In a case of damned if you do, damned if you don’t, there are news reports floating around about how ransoms being paid by shippers to Somali pirates to free prisoners can expose the shippers to liability for violating economic sanctions administered by the United States Department of the Treasury Office of Foreign Assets Control (“OFAC”).

The sanctions programs that may be impacted by such ransom payments include both the Somalia sanctions program that went into effect in April of 2010 and the Global Terrorism sanctions program, which may come into play because of a growing relationship between Somali pirates and Al-Shabaab, an Islamist organization designated as a Specially Designated National under the Global Terrorism sanctions program.

U.S. persons are prohibited from transferring, paying, exporting, withdrawing, or otherwise dealing in the property and interests in property of an entity or individual listed on the SDN List pursuant to Executive Order 13536 (“E.O. 13536”) which established the Somalia Sanctions program. E.O. 13536 Section 1(d)(i) also prohibits the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any person whose property and interests in property are blocked pursuant to the order.

However, it should be recognized that there are only a few pirates that have been designated under the Somalia sanctions program. Therefore, not all ransom payments to Somali pirates may lead to liability for violating U.S. economic sanctions.

That said, there is another concern. A number of sources are stating that there is a growing connection between the Somali pirates and the Al-Shabaab organization operating in Southern Somalia. Al-Shabaab is designated under the Global Terrorism Sanctions and as such all transactions directly and indirectly with them by U.S. persons are prohibited. The operative word here is “indirectly.” If a ransom is paid to a non-designated Somali, it may nevertheless violate OFAC sanctions if some of those funds are then provided to Al-Shabaab. In that scenario, OFAC might deem the ransom as an indirect transactions with a Specially Designated Global Terrorist.

So what is one to do? Risk the life of a human to in order to be in full compliance with U.S. trade sanctions? Or violate the sanctions, save a life, and then deal with the consequences later? Surely, a dilemma, however, in this scenario I would suggest filing a license application requesting expedited service and sending it through OFAC’s facsimile line, their email, and by courier. See if OFAC will allow for the transaction in the specific case of a ransom for those taken prisoner by Somali pirates. If the answer is no, then you either do nothing or violate the sanctions.

What I would mention is this: a law is only good as its enforcement. I think that in the event of a violation under the aforementioned circumstances that OFAC would be sympathetic and take a view of the totality of the circumstances in coming to a determination as to an appropriate enforcement action; which is what they are mandated to do by their own enforcement guidelines. That is not to say that one would avoid a penalty when paying a ransom to a Somali pirate, but certainly the fact that there was a captive person whose life was at risk would be a compelling argument for mitigation of a penalty.

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