Reading some other opinions around the web on Google and Microsoft’s suspension of certain services to users in OFAC sanctioned countries inspired me to consider how the United States Department of Treasury Office of Foreign Assets Control (“OFAC”) is going to address transactions and communications taking place via the Web.

Take this example for instance, “An Iranian graduate student publishes his graduate thesis containing large amounts technical data to the web via his Scribd account. He then shares the link to this information via Twitter. A number of his relatives in Iran also use Twitter and follow the graduate student’s feed. Some of these relatives are engineers working in a chemical processing plant outside of Tehran. They click on the link and find the graduate student’s thesis. They use the technical data to develop a new type of engine lubricant used in Iranian military vehicles.”

Should this transaction have been blocked? If so, who is liable for violating the sanctions regulations?

Under the Iranian Transactions Regulations (“ITR”) unless licensed by OFAC, goods, technology (including technical data or other information subject to Export Administration Regulations), or services may not be exported, reexported, sold or supplied, directly or indirectly, from the United States or by a U.S. person, wherever located, to Iran or the Government of Iran.

In the above example, the graduate student’s technical data was supplied indirectly from the U.S. to Iran. There are a number of parties facilitating this communication from the U.S. to Iran. Scribd by allowing users to upload their documents to their site and share them, is extremely susceptible to violating the ITR because they offer a service whose whole reason for being is to allow people to share documents over the web. Surely, this information includes technical data and as far as I am aware they do not block individuals from sanctioned nations. I could be wrong here, but I’m just using Scribd as an example.

Next, the graduate student shared his Scribd page via Twitter. Twitter might be a little less exposed to liability for the transmission of the technical data to Iran, because the technical data is not contained on their site or shared via their service; only the link to the technical data is shared. However, the argument could be made that since Twitter knew that Scribd allows for the posting of documents via its service, and further that Scribd facilitates the sharing of these documents via social media platforms like Twitter, that they had reason to know that technical data could have been shared via their platform.

As you can see this presents a huge challenge to OFAC. I don’t think with all the resources of the United States Government that OFAC could put a halt to the sharing of information via the Web. Perhaps the only way to stop scenarios like the one above would be for massive federal regulation of the Web…..something I don’t see happening. Even then I think we have reached a point where the transmission of information via the Web is already way beyond the point of being susceptible to government control. Those who want to share such information or use the Web to conduct transactions will always find a way to do so.

So what does OFAC do to ensure that their regulations aren’t rendered obsolete by online business and communications? In my opinion the imposition of penalties is a recipe for disaster and doomed for failure. Therefore, as I have advocated in the past, I think the U.S./OFAC strategy should be two fold:

1. Create greater awareness regarding the sanctions regulations and work closer with the private sector in ensuring that the regulations are followed;
2. Incentivize the implementation of and compliance with similar sanctions regulations to other nations.

In the end the law will never be able to keep up with changes in technology or with the speed of business. The private sector really needs to be involved if these sanctions regulations are going to remain effective.

That’s my two cents on the topic. Would love to hear some other opinions. Either post a comment or shoot me an email here.