worth of assets relating to four state sponsors of terrorism have been identified as being in the United States. $287 million of these assets belong to individuals and entities in Iran and Syria.
3. OFAC does not conduct valuations of tangible property or appraisals of real property until the property is sold or to be auctioned.
The entire report can be found here
As you will notice a substantial amount of the funds are in someway related to Iran or the government of Iran. This once again highlights the importance of U.S. economic sanctions pertaining to Iran. Those engaged in business whcih they feel might somehow involve Iran or Iranian entities should contact an OFAC attorney to help determine if there are any potential violations they are exposing themselves to.
Douglas McNabb, Erich Ferrari and other members of the firm practice and write extensively on matters involving Federal Criminal Defense, International Extradition and OFAC litigation.
The author of this blog is Erich Ferrari, a Partner in the Washington, DC office. If you have any questions please contact him at 202-351-6161 or ferrari@mcnabbassociates.com.
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March 4, 2010
This blog is normally devoted strictly to issues surrounding the sanctions programs administered and enforced by the United States Department of the Treasury Office of Foreign Assets Control (OFAC). However, there have been a number of developments over the past few weeks which have occured outside of OFAC, but that might dramatically impact one of the sanctions programs administered by OFAC: the Iranian Transactions Regulations.
Many people know that in addition to U.S. economic sanctions against Iran, there are also international U.N. sanctions against the Islamic Republic. What some people might not know is that those U.N. sanctions only call upon Member States to exercise vigilance or restraint in interacting with Iran on certain issues, such as weapons trade, banking, and shipping. However, there are now new proposed sanctions being circulated around the U.N. which call for actual prohibitions on particular transactions with Iran. These new sanctions in particular look to attack Iran’s banking system by banning transactions with certain banks much in the same way the U.S. sanctions ban transactions with Bank Melli and Bank Saderat. Furthermore, these sanctions would augment the travel ban and freezing of assets of some individuals.
Essentially, the goal with these proposed U.N. sanctions against Iran is to make them look more like the U.S. economic sanctions against Iran by mimicking sanctions available through various U.S. programs. Currently, the U.S. employs a number of sanctions programs to restrict both the physical and financial movements of targets in Iran or involving Iran. These programs include the Iranian Transactions Regulations, the Iranian Assets Control Regulations, and the Non-Proliferation Sanctions Regulations. It seems the proposed U.N. sanctions seek to draw a page from OFAC administered sanctions programs in establishing their approach.
Also, the U.S. House and Senate have passed the Comprehensive Iran Sanctions, Accountability and Divestment Act. That bill seeks to vastly expand U.S. economic sanctions against Iran. Some of the new key provisions include: penalizing non-U.S. companies involved in Iranian petroleum refining and importation, prohibiting the U.S. government from entering into contracts with any firms that sell equipment to Iran which would be used for censoring and monitoring its people, and requiring licensing for certain exports to countries deemed to be “Destinations of Possible Diversion Concern”.
While its clear that these proposed laws greatly expand sanctions against Iran. What is unclear is who will be responsible for administration of these sanctions from a U.S. prespective. Currently, OFAC does the majority of the work in regards to Iranian sanctions, however, if these new sanctions are in fact signed into law, will OFAC remain the primary player when it comes to administration and enforcement of the sanctions? Or will the United States Department of Commerce Bureau of Industry and Security (“BIS”) take the lead?
Also, what will be the impact on the Iranian Transactions Regulations be? Will they be amended? Will a completely new program be implemented into the regulations? These are important issues to consider because every government agency operates in their own fashion. Therefore, those in the private sector who have found themselves working with (or against) OFAC in regards to Iran sanctions, might soon find themselves dealing with another agency which operates differently. It is important to remember that the sanctions regulations are often ambigious, therefore, it is not what they say, but how they are administered and enforced which is vital to those trying to navigate their prohibitions and exemptions.
Douglas McNabb, Erich Ferrari and other members of the firm practice and write extensively on matters involving Federal Criminal Defense, International Extradition and OFAC litigation.
The author of this blog is Erich Ferrari, a Partner in the Washington, DC office. If you have any questions please contact him at 202-351-6161 or ferrari@mcnabbassociates.com.
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Posted by McNabb Associates, P.C.
March 3, 2010
By now you shouldn’t be surprised to hear that the U.S. government has become increasingly more aggressive in its use of economic sanctions to fight alleged drug traffickers around the world. For the last year I have written on the increasing number of designations under the Foreign Narcotics Kingpin Designation Act (Kingpin Act) and how the United States Department of the Treasury Office of Foreign Assets Control (OFAC) has been designating individuals and entities under this sanctions program left and right.
Well today was no exception. OFAC has designated a whopping 31 individuals and 47 entities as Foreign Narcotics Kingpins. That is 78 new Kingpins designees on the Specially Designated Nationals (SDN) List! According to this press release from the U.S. Department of the Treasury these designations place some of the most wanted narcotics traffickers in Columbia onto the SDN List. Moreover, Treasury alleges that these designees are partnered with the FARC (Fuerzas Armadas Revolucionarias de Colombia), a narco-terrorist organization identified by the President as a kingpin pursuant to the Kingpin Act in 2003.
However, OFAC was not just busy designating SDNs today, they also removed some names from the SDN list as well. While OFAC designated 78 individuals and entities today they also removed two individuals and three entities, none of which were originally designated under the Kingpin Act.
Why so many designations and so few removals? There are a couple of reasons. First, OFAC is obviously more geared towards designating as opposed to removing persons from the SDN list. Their job after all is to enforce and administer various sanctions programs; not constantly reviewing their own actions. Second, and perhaps more important, is that there is a lack of understanding on how to challenge these designations both amongst those who are designated and amongst the attorneys they hire to challenge the designation. I have seen so many attorneys representing SDNs write letters to the United Nations asking for removal or write letters to the U.S. State Department requesting a removal. This course of action is an absolute waste of time.
There are very clear administrative procedures set forth in the regulations which must be followed in order to contest a designation under an OFAC administered sanction program. If you find yourself in the position of having been designated and placed on the SDN list, contact a lawyer who is familiar with what these administrative procedures are and how they work. Taking other approaches to seek a removal ultimately lead to frustration and a waste of time.
Douglas McNabb, Erich Ferrari and other members of the firm practice and write extensively on matters involving Federal Criminal Defense, International Extradition and OFAC litigation.
The author of this blog is Erich Ferrari, a Partner in the Washington, DC office. If you have any questions please contact him at 202-351-6161 or ferrari@mcnabbassociates.com.
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March 1, 2010
You may or may not know, but the United States Department of the Treasury Office of Foreign Assets Control (OFAC) administers a sanctions program against those persons undermining democratic processes in Zimbabwe. While this sanctions program has been in effect since the handing down of an Executive Order calling for sanctions against such individuals in 2003, you don’t often hear about it. That’s why when I saw this story here, it peaked my interest.
Apparently, the owners of a struggling golf club in Marion, Illinois have been blocked from selling the property due to involvement with businessman John Bredenkamp.
The Zimbabwe-based Mr. Bredenkamp has been designated under the Zimbabwe Sanctions and is currently listed on the Specially Designated Nationals (SDN) List administered by OFAC.
Mr. Bredenkamp, who denies ties to Mugabe’s, was part of a group of business people that owned Kokopelli Golf Club and Restaurant between 2001 and 2006. Despite his lack of involvement since 2006, present owners attempts to sell the property, have been blocked by OFAC over the last 15 months. OFAC has placed a blocking order on the sale of the property because Mr. Bredenkamp he retains a right to future profits if the course is sold again.
The owners, however, argue that the agreed disposal price of $1 million will just cover the club’s debts. In other words, Mr. Bredenkamp would not be able to claim any financial benefit from the transaction.
While this is obviously a problem for the owners of the golf course, I think with some creative thinking and a lawyer who knows how OFAC operates, it’s an obstacle that can be overcome. For example, one way of addressing this issue, is proposing to OFAC that any proceeds due to Mr. Bredenkamp be placed in an a blocked interest bearing account. This account would remain blocked until a time when Mr. Bredenkamp was removed from the SDN list.
That’s just one option. There could be a number of ways to overcome OFAC’s position here, Kokopelli Golf Course and Restaurant just needs to find a way to work with OFAC to address their concerns.
Douglas McNabb, Erich Ferrari and other members of the firm practice and write extensively on matters involving Federal Criminal Defense, International Extradition and OFAC litigation.
The author of this blog is Erich Ferrari, a Partner in the Washington, DC office. If you have any questions please contact him at 202-351-6161 or ferrari@mcnabbassociates.com.
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Posted by McNabb Associates, P.C.
February 25, 2010
The United States Department of the Treasury Office of Foreign Assets Control (OFAC) has designated seven individuals and one entity under the Foreign Narcotics Kingpin Designation Act (Kingpin Act). These individuals are: Nicandro Barrera Medrano, Servando Gomez Martinez, Dionico Loya Plancarte, Jose de Jesus Mendez Vargas, Nazario Moreno Gonzalez, Enrique Plancarte Solis, and Jose Arnoldo Rueda Medina. The entity is: Transportadora Purepecha S.A. DE C.V.
According to the U.S. Department of the Treasury, the designated individuals are alleged to be seven key leaders of the international drug trafficking organization La Familia Michoacana (La Familia). The designated entity is alleged to be owned or controlled by one of La Familia’s lieutenants. As result of this designation, the assets of these individuals and the entity that are subject to U.S. jurisdiction have been blocked. In addition, U.S. persons can no longer engage in transactions with these persons.
La Familia is accused of being an extremely violent drug trafficking organization operating primarily in the State of Michoacán, Mexico. OFAC’s actions here constitute the first derivative designation against La Familia since that entity was designated as a significant narcotics trafficker in April of 2009.
Nazario Moreno Gonzalez, has already been indicted for drug trafficking in a U.S. district court in Texas in 2003, and Jose de Jesus Mendez Vargas is alleged to have been involved in the smuggling of large shipments of methamphetamine and cocaine into the United States.
As noted above, U.S. persons are prohibited in engaging in any transactions with these individuals or the entity. Penalties for violations of the Kingpin Act range from civil penalties of up to $1.075 million per violation to more severe criminal penalties. Criminal penalties for corporate officers may include up to 30 years in prison and fines up to $5 million. Criminal fines for corporations may reach $10 million. Other individuals face up to 10 years in prison and fines pursuant to Title 18 of the United States Code for criminal violations of the Kingpin Act.
President Obama promised a more focused approach in fighting Central and Southern American drug cartels and the use of economic sanctions has been a large part of that. There has been a rash of designations under the Kingpin Act since President Obama took office over a year ago. While these individuals have no right to appeal the designation in U.S. Courts, they may ask OFAC for a reconsideration under 31 C.F.R. 501.807. If successful, the designated party can be removed from the SDN list. However, these types of removals are difficult to achieve given the complex nature of the sanctions regulations and the internal workings of OFAC. To successfully remove an individual or entity from the OFAC SDN list, you need to contact a lawyer who is experienced not only in OFAC and the sanctions programs they administer, but also in these specific removal proceedings.
Douglas McNabb, Erich Ferrari and other members of the firm practice and write extensively on matters involving Federal Criminal Defense, International Extradition and OFAC litigation.
The author of this blog is Erich Ferrari, a Partner in the Washington, DC office. If you have any questions please contact him at 202-351-6161 or ferrari@mcnabbassociates.com.
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