Posts Tagged OFAC lawyers

OFAC Issues Advisory Alert to Shippers and Freight Forwarders

Today, the United States Department of the Treasury Office of Foreign Assets Control (OFAC) issued an advisory alert to shippers, importers/exporters and freight forwarders worldwide, warning them of the practices of the Islamic Republic of Iran’s Shipping Lines (IRISL) which have been used to evade U.S. sanctions. OFAC delineated a number of practices engaged in by IRISL that U.S. shippers, importers/exporters, and freight forwarders need to be aware of. These practices are as following:

(1) The use of container prefixes registered to another carrier. For example, IRISL has used the prefixes IRSU and XBIU, both of which belong to other carriers. IRISL also used the ALXU prefix which is a fabricated prefix.

(2) omitting or listing invalid, incomplete or false container prefixes in shipping container numbers; and/or

(3) naming non-existent ocean vessels in shipping documents.

Shipping documents utilizing one or more of these practices may be used to facilitate IRISL’s activities and the financing of transactions involving cargo shipped on blocked vessels. This includes through letters of credit. As readers of this blog know, transactions involving U.S.-sanctioned entities through the United States or by U.S. persons are prohibited unless there is a specific license authorization obtained from OFAC.

OFAC has warned all persons to exercise increased due diligence to ensure they do not mistakenly process transactions which are prohibited due to a failure to detect the aforementioned IRISL tactics. The IRISL is actively attempting to evade U.S. sanctions, as such, U.S. parties should be conscious and wary of such practices.

As a matter or best practices, all shippers, importers/exporters, and freight forwarders should be on alert as to fabricated vessel names in trade documents and should double check the legitimacy of entities with which they are unfamiliar. Another option is to verify the accuracy of container numbers. Again this is particularly true, if a party is unfamiliar with the issuer of the shipping documents. For those seeking to verify container numbers please check the link here.

What is interesting about this alert is that it comes a mere day after the removal of a number of IRISL vessels from the Specially Designated Nationals List, commonly referred to as the OFAC SDN List. No official announcement has been made regarding the reasoning behind the delisting of a number of IRISL vessels, however, it may have come through formal SDN removal proceedings under 31 C.F.R. 501.807. Regardless, as a matter of best practices shippers, importers/exporters, and freight forwarders should make sure to check the OFAC SDN List daily to make sure they have the most current information.

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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Are OFAC Sanctions Against Zimbabwe Pushing Diamonds Traders Further Underground?

For sometime many Zimbabweans have called for the West to lift sanctions against Zimbabwe, because of the belief that the sanctions are undermining the Zimbabwe diamond industry. According to recent reports Zimbabwe’s mining companies, particularly those nationally owned companies, have aggressively been seeking avenues to trade without being subjected to U. S. and E.U sanctions.

The United States has for sometime imposed sanctions against those involved in the Zimbabwean diamond trade. Some inside of Zimbabwe, however, believe that accountability will only occur in a sanctions-free environment, where the dictates of the market rule. These pundits believe that once a company has been designated by the United States Department of the Treasury Office of Assets Control (OFAC) they are more likely to find illegal or black market avenues to trade their products (in this case diamonds) then they would be otherwise. Therefore, once such entities are operating outside of traditional and open avenues there is no way to hold them accountable for their actions.

These sanctions have been and are increasingly being enforced. For example, recently $2-million deposited in South African-owned Stanbic Bank was blocked pursuant to the OFAC administered Zimbabwe Sanctions Regulations. In addition, the accounts of two Zimbabwean entities previously designated by OFAC as Specially Designated Nationals, Zimbabwe Mining Development Corporation (ZMDC) and Mineral Marketing Corporation of Zimbabwe (MMCZ), have been blocked by OFAC.

It was recently reported that a letter written by ZMDC chairman Godwills Masimirembwa to Zimbabwe Mines Minister Obert Mpofu, dated February 7 and marked “private and confidential”, reveals that the Zimbabwe government is now experiencing problems in receiving its diamond revenue. The letter, dated February 7, 2011, states that it has been difficult for Zimbabwe to “move, transfer and receive” its diamonds proceeds due to U.S. sanctions.

The real reason for this of course, is because in the global economy, most financial transactions eventually are routed through New York. Once a transaction involving a party blocked by OFAC touches a U.S. bank, that transaction is blocked. As such, any such transactions being routed through New York will eventually be blocked thereby making the financial transactions necessary for international trade nearly impossible. As such it is easy to believe that these OFAC measures are wreaking havoc on Zimbabwe’s diamond sales and payment system.

As I have written previously, foreign banks who are not necessarily under U.S. jurisdiction have also gotten into the act. For example, British-owned Standard Chartered Bank in Harare recently refused to process financial transactions involving ZMDC and China Uranium Corporation, citing ZMDC’s status as an entity on the OFAC SDN List.

Although it might seem incredibly difficult to do, ZMDC and/or MMCZ should embark upon a reconsideration process to remove their designation or at least obtain licensing for certain transactions. Implementation of an OFAC compliance program and greater transparency into their dealings might dissolve some of the U.S. government’s suspicions and allow for a slight loosening of the sanctions impacting them. Of course in a case of magnitude it might take years and lots of attorneys fees to accomplish the task, some of the African pundits do raise a valid point that OFAC sanctions could be pushing these diamond traders to pursue more trade in the black market.

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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