u.s. economic sanctions update

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U.S. Economic Sanctions UpdateKnow the Rules or Pay the Price

Cleveland Metropolitan Bar AssociationInternational Law Section

Cleveland, OhioApril 4, 2012



Disclaimer

The information provided is believed to be accurate as of the date of the presentation, but is subject to change without notice.

This presentation is designed for informational purposes only and is not intended to be, nor should it be deemed, specific legal advice. If such advice is required, please consult with qualified legal counsel.

Office of Foreign Assets Control

-Administers, enforces economic/trade sanctions against

foreign governments, government officials, persons/entities

and placed on the SDN List

-Financial expertise – blocking/freezing assets; title remains with sanctioned target

-Broad prohibitions on transfers/transactionsAttorney Advertising

OFAC History Lesson Treasury Department

-War of 1812 - sanctions against Britain for harassing American sailors

-Civil War, Congress approved law prohibiting transactions with Confederacy, called for forfeiture of goods involved in

transactions, and created a licensing regime

Office of Foreign Funds Control( “FFC‘”) – predecessor to OFAC; established at start of WWII after Germany invaded Norway (1940); initial purpose was preventing Nazi use of occupied countries' foreign exchange and securities holdings; extended to protect assets of other invaded countries; FFC used powers to block enemy assets and prohibit foreign trade/transactions

OFAC - created December 1950 after China entered Korean War; President Truman declared a national emergency and blocked all Chinese and N. Korean assets subject to U.S. jurisdiction


SDN List

► Specially Designated Nationals List

http://www.treasury.gov/ofac/downloads/t11sdn.pdf

► Individuals and companies owned/controlled by or acting for/on behalf of targeted countries

► Individuals, groups, and entities, (terrorists and narco- traffickers)

► Assets are blocked and U.S. persons are generally prohibited from dealing with SDNs

► “


SDN List Entrants2ND ACADEMY OF NATURAL SCIENCES (a.k.a. ACADEMY OF NATURAL SCIENCES;a.k.a. CHAYON KWAHAK-WON; a.k.a. CHE 2 CHAYON KWAHAK-WON; a.k.a. KUKPANG KWAHAK-WON; a.k.a. NATIONAL DEFENSE ACADEMY; a.k.a. SANSRI; a.k.a. SECOND ACADEMY OF NATURAL SCIENCES; a.k.a. SECOND ACADEMY OF NATURAL SCIENCES RESEARCH INSTITUTE), Pyongyang, Korea, North [NPWMD]

2904977 CANADA, INC. (a.k.a. CARIBE SOL; a.k.a. HAVANTUR CANADA INC.), 818 rue Sherbrooke East, Montreal, Quebec H2L 1K3, Canada [CUBA]

32 COUNTY SOVEREIGNTY MOVEMENT (a.k.a. 32 COUNTY SOVEREIGNTY COMMITTEE; a.k.a. IRISH REPUBLICAN PRISONERS WELFARE ASSOCIATION; a.k.a. REAL IRA; a.k.a. REAL IRISH REPUBLICAN ARMY; a.k.a. REAL OGLAIGH NA HEIREANN; a.k.a. RIRA) [FTO] [SDGT]


SDN List Entrants (cont’d)

A A TRADING FZCO, P.O. Box 37089, Dubai, United Arab Emirates [SDNTK]

ABASTECEDORA NAVAL Y INDUSTRIAL, S.A. (a.k.a. ANAINSA), Panama [CUBA]

BIN LADEN, Osama (a.k.a. BIN LADEN, Usama; a.k.a. BIN LADIN, Osama; a.k.a. BIN LADIN, Osama bin Muhammad bin Awad; a.k.a. BIN LADIN, Usama; a.k.a. BIN LADIN, Usama bin Muhammad bin Awad); DOB 30 Jul 1957; alt. DOB 1958; POB Jeddah, Saudi Arabia; alt. POB Yemen (individual) [SDT] [SDGT]



CENTRAL AFRICAN AIR (a.k.a. CENTRAFRICAIN AIRLINES; a.k.a. CENTRAFRICAN AIRLINES; a.k.a. CENTRAL AFRICAN AIR LINES; a.k.a. CENTRAL AFRICAN AIRWAYS), P.O. Box 2760, Bangui, Central African Republic; c/o Transavia Travel Agency, P.O. Box 3962, Sharjah, United Arab Emirates; P.O. Box 2190, Ajman, United Arab Emirates; Kigali, Rwanda; Ras-al-Khaimah, United Arab Emirates [LIBERIA]

MAHAB GHODSS CONSULTING ENGINEERING CO. (a.k.a. MAHAB GHODSSCONSULTING ENGINEERING COMPANY; a.k.a. MAHAB GHODSS CONSULTINGENGINEERS SSK; a.k.a. MAHAB QODS ENGINEERING CONSULTING CO.), 16Takharestan Alley, Dastgerdy Avenue, P.O. Box 19395-6875, Tehran 19187 81185, Iran; No. 17, Dastgerdy Avenue, Takharestan Alley, 19395-6875, Tehran 1918781185, Iran; Registration ID 48962 (Iran) issued 1983; all offices worldwide [IRAN]Attorney Advertising


NAFT IRAN INTERTRADE COMPANY LTD (a.k.a. NAFTIRAN INTERTRADE CO. (NICO) LIMITED; a.k.a. NAFTIRAN INTERTRADE COMPANY (NICO); a.k.a. NAFTIRAN INTERTRADE COMPANY LTD; a.k.a. NICO), 41, 1st Floor, International House, The Parade, St Helier JE2 3QQ, Jersey; Petro Pars Building, Saadat Abad Ave, No 35, Farhang Blvd, Tehran, Iran; all offices worldwide [IRAN]

NAFTIRAN TRADING SERVICES CO. (NTS) LIMITED, 47 Queen Anne Street, London W1G 9JG, United Kingdom; 6th Floor NIOC Ho, 4 Victoria St, London SW1H 0NE, United Kingdom; UK Company Number 02600121 (United Kingdom); all offices worldwide [IRAN]



RUNNING BROOK, LLC (USA), Miami, FL; Business Registration Document #L00000010931 (United States); US FEIN 030510902 (United States) [SDNTK]

TAHA, Abdul Rahman S. (a.k.a. TAHER, Abdul Rahman S.; a.k.a. YASIN, Abdul Rahman; a.k.a. YASIN, Abdul Rahman Said; a.k.a. YASIN, Aboud); DOB 10 Apr 1960; POB Bloomington, Indiana USA; citizen United States; Passport 27082171 (United States) issued 21 Jun 1992; alt. Passport M0887925 (Iraq); SSN 156-92-9858 (United States); U.S.A. Passport issued 21 Jun 1992 in Amman, Jordan (individual) [SDGT]


OFAC’s Historic Legal Authorities

International Emergency Economic Powers Act of 1977 (“IEEPA”)

“unusual and extraordinary threat...to the national security, foreign policy, or economy of the United States”

Trading with the Enemy Act of 1917 (“TWEA”)


Burma

►Positive political developments – release of Aung San Suu Kyi and others

Jan. 2012:►Sen. Mitch McConnell “impressed” with

reforms►Sec. Clinton - U.S. to exchange ambassadors►EU agrees to ease sanctions; boost aid

But…Business as usual for OFAC sanctions


Burma

►Hyrbid – most complicated (31 CFR 537)

Ban on imports of Burmese-origin goods Blocked property – Government officials No general prohibition on export of

goods/services


Burma

► Prohibition on export of financial services - broad definition; unique to Burma sanctions

► Transfer of funds, directly or indirectly, from U.S. or by U.S. person to Burma; or

► Providing, directly or indirectly, to persons in Burma: banking, brokerage, insurance, investment, money remittance services; loans, guarantees, L/C or other extensions of credit


Burma

► Query: can a U.S. company sell on open account terms to a Burmese buyer paying from a non-blocked account?

► Other aspects of BSR: NGO activity – exception to financial

services prohibition New investment prohibition – Gov’t.

contracts Facilitation prohibition – divestiture

exception Attorney Advertising

Libya

►31 CFR 570►General License No. 7A – Sept. 19,

2011 Removed Libyan National Oil Corporation and

subs: Arabian Gulf Oil Company; Brega Petroleum Marketing Company; Mediterranean Oil Services Company; Mediterranean Oil Services GmbH; National Oil Fields and Terminals Catering Company; North African Geophysical Exploration Company; Oilinvest Netherlands B.V.

► Unblocked property and interests in propertyAttorney Advertising

Libya► General License No. 8A – Sept. 23, 2011► Authorizes all transactions involving Gov’t. of Libya,

(including agencies, instrumentalities, controlled entities, and Central Bank of Libya), provided: (1) all funds, including cash, securities, bank

accounts, and investment accounts, and precious metals blocked pursuant to E.O. 13566 or the LSR as of Sept. 19, 2011, remain blocked (expect for NOC under General License No. 7A); and

(2) the transactions do not involve any persons listed in the Annex to General License 8A.


Libya

►General License No. 11

► Unblocked all property and interests in property of the Gov’t. of Libya, etc. except:

all funds, including cash, securities, bank accounts, and investment accounts, and precious metals of the Libyan Investment Authority (“LIA”) and entities owned or controlled by the LIA


Syria - Pre-Arab Spring 2011

► E.O. 13338 (5/11/04 – refers to IEPPA authority)

I, GEORGE W. BUSH, President of the United States of America, hereby determine that the actions of the Government of Syria in supporting terrorism, continuing its occupation of Lebanon, pursuing weapons of mass destruction and missile programs, and undermining the United States and international efforts with respect to the stabilization and reconstruction of Iraq constitute an unusual and extraordinary threat tothe national security, foreign policy and economy of the United States and hereby declare a national emergency to deal with that threat.

►


Syria – Pre-Arab Spring 2011

►E.O. 13338 Main Effects: Prohibited export/re-export of USML, CCL

items, and any products of the U.S. (except food and medicine)

Blocked all property and interests in property that are in/come within U.S., or are/come within possession or control of U.S. persons, including overseas branches for those found by Sec. of Treasury, in consultation with Sec. of State, to:


Syria – Pre-Arab Spring 2011

Those contributing significantly to Syrian Government’s ability to provide safe haven/support to Hamas, Hizballah, Palestinian Islamic Jihad, etc.

Those contributing significantly to Syrian Government’s military presence in Lebanon

Those contributing significantly to Syrian Government’s development of chemical, biological, or nuclear weapons


Syria – Summer 2011► E.O. 13582 (8/17/11) – broader sanctions► Blocks ALL assets of Syrian Government► Prohibits:

new investment in Syria by U.S. persons; export/re-export, sale/supply, directly or indirectly, from

U.S. or by U.S. persons of any services to Syria; import or involvement with any transaction/dealing by U.S.

persons, including purchasing/selling, transporting, brokering, financing, facilitating, or guaranteeing, in or related to petroleum or petroleum products of Syrian origin; and

any approval, financing, facilitation, or guarantee by a U.S. person, wherever located, of a transaction by a foreign person where the transaction could not be handled directly.


Syria – Summer 2011- Winter 2012

►15 General Licenses – 8/18/11 – 2/22/12


General License 1 - Syrian Diplomatic Missions in the United States General License 2 - Authorizing Provision of Certain Legal Services with Respect to Syria General License 3 - Entries in Certain Accounts for Normal Service Charges Authorized with Respect

to Syria

General License 4 - Exportation or Reexportation to Syria of Items Subject to the Export Administration Regulations; Exportation or Reexportation of Services Ordinarily Incident to Exportations or Reexportations of Items Licensed or Otherwise Authorized and Related Services

General License 5 - Exportation of Certain Services Incident to Internet-Based Communications Authorized

General License 6 - Noncommercial, Personal Remittances Authorized General License 7 - Winding Down Contracts Involving the Government of Syria; Divestiture of a U.S.

Person's Investments or Winding Down of Contracts Involving Syria General License 8 - Official Activities of International Organizations General License 9 - Transactions Related to U.S. Persons Residing in Syria General License 10 - Operation of Accounts General License 11 - Authorizing Certain Services in Support of Nongovernmental Organizations'

Activities in Syria General License 12 - Third-country Diplomatic and Consular Funds Transfers General License 13 - Allowable Payments for Overflights of Syrian Airspace General License 14 - Transactions Related to Telecommunications Authorized General License 15 - Certain Transactions Related to Patents, Trademarks, and Copyrights

Authorized

http://www.treasury.gov/resource-center/sanctions/Programs/Documents/syria_gl1.pdf















Syria

►General License Highlights G.L. No. 4 – Export/Re-export of items

(and related services) subject to EAR; harmonizes with BIS and defers licensing to BIS

Food and medicine “EAR 99” – NLR Food and medicine on CCL – BIS license;

no specific OFAC license required


Syria

► G.L. No. 7 - Winding Down Contracts and Divestitures

Limited Window – in effect prior to 8/18/11; completed by 11/25/11

Reporting requirement – within 10 days of completing transaction

Possible voluntary self-disclosure scenario


Sudan

►31 CFR 538

►Trigger for change: Republic of South Sudan; July 9, 2011

►April, 2011: OFAC Guidance – SSR would not apply to South Sudan, but certain transactions subject to OFAC specific license


Sudan

► July 9 - Dec. 8, 2011 – SSR prohibited U.S. parties transacting/facilitating business regarding petro/petrochemical industries, without OFAC license

► From Dec. 8, 2011 – 2 G.L.s issued: (1) activities involving

petro/petrochemical industries in South Sudan and related financial transactions and (2) transshipping goods, technology, and services through Sudan to/from South Sudan and related financial transactions


Sudan

►G.L. payment restriction –

Transactions from banks and other financial institutions owned/controlled by the Government of Sudan or located in Sudan “must first transit through a depository institution that is not owned or controlled” by the Government of Sudan.


Cuba

31 CFR 515 2009 - Administration eased sanctions

1/25/11 – amendments to Cuban Assets Control Regulations encourage greater educational, cultural,

religious, and journalistic activities and expand licensing of remittances


Cuba

►Travel under G.L. Faculty, staff, and students - accredited U.S.

schools Employees of producers/distributors of ag

commodities, medicine, or medical devices Employees of telecom services providers – 1)

travel-related transactions to participate in meetings for marketing, negotiating, performing contracts, or establishing facilities to provide services; 2) directly incident to marketing, negotiating, accompanying delivery, or servicing in Cuba of telecom items authorized for commercial export to Cuba by BIS


Cuba

Comprehensive sanctions Regs prohibit persons subject to U.S.jurisdiction from dealing in any property in which Cuba/Cuban national has or had any interest General prohibition on exports – ALLexports must be licensed by OFAC

► Overview (1/24/12) - http://www.treasury.gov/resource-center/sanctions/Programs/Documents/cuba.pdf


Cuba

► What can be legally exported? Exports of ag, medicine, and medical

devices are subject to BIS license BIS has favorable licensing policy Permissible payment terms:

►cash in advance; or ►third-country banks that are not U.S.

persons or Cuban Government entities


Iran

“In Greece, Hellenic Petroleum, the country’s leading refiner, also suspended purchases of Iranian crude oil — not because of the impending European Union embargo, but because banking payments to Iran have been rendered unworkable by the financial sanctions already in place, Reuters reported.”

Source: NYT, April 3, 2012


Iran

►31 CFR 560

►Companies and individuals are facing criminal and civil penalties for ITR violations

►Facilitation, conspiracy, aiding & abetting

►U.S. and foreign parties at riskAttorney Advertising

Iran

►Key Points of ITR

► General prohibition on exports/re-exports, directly or indirectly, of goods, technology, or services, from the U.S. or by a U.S. person, wherever located, to Iran or the Government of Iran, without OFAC license

► No U.S. person “brokering” = providing services


Iran

► General prohibition on a person exporting from the U.S. any goods, technology or services, if that person knows or has reason to know items are destined ultimately for Iran

Don’t ask, don’t tell does not work!


Iran

►Export prohibition includes: U.S. items intended for use in production

of, for commingling with, or for incorporation into goods, technology or services to be directly/ indirectly supplied, transshipped or re-exported exclusively or predominately to Iran or the Government of Iran.

Narrow exception: substantial transformation in third country


Iran

►PERSONS DETERMINED TO BE THE GOVERNMENT OF IRAN MAHAB GHODSS CONSULTING ENGINEERINGCOMPANY (a.k.a. MAHAB GHODSS CONSULTING ENGINEERING CO.; a.k.a. MAHAB GHODSS CONSULTING ENGINEERS SSK; a.k.a. MAHAB QODS ENGINEERING CONSULTING CO.)

Overview (1/23/12) - http://www.treasury.gov/resource-center/sanctions/Programs/Documents/iran.pdf


Iran – Recent Timeline

► July 1, 2010 - Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (CISADA) – aimed at petro refining industry; non-U.S. persons Investment of $20M in Iranian petro

resources Provided, leased, sold $1M (annual $5M)

in refined products Provided, leased, sold goods/services to

Iran to maintain or expand refining capabilities Attorney Advertising

Iran – Recent Timeline

►Dec. 31, 2011 - National Defense Authorization Act (NDAA) – § 1245 aimed at Central Bank of Iran

►Feb. 6, 2012 - E.O. 13599 - Blocking Property of the Government of Iran and Iranian Financial Institutions


Iran

►OFAC General Licenses Survey

-Consular Funds Transfers & Transport of Human Remains -Export/Re-export of Food Items-Personal Communication Services via Internet-Funds Transfers to Iran for Humanitarian Relief -Certain Noncommercial, Personal Remittances to/from Iran


Iran

► Iran General License A – Feb. 6, 2012

authorized certain transactions under general or specific licenses issued previously

► Possible April 6, 2012 expiry on certain specific licenses if no expiry date stated

► General License B - remittances


Iran

►Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA) Specific license to export ag, medicine,

and medical devices to Iran

OFAC: Still valid and available (2/14/12)

http://www.treasury.gov/resource-center/sanctions/Programs/Pages/tsra.aspx




OFAC Civil Penalties

►No Action►Cautionary Letter►Civil Penalty – greater of $250,000 or

2x transaction value per violation►License revocation►Accounts blocked►Criminal – 20 years and $1M per

violationAttorney Advertising

OFAC Investigations

►Voluntary Self-Disclosure ►Cooperation►Egregious v. non-egregious

Compliance with administrative subpoena; statements to investigators; duration; willful or reckless; awareness of conduct


OFAC Resource Center

►http://www.treasury.gov/resource-center/faqs/Sanctions/Pages/answer.aspx


http://www.treasury.gov/resource-center/faqs/Sanctions/Pages/answer.aspx

http://www.treasury.gov/resource-center/faqs/Sanctions/Pages/answer.aspx

Thank you

Jon P. YormickManaging Attorney

Yormick & Associates Co., LPA

[email protected] Free: +1.866.967.6425 Mobile: +1.216.269.5138

Buffalo | ClevelandAttorney Advertising

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