Posts Tagged ofac sdn list

Al-Kuzbari Reconsideration Shows that Designated Syrians Can Be Removed from the SDN List

Given all that is going on in Syria these days, one might believe that those designated under the Syrian Sanctions program by the United States Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) have no chance of coming off of the List of Specially Designated Nationals and Blocked Persons (“SDN List”). The fact is that removal from the OFAC SDN List is always difficult/ This is particularly true in the case of a Syria designation. That said, removal is not impossible. Indeed, just last week a Syrian individual, Nabil Rafik Al-Kuzbari was removed from the OFAC SDN List. While details regarding what prompted OFAC to remove Al-Kuzbari from the SDN List are limited, it has been rumored that the reason underlying his removal from the SDN List was due to his leaving his position with a company owned and controlled by Rami Makhlouf, another designated Syrian national who is reported to have close ties to the Assad regime.

It’s important to keep in mind that OFAC designations are not meant as punitive measures. They are designed to compel a change in behavior of the parties they target. As such, if the rumors are true, then OFAC’s designations of Al-Kuzbari worked perfectly. Others on the OFAC SDN List who seek to be removed from that list would be wise to cut off any ties to other designated parties and present the information of those severed ties as soon as possible to OFAC. The issue then turns to one of getting OFAC’s attention and getting them to act, which is probably the most difficult task. OFAC is incredibly overburdened in all phases of its operations and has an extremely limited budget–around $30 million–despite the importance and breadth of its mission.

As such, to successfully contest any type of OFAC SDN designation, quickly file the request for reconsideration pursuant to 31 C.F.R. 501.807. This will get the reconsideration process moving with OFAC. Second, identify those relationships with other SDNs which may have lead OFAC to make the designation in the first place. Once those relationships are identified, steps should be taken to cut ties with those individuals and entities and provide information showing the severing of those relationships to OFAC. If it is a case of mistaken identity or an erroneous designation, it still makes sense to seek to cut off any potentially troublesome relationships or affiliations. Arguing with OFAC that they have it all wrong and that the designated party is completely innocent of any wrongdoing–whether true or not–will only leave the party seeking reconsideration mired in a back and forth with OFAC that will move slowly if at all. Keep in mind, OFAC feels very confident that the designations they make are based on credible information, or else they wouldn’t have made it. Whether they got it wrong or not is not the point. Showing them they are wrong will not get you very far, however, showing them that you have changed circumstances or done everything in your power to avoid engaging in any type of nefarious activity or other designated parties will be much more compelling to them. Reconsideration of OFAC SDN designations is very difficult, particularly when the designations are related to programs such as Syria, but they are not impossible. With the right counsel and the right frame of mind, even the most difficult designations can be removed.

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@ferrariassociatespc.com.

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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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Could Iran-Indonesia Connection Lead to More OFAC Sanctions?

A number of news reports have come out recently indicating that bilateral trade between Indonesia and Iran reached more than $1 billion USD in 2010; an increase of more than 20% over the previous year. There is some speculation by members of the Indonesian Government that this could increase further if energy was included. Currently the numbers only reflect foreign commodity trade.

There have discussions between the two countries related to increasing trade and overcoming problems arising with bank transactions which to this point have been mostly carried out in an informal matter. The commodities being traded include exports to Iran of rubber and rubber products, steel products, food, palm oil, footwear, textile and textile products. On the other hand, Iran exports to Indonesia asphalt, minerals, pipes, construction materials, carpets and building material.

There have been rumors from inside the Indonesian Government that the trade has been implemented by way of third party countries, such as Turkey, U.A.E., and Malaysia. The reason for this indirect trade is because of the U.S. trade sanctions administered by the United States Department of the Treasury Office of Foreign Assets Control (OFAC). OFAC currently administers the Iran sanctions program, which virtually prohibits all trade between the U.S. and Iran without an OFAC license. The fear from the Indonesian side is that if there ties to Iran become too strong, then they may also endure the wrath of OFAC sanctions.

So does the Indonesian Government truly have cause for concern? Maybe, but probably not. There is no specific sanctions program or regulation which calls for imposition of sanctions against those foreign nations or parties trading with an OFAC blocked country, such as Iran. However, it would not be out of the realm of possibility for OFAC to target certain Indonesian exporters or government officials, if they deem those parties to be involved in activity which could potentially be deemed as the provision of material assistance to Iran’s military, support of terrorist organizations, human rights abuses, or nuclear weapons program. For example, if Indonesian exporters begin exporting articles critical to Iran’s proliferation of weapons of mass destruction, I could easily see those exporters being designated as Specially Designated Nationals (SDNs) on the OFAC SDN List.

In the end, however, I do not believe OFAC will impose sanctions over all of Indonesia. The U.S. government and OFAC have moved away from country based sanctions programs recently and they seem to be more interested in using target based programs which target for SDN designation specific individuals and entities. As such, I think an Indonesian OFAC sanctions program is unlikely.

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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