According to a recent article from the Wall Street Journal, Iran’s state shipping company has changed the names and ownership of most of its vessels to avoid U.S. sanctions. However, the article goes on to say that the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC””) has yet to update the Specially Designated Nationals (SDN) list that U.S. persons check to verify they are in compliance with U.S. sanctions programs.

This article was based on a report by the Wisconsin Project on Nuclear Arms Control, which states that some firms are at risk of doing business with the company, Islamic Republic of Iran Shipping Lines (“IRISL”), despite that entity being placed on the SDN list since 2008.

The article discusses OFAC’s implementation of a number of financial sanctions on Iran, including asset freezes. However, the Wall Street Journal has characterized the asset freezes as surprisingly small, constituting less than $43 million in the U.S. and about $1.4 million in Switzerland. This understates the effect that U.S. sanctions against Iran have. The sanctions are not only for the freezing of assets, but also prohibit transactions by U.S. persons with Iranian individuals and entities, as well as, with the government of Iran. This is where the real impact of Iran sanctions can be felt.

The Wisconsin Project report states that IRISL, since its designation, has renamed at least 80 of the 123 vessels in its shipping fleet—often dropping the word “Iran”. However, Treasury’s current published list used by U.S. companies continues to include the old names. One example was that the Iran Matin was renamed the Abba, and the Iran Kermanshah was changed to the Acena, the report states.

The report also goes on to state that IRISL, has also been transferring ownership of its ships to shell companies that don’t appear on OFAC’s SDN list.

One of the main problems facing the administration of U.S. economic sanctions is the inability of the Office of Foreign Assets Control (OFAC) to quickly adapt to changes in tactics by targeted regimes and/or persons. A similar problem occured when Iranian protestors during the June of 2009 election unrest were stymied in their efforts to communicate using U.S. origin internet based communications software such as Google Talk and MSN Messenger, because of the bans on exportation of this kind of software contained in the Iranian Transactions Regulations. This month took nearly nine months to resolve, as first the State Department had to consider the allowing of such exportation, which they did deem to be of value to enhancing foreign policy objectives in December of 2009. However, once this determination was made and State recommended to OFAC temporarily lifting the ban, it took OFAC nearly four months to act and issue a general license, which it did in early March of 2010.

With limited resources and sanctioned parties changing their tactics every day it seems OFAC has a hard time keeping up. In my opinion They need to streamline their processes and work closely with private industry in order to effectively adminiter these sanctions programs.

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.