Government’s Jury Instructions in Online Micro Case Give Insight on the Term “Willful”

Last week the U.S. Attorneys Office prosecuting Masood Habibion, Mohsen Motamedian and Online Micro, LLC for, among other charges, violations of the Iranian Transactions Regulations (ITR) submitted proposed jury instructions to the United States District Court for the District of Columbia. Within those proposed jury instructions, the Government sought to clarify the phrase “willful violation of export control laws.”

In their proposed jury instructions, the government set out four (4) elements which must be satisfied for finding that the defendants engaged in a “willful violation of export control laws.” Those elements are as follows:

1. That the defendants exported goods from the United States to Iran, through the United Arab Emirates;

2. That the defendants acted willfully;

3. That a license was required from the Office of Foreign Assets Control (OFAC) before exporting the goods; and

4. That the defendants did not obtain the necessary license.

What is much more interesting than these elements, however, is the clarification the government proposed for the term “willful.” In their proposed jury instructions, the government stated that, “[the] government must prove beyond a reasonable doubt that the conduct alleged of the defendants…..was undertaken with the defendant’s knowledge that the export was unlawful. A finding that a defendant engaged in conduct with the intent to export goods to Iran is, by itself, insufficient to sustain a finding of guilt. The government must prove that the defendant engaged in the conduct with the intent to violate a known legal duty, that is, with knowledge of illegality.”

I was actually impressed with this portion of the jury instruction and thought that the government had offered a very fair standard for determining willfulness. My elation, however, passed once I read the next paragraph. According to the government’s proposed instruction, “While the government must show that the defendant knew that his conduct was illegal……..in this case, the government is not required to prove that any defendant had read, was aware of, or had consulted the relevant Iranian Transactions Regulations, including the licensing requirement in those regulations. The government, however, must prove beyond a reasonable doubt that the defendant knew that his conduct was unlawful. At all times relevant to this case, it was unlawful to export goods from the United States to Iran, either directly or indirectly, without prior approval in the form of a license issued by the Office of Foreign Assets Control in the Department of the Treasury.”

I think the language of this second paragraph confuses the issues as it suggests that the illegality of the conduct is directly tied to the exportation without a license, not merely the exportation itself. At the same time, the government states that the defendants must have known that their conduct was unlawful, but they did not need to be “aware of” the licensing requirement in the relevant regulations. However, if they were unaware of the licensing requirement, they couldn’t have known their conduct was unlawful because they wouldn’t have known that they needed a license. So in that case to have unlawfully exported without a license they must have been “aware of” a licensing requirement.

I think what the government is really shooting for here, and as they accurately state earlier in the instruction, is that the illegal conduct is the export of products to the U.A.E. with knowledge that they would then be shipped to Iran. However, the government’s comment about OFAC licenses later in the jury instruction could cause a juror to be confused as to whether the government is stating that the unlawful conduct is exporting to Iran without a license, as opposed to just exporting to Iran. I look forward to seeing how Judge Huvelle rules on this proposed instruction.

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.

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Download Dangers: U.S. Sanctions and Internet Downloads

There was a recent article written on a Slovakian company which had developed anti-virus software that was being downloaded in large numbers by users in Tehran. It is believed that the software was being utilized to secure the country’s networks against cyber attacks targeting Tehran’s nuclear program.

The problem with the Slovakian based company allowing downloads of this software in Iran is that they maintain offices in San Diego and therefore fall under U.S. jurisdiction for the administration of sanctions.

To complicate matters further, a former employee of the company, brought the large number of Iranian downloads to the attention of executives in San Diego who allegedly ignored the warnings of this employee. Furthermore, that same employee informed company executives that their software was being pirated and sold by street vendors in Tehran. Again, the company executives did not act upon the employees warnings.

According to the article, the company’s executives could have blocked downloads from computer locations in Iran by blocking Iranian IP addresses. However, they failed to do so. Moreover, the company fired the employee who had informed them of the Iranian downloads for policy violations related to printing the data he used for his analysis of the Iranian downloads.

The company has responded publicly by stating that they do not engage in business in sanctioned countries, however, they cannot stop illegal pirating and sales of their software in sanctioned countries.

The employee who was fired has provided evidence of these alleged sanctions violations to the Secret Service in San Diego, which told him they had provided the information to the United States Department of the Treasury Office of Foreign Assets Control (OFAC).

If the allegations of the employee are confirmed then this is a slam dunk case for OFAC and there will likely be a significant penalty. Not only is there the export of technology to Iran, the technology was also being utilized to secure Iran’s nuclear activities from cyber attack. Furthermore, the company’s executives were warned on multiple occasions by their former employee of potential sanctions violations and chose to turn a blind eye to what was occurring.

Two lessons can be learned here. First, be nice to your employees. You never know when one of them is going to become disgruntled enough to report you to the Feds for sanctions violations. Second, take potential OFAC violations seriously. Often times business people attempt to formulate some justification as to why their particular activities do not violate the sanctions because of such and such exemption or general license. While they might be right in some cases, the applicability of those exemptions and licenses to particular transactions are really for OFAC to determine. In those scenarios it makes sense to file a request for interpretative guidance to determine whether or not a particular activity is authorized under existing law. Otherwise, you may end up with only the “we can’t stop software piracy” defense, which I have difficulty believing will be very effective.

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.

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Sudan Remains on List of State Sponsors for Terrorism Despite Facts Suggesting Otherwise

Late last week the United States Department of State released its list Country Reports on Terrorism 2010. This document is an annual report submitted to Congress detailing the terrorist activities of countries and group designated as State Sponsors of Terrorism or Foreign Terrorist Organizations.

Prior to the released of this report many believed that Sudan would be released from the list of State Sponsors of Terrorism. Unfortunately for Sudan, that was not the case. Moreover, it is unclear why they remain on the list as the information regarding Sudan in the report does not denote any sponsorship of terrorism and if anything shows that Sudan is working with the U.S. on a number of counter terrorism efforts. For example, the report indicates that, “The Sudanese government has taken steps to limit the activities of foreign terrorist groups within Sudan and has worked hard to disrupt foreign fighters’ use of Sudan as a logistics base and transit point for violent extremists going to Iraq” and that “Sudan was generally responsive to the international community’s concerns on terrorism and was generally supportive of international counterterrorism efforts.” Regardless, the report noted, “elements of designated Foreign Terrorist Organizations, including al-Qa’ida inspired terrorists, remained in Sudan, as gaps remained in the Sudanese government’s knowledge of and ability to identify and capture these individuals as well as prevent them from exploiting the territory for smuggling activities.” In other words, the State Department maintains Sudan on the list of State Sponsors of Terrorism because although they are cooperating and working hard to counter terrorist efforts, they do not have sufficient ability to identify and capture terrorists that remain in their country. I am not a terrorist expert by any stretch of the imagination, however, that sounds less like sponsorship and more like ineptitude. I am not entirely clear how Sudan’s inability to capture terrorists in their country correlates to their sponsorship of such terrorists. I would be happy to hear from anyone who can maybe clear this up for me.

So what does this mean for those dealing with Sudanese sanctions administered by the United States Department of the Treasury Office of Foreign Assets Control (OFAC)? First, those that thought the current limitations in transacting with Southern Sudan would dissipate upon the removal of Sudan from the list of State Sponsors of Terrorism, are in for a longer wait then initially anticipated. As such, strict compliance programs for those transacting in Southern Sudan are still a must.

Second, those who have been holding off on filing license applications to transact with Sudan in hopes that they would be removed from the list and relieved of the burden of sanctions, should reconsider their strategy. Despite reports to the contrary, it seems that the U.S. Government is committed to keeping Sudan on the list of State Sponsors of Terrorism for the time being. Thus, it seems any hopes of sanctions being removed against Sudan are premature at this time.

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.

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Reuters Exclusive on Somali Sanctions and OFAC

Yesterday, Reuters came out with an excellent article on the impact of sanctions on Somali pirates. From their article, it doesn’t sound as if sanctions are making that much of a difference in curbing the efforts of pirates off of the coast of Somalia from kidnapping and extorting those operating in the waters they patrol.

Some of the more interesting points in the article quote a Treasury representative’s view on the issues. That representative made it clear that the policy underlying Executive Order 13536 and the Somalia sanctions is to deny pirates the benefit of ransom payments and other types of financial support. However, the representative openly admitted that these sanctions are only enforced if there is a U.S. person or entity involved. The reason for this is that the United States Department of the Treasury Office of Foreign Assets Control (OFAC) only has authority over U.S. persons. This is a point I have often made. Although sanctions target a country or a specific group of individuals engaged in some conduct detrimental to U.S. national security interests, the burden of the sanctions falls upon U.S. persons, because that is the group over which OFAC can assert jurisdiction.

The Treasury representative also stated that although shipowners have previously sought guidance from OFAC on how to handle pirate ransom situations and what legal restrictions they may be under in regards to transactions with Somali pirates. The representative clarified, however, that OFAC has never licensed or authorized any ransom payments between these shipowners and Somali pirates. This representative further stated that any correspondence that has come from OFAC on this issue was not to be considered an authorization to make a ransom payment or a non-objection to such payments.

Finally, the Treasury representative made it clear that the sanctions against Somali pirates were a powerful tool, not because they would prevent individuals from joining the pirate ranks, but because they could be used to stifle the financial networks through which the ransom payments are laundered. The Treasury representative went on to say that there is currently an OFAC investigation into such matters taking place.

The problem with OFAC administered sanctions is always how to enforce them and promote respect for them. As is evidenced by the Reuters article, many shipowners are paying the ransoms, without concern for U.S. sanctions. This may very well be because they know that OFAC cannot assert jurisdiction over them. I do think that the results of this current OFAC investigation into Somali pirate ransom payments may lead to a large penalty; potentially one that will cause those shipowners considering the payment of ransoms to Somali pirates to think twice.

Those of us who regularly follow developments in this field may recall that 6 or 7 years ago, there were not as many problems transferring money between Iran and the United States. However, after a series of massive penalties in 2009-2010, there are very few foreign banks that will facilitate such transactions even when they are authorized by OFAC. A massive penalty for a violation of the Somalia sanctions may lead to a similar result.

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.

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OFAC Speaks on Humanitarian Assistance in Somalia and Al-Shabaab

At the beginning of last week myself and a number of journalists, most notably Josh Gerstein at Politico who forwarded me some very useful statements, wrote about the policy the U.S. government was adopting towards U.S. persons who may potentially violate sanctions for providing money to sanctions targeted persons in Somalia during the course of carrying out humanitarian efforts. By the end of the week, The United States Department of the Treasury Office of Foreign Assets Control (OFAC) released a statement updating their Frequently Asked Questions and Answers (FAQ) section to reflect these statements.

The updated FAQ confirms what I previously stated in this blog; that there is no concern of violating U.S. sanctions relating to Somalia if the parties with whom U.S. persons are transacting have not been specifically targeted for sanctions and are not on the OFAC Specially Designated Nationals and Blocked Persons List (SDN List).

Moreover, OFAC confirmed the statements earlier this week which made it clear that those engaged in humanitarian activities which unintentionally lead to food and medicine ending up in the hands of Al-Shabaab or other Specially Designated National’s hands will not be punished for such technical violations of the Somalia sanctions program. OFAC contends that such incidental benefits are not the focus of OFAC administered sanctions.

OFAC did clarify, however, that if U.S. persons providing humanitarian assistance in Somalia are repeatedly being forced to pay bribes to Al-Shabaab, then they should consult with OFAC prior to proceeding with their operations.

This guidance is nice, but cases will still need to be viewed on a case to case basis to determine the need for a penalty. Moreover, the guidance makes it clear–incidental transactions may avoid enforcement action, while more consistent transactions violating the Somalia sanctions will require consultation with OFAC.

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.

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Iran Air 2011: Flying the Friendly Skies?

Much ado was made last month when the United States Department of the Treasury Office of Foreign Assets Control (“OFAC”) designated Iran Air as a Specially Designated National (“SDN”) under the Weapons of Mass Destruction Proliferators sanctions program. At first, many people were concerned that OFAC’s designation of Iran Air would prevent U.S. persons from being able to fly into and within Iran on the carrier, however, a number of sources quickly raised the fact that the travel exemption contained in the International Emergency Economic Powers Act (“IEEPA”) allowed for U.S. persons to engage in travel related transactions with Iran Air. So everything is ok with flying Iran Air right? Not necessarily.

As Clif Burns from Export Law Blog wrote last week, a U.S. Department of State official revealed some concerns that may make one think twice before stepping on to an Iran Air flight. During the Q&A session of last week’s 2011 Update conference held by the U.S. Department of Commerce Bureau of Industry and Security (“BIS”) panel member John-Marshall Klein from the Office of Terrorism Finance and Economics Sanctions Policy, noted that while Iran Air’s designation did not preclude travel on the carrier, he wouldn’t advise Americans to travel on Iran Air because the sanctions would prevent Iran Air from getting spare parts.

What Mr. Klein was hinting at was that due to Iran Air’s designation under the Weapons of Mass Destruction Proliferators Regulations, the general license at 31 C.F.R. 560.528 which permits OFAC to license on a case-by-case basis spare parts necessary for the safety of civil aviation would not be applicable.

As Mr. Burns also pointed out in his blog there are treaty obligations which would bar the United States from engaging in activities which would endanger civil aviation. Nonetheless, it does seem from Mr. Klein’s comments that OFAC may not be open to authorizing transactions allowing aircraft parts needed for the safety of civil aviation to Iran Air.

Keep in mind that Mr. Klein is an official from the U.S. Department of State, and while the Department of State does play a consultative role, OFAC is ultimately responsible for issuing specific licenses for the export to Iran of parts needed for the safety of civil aviation. So the question remains: do Mr. Klein’s comments portend the denial of license applications to export parts needed for the safety of civil aviation to Iran Air, thereby rendering the move by the United States and OFAC a direct attempt to threaten the lives of innocent persons flying Iran Air? Or were Mr. Klein’s comments just made in an off hand manner without a thorough consideration of how the export of such parts to Iran Air could be authorized?

I have to believe it was the latter. I just have a very hard time believing the U.S. government would intentionally seek to endanger the lives of so many innocent parties, particularly when a number of those parties are Iranian Americans who quite often use Iran Air to travel to or within Iran. Moreover, even if the United States did have such nefarious intentions–which again I doubt–it would be highly unlikely for them to openly admit them. At the end of the day, I believe that both the legal and policy arguments for licensing the export of parts for the safety of civil aviation to Iran Air are so compelling that OFAC would have an extremely hard time justifying the denial of such a license. I will be interested to see what determinations they render for such license applications and would encourage anyway who had the patience and the money to file either a license application or a request for interpretative guidance to see what OFAC actually takes on the issue.

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.

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Debunking the Myth: Transfers of Less than $10,000 Can Be “Smurfing”

There is a prevailing myth amongst many people that if you transfer money in amounts of less than $10,000 from outside of the U.S. into the United States that there will be no problems with the transfer, even in the event, that the transfer was the result of some prohibited activity or if the funds are originating from an embargoed country. Perhaps it is due to close connections with the Iranian-Americans and Iran sanctions that we have found this belief to be most prevalent in the Iranian-American community. When advising individuals seeking to transfer funds from Iran to the United States, we are often met with the counter argument that it is ok if the amount being transferred is less than $10,000. This argument is based upon the fact that many people believe since its less than $10,000 it does not have to be reported and therefore cannot evidence any wrongdoing.

In the case of Iran sanctions this is neither true, nor is it particularly relevant, if the funds are derived from some sort of prohibited activity (i.e., sale of a home in Iran). Moreover, even in cases where the transactions are permitted, transferring funds in amounts less than $10,000 has been found to be evidence of “Smurfing.” Smurfing is the act of intentionally transferring funds in sums of less than $10,000 to avoid the $10,000 reporting requirements. The federal government has the authority to criminally prosecute individuals who “Smurf” or structure their transactions in this manner. See 18 USC 5324. Penalties for this type of conduct range from 5 years in prison, to fines, or both. However, enhanced penalties, including up to 10 years of imprisonment, can be assessed in aggravated cases like ones establishing a pattern of illegal activity or involve the violation of other federal laws. For example, if Smurfing is done in connection with transferring funds in violation of economic sanctions (i.e., Iran sanctions) then enhanced penalties may apply.

Of particular interest is part (c)(3) of this statute which prohibits individuals from structuring their monetary transactions to or from international locations. The statute states that “no person shall, for the purpose of evading the reporting requirements of section 5316, structure or assist in structuring, or attempt to structure or assist in structuring, any importation or exportation of monetary instruments.” The unfortunate reality of this law is that it targets U.S. persons who have family or friends overseas who may support or depend on one another financially. This is particularly true in the Iranian-American community, where family living in Iran are frequently sending money as gifts, as inheritance money, and as other non-commercial remittances.

Traditionally, federal laws regarding currency transaction reporting (CTR) targeted financial institutions such as banks, currency exchanges, credit unions, and other institutions that deal with large sums of currency. The definition of “financial institution” has always been broader than “depository instititution” and also includes pawnbrokers, travel agencies, and auto dealerships among others. These institutions would have to file a report whenever a currency transaction of over $10,000 took place. The laws never required individual customers to file the actual report, only the financial institution the individual was transacting with had to file a CTR. The obvious reaction by people who wanted to avoid having their transactions reported to the government was to structure their transactions so that no single transaction would be over $10,000. This practice was commonly referred to as “Smurfing.” And since the reporting laws only targeted financial institutions, many individuals were able to escape liability. A few unlucky people were prosecuted under 18 USC 371 for conspiring to defraud the United States before any anti-structuring statutes existed, but that was not enough for Congress. Accordingly, in 1986, Congress decided to specifically target individuals who utilized the $10,000 loophole by passing 18 USC 5324.

Somewhat disturbingly, Chapter 53 of the U.S. code also empowers the Department of the Treasury to pay a reward to individuals who provide information which leads to a recovery of a criminal fine, civil penalty, or forfeiture for violations of these reporting and anti-structuring laws. The reward can be as high as 25% of the net amount of the fine, penalty, or forfeiture collected. In essence, a law that already targets U.S. persons who have family or friends overseas who may depend on or support one another is exacerbated by the fact that their neighbors now have an incentive to disclose the conduct to the government.

What all of this adds up to is an increased burden on the Iranian-American community. Although, these laws are not targeted at Iranian-Americans per se, the simple fact is that Iranian-Americans are more susceptible to criminal prosecution for a number of reasons.

First, there is the aforementioned prevailing myth amongst the community that transfers from Iran in amounts less than $10,000 are legal. Despite the fact that this myth has frequently been debunked by experts in this field, there are still many people who hold this belief. Indeed, there have been cases where subjects and targets of federal criminal investigations have openly admitted to the FBI that they were receiving funds in amounts between $9,000 and $10,000 so they didn’t have to report it, because they believed that if they had to report it the transaction would be illegal.

Second, Iranian-Americans as a newer immigrant population still maintain many connections with Iran and often times have family in Iran. These connections frequently lead to transfers of funds for a variety of reasons. For example, gifts of money are often transferred from Iran to the United States, as is money for schooling. When coupled with the aforementioned myth, there begins to develop a concern that Smurfing will be engaged in.

Third, the U.S. has imposed an extremely broad sanctions program against Iran. As such, most transactions with Iran are prohibited. Therefore, many of the transactions where smurfing may be engaged in will lead to enhanced penalties. This should also be considered alongside of the fact that Iran sanctions are also the most heavily enforced of any U.S. sanctions program. In sum, not only are Iranian-Americans more susceptible to engaging in Smurfing; they may also be more likely to receive enhanced penalties for such activities.

This all leads to the conclusion that the Iranian-American community needs to be very cautious when sending or receiving funds between Iran and the United States. Even if OFAC and the sanctions are not an issue, the manner in which the transactions are often structured could lead to federal criminal penalties.

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. This post was co-authored by Kaveh Miremadi, an Associate Attorney at Ferrari Legal, P.C.

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President Obama Issues New E.O. Regarding Iran Sanctions

Yesterday, President Obama issued a new Executive Order aimed at augmenting the Iran Sanctions Act of 1996 (ISA). The new executive order states that once someone has been designated by either the President or the Secretary of State pursuant to Section 5 of ISA that the U.S. Department of Treasury shall take the following actions:

1. Prohibit any United States financial institution from making loans or providing credits to any sanctioned person totaling more than $10,000,000 in any 12-month period unless such person is engaged in activities to relieve human suffering and the loans or credits are provided for such activities;

2. Prohibit any transactions in foreign exchange that are subject to the jurisdiction of the United States and in which the ISA-sanctioned person has any interest;

3. Prohibit any transfers of credit or payments between financial institutions or by, through, or to any financial institution, to the extent that such transfers or payments are subject to the jurisdiction of the United States and involve any interest of the ISA-sanctioned person;

4. Block all property and interests in property that are in the United States, that come within the United States, or that are or come within the possession or control of any United States person, including any overseas branch, of the ISA-sanctioned person, and provide that such property and interests in property may not be transferred, paid, exported, withdrawn, or otherwise dealt in;

5. Restrict or prohibit imports of goods, technology, or services, directly or indirectly, into the United States from the ISA-sanctioned person.

Section 5 of ISA calls for sanctions to be imposed against those parties investing in the development of Iran’s petroleum resources.

Today, the Secretary of State designated seven foreign entities pursuant to the ISA for their activities in support of Iran’s energy sector. These companies are Petrochemical Commercial Company International (PCCI), Jersey and Iran; Royal Oyster Group, UAE; Speedy Ship, UAE, Iran; Tanker Pacific, Singapore; Ofer Brothers Group, Israel; Associated Shipbroking, Monaco; and Petroleos de Venezuela, sometimes known as PDVSA, in Venezuela.

It is believed that all of these companies have engaged in activities related to the supply of refined petroleum products to Iran. Such activities include the direct supply of gasoline and related products to the Islamic Republic of Iran Shipping Lines (IRISL), an entity that has been designated by the United States and placed on the Specially Designated Nationals List (SDN LIst) administered by the United States Department of the Treasury Office of Foreign Assets Control (OFAC).

The Obama administration is the first administration to invoke sanctions on firms under the ISA, and has been very proactive in imposing and enforcing sanctions against Iran. With this latest move the administration is send a clear message to international businesses: companies around the world: those who continue to facilitate Iran’s efforts to evade U.S. sanctions will face significant consequences.

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.

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Recently De-listed Bank of Khartoum Plans Move Into Kenya

The Sudanese Islamic Bank of Khartoum, recently removed from the list of Specially Designated Nationals (SDN List) administered by the United States Department of the Treasury Office of Foreign Assets Control (OFAC), has revealed plans to move into Kenya. Such a move would be the first cross border expansion of Islamic finance in East Africa. Currently Kenya is taking steps to permit Islamic finance by revamping its finance laws. Kenya already leads the region in Islamic finance by being home to two Shari’ah compliant banks, a Takaful company and an array of Shari’ah compliant banking products in conventional banks. Moreover, Kenya has also reformed its capital markets laws to allow the issuance of Sukuk.

The Bank of Khartoum was privatized in 2002 and is now mostly owned by the UAE’s Dubai Islamic Bank which holds 60% of its shares since 2005. This move into Kenya is seen as part of an overall strategy by the Dubai Islamic Bank to tap into emerging opportunities in Islamic finance across a number of sub-Saharan Africa countries. It is believed that East Africa is set to be a global Islamic finance hotspot, with Kenya, Uganda, Sudan, Tanzania and Somalia all redoubling their efforts to attract the Muslim dollar. This growth is thought to lead to new challenges to the respective central banks to ensure they are well prepared to regulate Islamic financial institutions if new to the country.

This announcement from Bank of Khartoum comes mere days after OFAC removed the bank from a blacklist of Sudanese entities and individuals who had been subjected to economic sanctions since 1997 because of the country’s alleged financing of terrorism.

The Bank of Khartoum’s removal from the OFAC SDN List is already having a positive effect and is a perfect example of why blocked parties should pursue removal from the list. It just goes to show that removal from this list is possible in some scenarios and life does go on afterwards. In order to remove a name from the OFAC SDN List one most show, through evidence and arguments, changed circumstances or that the designation was made due to mistaken identity.

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.

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Return to Sender: Packages Returned Due to OFAC Sanctions

We have been getting an increasing number of calls relating to shipments being returned due to OFAC sanctions. Most people are perplexed that these seemingly innocuous shipments would be in violation of U.S. economic sanctions administered by the United States Department of the Treasury Office of Foreign Assets Control (OFAC). However, it is important to understand that the liability for a violation is not only upon the shipper but also upon the company facilitating the shipment. As such, shipping and delivery services are becoming more sensitive to facilitating these shipments.

Essentially, once a package has been returned to you “due to OFAC sanctions” there could be a number of reasons why the package was rejected. Here are some common questions you should ask yourself if you find a package returned to you “due to OFAC sanctions”:

1. Was the package destined for Iran, Sudan or Cuba and lacking a description of the contents?

2. Was the shipment to any of those countries an unlicensed commercial shipment?

3. Was the shipment a personal gift destined for an individual in Iran or Sudan, with a stated value exceeding $100?

All of these reasons can form the basis of shipping companies’ refusal to process such packages. As mentioned above, if the shipping companies were to process the shipment, not only could you be liable for attempting to send such packages, but the shipping companies also could be liable for their role in processing them.

As always engaging in any type of transactions with a sanctioned country can be perilous. In order, to ensure that you are full compliance with U.S. law always check the OFAC website and in particular the information relating to that country based sanctions program. If you are still unable to decipher whether your transaction will be authorized, contact and OFAC attorney who is experienced in navigating OFAC rules and regulations.

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.

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