Much to the chagrin of Captain Jack Sparrow, the Obama Administration has offered some insight into what the new sanctions aimed at Somalia entail. According to a recent news article, White House officials have met with maritime industry leaders and are stating that they want shipowners to seek US approval before paying ransom to Somali pirates.

The executive order issued in response to Somali piracy prompted concern that ransom payments could be deemed as ‘financial support’ for pirates. Some critics have stated that a technical reading of the executive order could make it possible for assets of ransom-paying owners to be blocked by the United States Department of the Treasury Office of Foreign Assets Control (OFAC).

However, Administration officials met with maritime industry leaders on April 16th to clarify their intent. According to reports from that meeting, the U.S. government only intends the order to apply to dealings by US persons with persons listed in the Annex [block list] of the executive order.  Therefore, the prohibitions found in the executive order would not extend to payments made by non-US shipowners in currency other than US dollars. However, the officials also emphasised the need to consult with OFAC when considering payment of ransom from a US source or in circumstances in which the order might apply.

There are currenly only two individuals on the current blocked persons list for being ‘known supporters of piracy’: Mohamed Abdi Garaad and Yemane Ghebreab.

This statement by the U.S. government is indicative of the system OFAC has created; a system in which U.S. persons must always seek OFAC’s permission prior to engaging in transactions which may even remotely be prohibited by U.S. economic sanctions. This system could prove dangerous, because, while its true OFAC might want you to seek their permission prior to paying a ransom to a group of Somali pirates, it remains to be seen whether the pirates will patiently wait the two months or so that it will take for OFAC to make a determination as to whether or not you are authorized to pay the ransom.

The author of this blog is Erich Ferrari, an attorney specializing in OFAC litigation. If you have any questions please contact him at 202-280-6370 at 202-351-6161 or ferrari@ferrari-legal.com.