Archive for the ‘Sudan’ Category

The United States Substantially Relaxes Existing Embargo on Sudan

Thursday, March 2nd, 2017 by Danielle McClellan

By: Cari N. Stinebower, Esq., cstinebower@crowell.com, 202-624-2757; Alan W.H. Gourley; Esq., agourley@crowell.com, 202-624-2561 and +44-20-7413-1342 (London Office); and Carlton Greene, Esq., cgreene@crowell.com, 202-624-2818.  All of Crowell & Morning LLP.

(Source: Crowell & Moring LLP)

On January 13, 2017, the United States suspended most of the comprehensive embargo that it has maintained on Sudan since the Clinton Administration. As described further below, new authorizations have been issued to permit U.S. persons to engage in most commercial activity with Sudan, including the exportation of most goods or services to Sudan and persons in Sudan, and to unblock property previously frozen under these sanctions. However, sanctions relating to the Darfur region of Sudan remain, and these, along with other sanctions programs relating to terrorism and weapons of mass destruction, may continue to affect transactions with Sudan.

 

Issuance of New Executive Order

On January 13, President Obama issued an (as-yet-unnumbered) Executive Order (EO) which announced the new U.S. policy changes towards Sudan. In recognition of a series of “positive actions” by the Government of Sudan, the EO announced that it would terminate most aspects of the two previous EOs-EO 13067 (Nov. 3, 1997) and EO 13412 (Oct. 13, 2006)-that had authorized the comprehensive embargo on Sudan. Importantly, however, this revocation will only occur on July 12, 2017 and only after the Secretary of State, in consultation with other Administration colleagues, publishes a notice that “the Government of Sudan has sustained the positive actions that gave rise to this order….”

 

Relaxation of OFAC Sanctions

In parallel to the new Executive Order, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) dramatically relaxed the existing restrictions imposed in the Sudanese Sanctions Regulations (SSR). Specifically, OFAC issued a final rule establishing a new General License (31 C.F.R. 538.540) (which it refers to as the “2017 Sudan Rule”), authorizing all transactions prohibited by the SSR, including transactions in which the Government of Sudan has an interest.

As OFAC has clarified in a Fact Sheet on its website, pursuant to the 2017 Sudan Rule, “U.S. persons will generally be able to transact with individuals and entities in Sudan, and the property of the Government of Sudan subject to U.S. jurisdiction will be unblocked.” In particular, this means that U.S. persons can:

  • Import goods or services of Sudanese origin.
  • Export most goods, technology, and services to Sudan (a separate licensing requirement may apply to goods or technology subject to the Export Administration Regulations (EAR) as summarized in the subsection below).
  • Engage in transactions with persons blocked pursuant to the SSR (designated by the tag [SUDAN]).
  • Engage in transactions in which the Government of Sudan has an interest.
  • Engage in “all transactions necessary to unblock any property or interests in property that were blocked pursuant to 31 C.F.R. 538.201”.
  • Engage in transactions relating to the petroleum or petrochemical industries in Sudan.

OFAC has clarified in a set of Frequently Asked Questions posted on its website that the 2017 Sudan Rule supersedes existing general licenses as well as existing specific licenses or pending specific license applications. U.S. persons need only now comply with the terms of the 2017 Sudan Rule and not with any additional conditions contained in pre-existing and more restrictive general or specific licenses.

The 2017 Sudan Rule did not remove all restrictions on transactions with Sudan. In particular, the following restrictions remain:

  • Export of Agricultural Commodities, Medicine, or Medical Devices: Due to a statutory restriction, exports or re-exports of agricultural commodities, medicine, or medical devices eligible for export under the Trade Sanctions Reform and Export Enhancement Act (TSRA) “must be shipped within the 12 month period beginning on the date of the signing of the contract for export or reexport.”
  • Transactions with Other SDNs: While U.S. persons may now engage in transactions with persons designated pursuant to the SSR (identified with a [SUDAN] tag), the changes did not remove any other designations. U.S. persons, therefore, remain prohibited from engaging in virtually all transactions with persons remaining on the SDN list designated pursuant to other programs, including inter alia, Darfur ([DARFUR]), South Sudan ([SOUTH SUDAN]), terrorism ([SDGT]), or proliferation ([NPWMD]).
  • Other Agency Restrictions: OFAC’s 2017 Sudan Rule also did not affect any restrictions administered by other agencies, including but not limited to the export restrictions administered by the Bureau of Industry and Security (BIS) (see below).

 

BIS Relaxations

Simultaneously, BIS issued a new review policy for certain limited Sudan-related exports. BIS will continue to require a license for the export or re-export to Sudan of nearly all goods, technology, or software subject to the EAR that are specified on the Commerce Control List, and will continue to maintain its general policy of denial for applications to export or reexport most controlled items when intended for any end-user or end-use in Sudan, with two exceptions. BIS has now adopted a general policy of approval for the following two types of exports or reexports:

  • Civil Aircraft: items controlled only for AT reasons and “that are intended to ensure the safety of civil aviation or the safe operation of fixed-wing commercial passenger aircraft.”
  • Railroads: items controlled only for AT reasons that “will be used to inspect, design, construct, operate, improve, maintain, repair, overhaul or refurbish railroads in Sudan.”
  • This general policy of approval, however, does not apply to transactions involving “sensitive” end-users, including Sudan’s “military, police, and/or intelligence services and persons that are owned by or are part of or are operated or controlled by those services.”

 

Additional Risk Factors

In addition to the lingering sanctions and export control restrictions summarized above, there are additional risk factors to consider before undertaking any transactions with Sudan. These include, inter alia:

  • State Sponsor of Terrorism: These relaxations did not affect Sudan’s current designation as a state sponsor of terrorism.
  • Skepticism from the New Administration and the Hill: The continuation of the relaxations will be heavily dependent on the views of the incoming Administration. President Trump’s administration will be responsible for making the notification required in the EO and it could revoke these changes as quickly as President Obama’s administration implemented them.

US Oil & Gas Company Fined $25 Million from BIS & OFAC

Tuesday, December 20th, 2016 by Danielle McClellan

National Oilwell Varco, Inc., a Delaware corporation, and its Canadian subsidiaries, Dreco Energy Services, Ltd (Dreco) and NOV Elmar (NOV) have agreed to pay a combined $25 Million for violations of the Cuban Assets Control Regulations, the Iranian Transactions and Sanctions Regulations, and the Sudanese Sanctions Regulations.

The charges are as follows:

  • Between 2002 and 2005, National Oilwell Varco approved four Dreco commission payments to a UK based entity related to the sale and exportation of goods from Dreco to Iran. The four commission payments had a combined value of $2,630,091.
  • Between 2006 and 2008 National Oilwell Varco was involved in two transactions involving the sale and exportation of goods to Iran that totaled $13,596,980.
  • Between 2003 and 2007, Dreco knowingly exported (indirectly) goods from the US to fill seven orders from Iranian customers. The transactions totaled $526,480.
  • During 2007 and 2009, Dreco engaged in 45 transactions involving the sale of goods to Cuba totaling $1,707,964.
  • NOV engaged in two transactions between 2007 and 2008 involving the sale of goods or services to Cuba that totaled $103,119.
  • Finally, between 2005 and 2006 NOV engaged is a $20,928 transaction involving the exportation of goods from the US to Sudan.

OFAC considered the violations to be egregious since senior-level executives approved the commission payments and the NOV “willfully blinded” itself of the regulation violations by continuing to approve payments and communications. NOV will pay OFAC a settlement of $5,976,028, this will be deemed satisfied with its payment of $25,000,000 in relation to its settlement agreement between OFAC, BIS, and a Non-Prosecution Agreement (NPA).

OFAC considered the following to be aggravating factors:

  1. NOV’s conduct that gave rise to the Apparent Violations demonstrated at least reckless disregard for U.S. sanctions requirements;
  2. Senior managers at National Oilwell Varco, Inc. and Dreco knew or had reason to know that their respective business transactions giving rise to the ITSR-related apparent violations involved Iran;
  3. NOV’s conduct caused harm to sanctions program objectives by providing a significant and sustained economic benefit to the petroleum industries in Cuba, Iran, and Sudan;
  4. NOV is a large and sophisticated company that is engaged in the business of providing oilfield services around the world, including regions with high sanctions risk; and
  5. NOV’s compliance program at the time of the Apparent Violations was wholly inadequate.

OFAC considered the following to be mitigating factors:

  1. NOV had not received a Penalty Notice or Finding of Violation in the five years preceding the date of the earliest transaction giving rise to the Apparent Violations;
  2. NOV cooperated with OFAC’s investigation, including by agreeing to toll the statute of limitations for more than 2,600 days; and
  3. NOV has made efforts to remediate its compliance program and agreed to further compliance enhancements.

More Information: https://www.treasury.gov/resource-center/sanctions/CivPen/Documents/20161114_varco.pdf

It’s Not A Good Time for Iran Violations: Company Fined Over $16 Million for Medical Supplies Exported to Iran, Sudan and Syria

Tuesday, August 9th, 2016 by Danielle McClellan

By: Danielle McClellan

Alcon Laboratories, Inc., (Fort Worth), Alcon Pharmaceuticals Ltd. (Fribourg, Switzerland) and Alcon Management, SA (Geneve, Switerland) (collectively, “Alcon”) have agreed to settle a potential civil liability with the US Department of Treasury’s Office of Foreign Assets Controls (OFAC) and with the Department of Commerce’s Bureau of Industry and Security (BIS).

Between 2008 and 2011 Alcon exported end-use surgical and pharmaceutical products from their United States location to their sister companies in Switzerland and then along to distributors in Iran, Sudan and Syria. The charges are broken down as follows:

OFAC Charging Details

On 452 occasions Alcon violated the Sudanese Sanctions Regulations (SSR) when they sold and exported medical supplies to distributors in Sudan. On 61 occasions they violated the Iranian Transactions and Sanctions Regulations (ITSR) when they sold and exported their products to Iranian distributors. Alcon will pay $7,617,150 related to the OFAC violations. The statutory maximum monetary penalty amount was $138,982,584 and the base penalty amount for the Apparent Violations was $16,927,000.

OFAC considered the following to be aggravating factors in this case:

  1. Alcon demonstrated reckless disregard for U.S. sanctions requirements by having virtually no compliance program, despite significant business involving the exportation of goods from the United States to Iran and Sudan, and by failing to take adequate steps to investigate a third-party freight forwarder’s cessation of shipments to Iran on behalf of Alcon;
  2. Alcon and its then-senior management knew of the conduct giving rise to the Apparent Violations; and
  3. Alcon is a sophisticated multinational corporation with extensive experience in international trade.

OFAC considered the following to be mitigating factors in this case:

  1. The harm to U.S. sanctions program objectives was limited because the exports involved medical end-use products that were licensable under the Trade Sanctions Reform and Export Enhancement Act of 2000, and in fact had been previously and subsequently licensed by OFAC for Alcon;
  2. Alcon has no prior OFAC sanctions history, including receipt of a Penalty Notice or Finding of Violation in the five years preceding the date of the earliest transaction giving rise to the Apparent Violations, making it eligible for “first violation” mitigation of up to 25 percent;
  3. Alcon took remedial action by ceasing the unlicensed exports to sanctioned countries, initiating an internal investigation of the Apparent Violations, and instituting a robust compliance program that now includes:
    1. Updated or newly-created corporate export and trade sanctions compliance documents,
    2. Enhanced trade compliance training, and (c) enhanced compliance procedures for requesting OFAC licenses; and (4) Alcon substantially cooperated with OFAC’s investigation, including by providing detailed and well-organized information and entering into several statute of limitations tolling agreements with OFAC.

BIS Charging Details

Alcon has received 100 charges of Acting with Knowledge of a Violation, 45 charges of Unlicensed Reexports to Syria, and 43 Charges of Unlicensed Exports to Iran. In the cases of unlicensed exports, Alcon Pharmaceuticals (Switzerland) sent orders and invoices to Alcon labs (United States) with instructions to ship the orders to warehouses and distribution centers that it used in various countries, most specifically Switzerland. The facilities would receive the products and then Alcon Pharmaceuticals transferred and/or forwarded the items to Iran and Syria without required government licenses.

Alcon collectively has been accessed a civil penalty from BIS in the amount of $8,100,000, all of which is due, and will accrue interest if not paid on time. Alcon must also pay the penalty amount due to OFAC in a timely manner and comply with all of the terms related to the OFAC Settlement Agreement.

OFAC Information: https://www.treasury.gov/resource-center/sanctions/CivPen/Documents/20160705_alcon.pdf

BIS Information: https://efoia.bis.doc.gov/index.php/component/docman/doc_download/1068-e2466?Itemid=

Company Fined $38,930 for Selling Internet Security Products to Iran, Sudan and Syria

Tuesday, January 19th, 2016 by Danielle McClellan

By: Danielle McClellan

Barracuda Networks, Inc. of California and its United Kingdom subsidiary, Barracuda Networks Ltd. voluntarily disclosed violations to the Office of Foreign Assets Controls (OFAC) related to the sale of various internet security products.

Between August 2009 and April 2012 Barracuda UK sold web filtering products that are used to block or censor Internet activity along with internet security products and the related software subscriptions to entities in Iran, Sudan and entities on the Specially Designated Nationals and Blocked Persons List (SDNs). During the same time period Barracuda US provided firmware and software updates to the illegal software subscriptions. The total transaction value for these sales was $123,586.

Both companies were charged with a total of 37 violations and fined a total of $38,930. OFAC released the following factors and considerations related to the fine:

  1. Barracuda acted with reckless disregard for sanctions requirements by (a) permitting distributors and resellers to sell its products and updates to SDNs and to customers in sanctioned countries when it knew or had reason to know that the products were located in sanctioned countries or with SDNs, in potential violation of U.S. sanctions requirements, and (b) distributing its products and technology to more than 17,000 resellers and distributors worldwide without implementing any written sanctions compliance policies or procedures, and failing to provide training to its employees regarding export controls and sanctions;
  2. Barracuda knew or had reason to know that it was exporting goods, technology, and services to Iran and Sudan because IP addresses associated with those countries were used to contact the company; further, Barracuda knew or had reason to know that it was exporting technology to Syrian SDNs because the SDNs were listed on sales invoices;
  3. The exportation of the Web filtering software and hardware to Iran, Sudan, and SDNs in Syria could potentially have caused significant harm to U.S. sanctions program objectives because the technology could have been used to block or censor Internet activity;
  4. Barracuda did not screen IP addresses used to contact Barracuda’s servers because it had no OFAC compliance program in place at the time of the transactions;
  5. Barracuda has no prior OFAC sanctions history, including no penalty notice or Finding of Violation in the five years preceding the earliest date of the transactions giving rise to the apparent violations, making it eligible for up to 25 percent “first offense” mitigation;
  6. Barracuda took significant remedial steps including developing a method to disable products in sanctioned countries, prioritizing U.S. sanctions and export controls compliance by establishing an Office of Trade Compliance and hiring a general counsel with subject matter expertise in these areas, issuing company-wide a statement from the CEO about sanctions-related policy, implementing a trade compliance manual, and enhancing its sales software to include red flags for orders that may require a license; and
  7. Barracuda substantially cooperated with OFAC’s investigation, including by agreeing to toll the statute of limitations for approximately 521 days.

OFAC Notice: https://www.treasury.gov/resource-center/sanctions/CivPen/Documents/20151124_Barracuda.pdf

EGYPTAIR Leases Aircraft to Sudan Airways…Fined $140,000

Tuesday, January 19th, 2016 by Danielle McClellan

By: Danielle McClellan

Between August 2010 and February 2011 EGYPTAIR leased two Boeing 737-566 aircraft to Sudan Airways without obtaining the required BIS licenses. Both aircraft were flown under Sudan Airways flight numbers and are classified as 9A991.b and controlled for Anti-Terrorism reasons. EGYPTAIR has been assessed a penalty of $140,000 for two charges of reexporting an item without required licenses.

EGYPTAIR did not self-disclose the violations and will pay the $140,000 fine in installments.

Charging Letter

Commerzbank to Pay $258,660,796 for Violating Multiple Sanctions Programs

Monday, March 30th, 2015 by Brooke Driver

By: Brooke Driver

Commerzbank AG recently agreed to settle with OFAC regarding its 1,596 apparent violations of multiple U.S. sanctions programs, including the Iranian Transactions and Sanctions Regulations, the Sudanese Sanctions Regulations, the June 28, 2005 Executive Order 13382, “Blocking Property of Weapons of Mass Destruction Proliferators and Their Supporters,” the Weapons of Mass Destruction Proliferators Sanctions Regulations, the Burmese Sanctions Regulations and the Cuban Assets Control Regulations.

The bank’s massive $258,660,796 fine reflects the number and enormity of the apparent violations, as does the large scale of its case, with collaboration between OFAC, the U.S. Department of Justice, the New York County District Attorney’s Office, the Federal Reserve Board of Governors and the Department of Financial Services of the State of New York.

Fokker Forks Over $10.5 Million for Illegal Shipments to Iran and Sudan

Wednesday, July 16th, 2014 by Brooke Driver

By: Brooke Driver

The US Bureau of Industry and Security (BIS) again showed its resolve to impose significant penalties when it took down Netherlands-based aerospace services provider Fokker Services B.V. BIS charged the company with a whopping 253 separate violations of the EAR, and the egregious nature of the charges drew special attention from other branches of the U.S. government. Fokker Services, a subsidiary of Fokker Technologies Holding B.V., repeatedly participated in the export and reexport of aircraft parts, technology and related services to Iran and Sudan, activities that are controlled under the EAR for national security and antiterrorism purposes. Even worse, Fokker Services seems to have dealt knowingly with Iranian military end users and systematically avoid U.S. customs law by concealing the final destination of the transactions.

Due to the gravity of the case, the OEE was joined by the Department of Justice, the Department of the Treasury’s Office of Foreign Assets Control, the Federal Bureau of Investigation, the Defense Criminal Investigative Service and Homeland Security in investigating Fokker Service’s activities and arriving at a corresponding punishment. The Under Secretary of Commerce Eric L. Hirschhorn explained in a press release the importance of the case:

“The scope of today’s global settlement with Fokker Services highlights the egregious nature of the violations and points to the commitment of OEE to pursue and prosecute those responsible no matter where they are located…OEE and our partner law enforcement colleagues will continue to use all means available to ensure that U.S. technology does not fall into the wrong hands.”

Unlicensed Reexport to Sudan Costs Solenta Aviation $70,000

Wednesday, August 21st, 2013 by Brooke Driver

By: Brooke Driver

The Bureau of Industry and Security issued a letter May 17, 2013 announcing its intention to take action against Johannesburg-based Solenta Aviation (Pty) Ltd. per the company’s violation of the Export Administration Regulations. Specifically, Solenta is accused of violating Section 766.3 and Section 13(c) of the EAR between October 2007 and May 2009. Without first attaining the necessary licenses detailed in these sections, the company reexported items controlled by the regulations, including Beechcraft 1900 aircraft (ECCN 9A991), from South Africa to Blue Bird Aviation in Sudan. The letter sent in May details BIS’s terms of settlement, which include:

  • $40,000 penalty, to be paid in four installments
  • A two year probationary period, during which another violation will result in an additional $30,000 fine
  • The threat of the suspension of all exporting privileges, should Solenta neglect to comply with the terms of the settlement
  • The publicizing of the charges and settlement terms

Italian Bank Agrees to Pay over $4 Million for Slew of Violations of US Embargoes

Wednesday, August 21st, 2013 by Brooke Driver

By: Brooke Driver

Intesa Sanpaolo S.p.A. (“Intesa”) agreed to pay over four million dollars to the Office of Foreign Assets Controls for supposed violations of the Cuban Assets Control Regulations (“CACR”), 31 C.F.R. part 515; the Sudanese Sanctions Regulations (“SSR”), 31 C.F.R. part 538; and the Iranian Transactions Regulations (“ITR”), 31 C.F.R. part 560. Beginning in the late 1990’s, Intesa fostered a business relationship with an Italian-headquartered company controlled by the Government of Iran called Irasco—a company not only owned by the embargoed country, but built on exportation to Iran. Intesa neglected to identify the company as meeting the ITR definition of the GOI, and continued to engage in unauthorized business transactions with the company, processing 31 wire transfers for Irasco totaling $3,142,565 between November 1, 2004, and December 8, 2006.
Unfortunately, dealing with Irasco was not Intesa’s only error in judgment; the misguided company also performed 53 transactions between October 29, 2004, and March 12, 2008 involving Cuba and 67 similar transactions involving Sudan, between the dates of November 4, 2004 and October 29, 2007. In other words, Intesa hit the Foreign Assets Controls trifecta, violating enough regulations—ITR, CACR and SSR—to make an excellent bowl of alphabet soup and to hit a base penalty amount of over nine million dollars.
OFAC agreed to settle, however, for less than half of this fine—still a sizable debt—due to the facts that:

  • Intesa did not voluntarily self-disclose
  • Intesa had reason to know that one of its customers met the definition of the GOI in the ITR and that payments which terminated in the United States for this customer constituted apparent violations of the ITR
  • Intesa’s conduct resulted in harm to the integrity of U.S. economic sanctions programs
  • Intesa (obviously) did not have an effective compliance program in place
  • The case was non-egregious
  • The apparent violations did not constitute a willful or reckless violation of the law
  • No Intesa managers or supervisors had actual knowledge of these matters
  • Intesa substantially cooperated with OFAC
  • Since the violations, Intesa has taken remedial action and now has a more robust compliance program in place
  • Intesa has not received a penalty notice or Finding of Violation from OFAC in the five years preceding the date of the transactions giving rise to the apparent violations

Illegal Stripping at Standard Chartered Bank Nets $327 Million for OFAC+ Violations

Thursday, January 17th, 2013 by Danielle McClellan

By: John Black

(Editor’s Note: That is perhaps one of the most attention grabbing export control headlines ever.)

On December 10, 2012 the Office of Foreign Assets Control (OFAC) in the US Treasury Department announced a $132 million settlement agreement with Standard Chartered Bank (SCB) to settle alleged violations of US trade embargoes and sanctions. The $132 million OFAC settlement is part of a combined global settlement of $327 million with federal and local government partners. The settlement is related to alleged violations by the London and Dubai offices of SCB of a number of U.S trade embargoes and sanctions programs, including those relating to Iran, Burma, Libya and Sudan and the Foreign Narcotics Kingpin Sanctions Regulations.

“Today’s settlement is the result of an exhaustive interagency investigation into Standard Chartered Bank’s attempts to violate U.S. sanctions programs through the ‘stripping’ from payment messages of critical information,” said OFAC Director Adam J. Szubin. “We remain committed to working with our partners in the regulatory and law enforcement community to ensure that the U.S. financial systems are protected from the risks associated with this type of illicit financial behavior.”

According to OFAC, from 2001 to 2007, SCB’s London head office and its Dubai branch engaged in stripping practices that interfered with the implementation of U.S. economic sanctions by financial institutions in the United States, including SCB’s New York branch. In London, those practices included omitting or removing references to US-sanctioned locations or entities from payment messages sent to U.S. financial institutions. SCB replaced the names of ordering customers on payment messages with special characters, effectively obscuring the true originator and sanctioned party in the transaction; and forwarding payment messages to US financial institutions that falsely referenced SCB as the ordering institution. In Dubai, the practices included sending payment messages to or through the United States without references to locations or entities that the US banks would have spotted as creating US sanctions issues. As a result, millions of dollars of payments were routed through U.S. banks for or on behalf of sanctioned parties in apparent violation of U.S. sanctions.

In addition, SCB’s New York branch settled charges related to eight apparent violations of the Foreign Narcotics Kingpin Sanctions Regulations (FNKSR).

Under the settlement agreement, SCB is required to put in place and maintain policies and procedures to minimize the risk of the recurrence of such conduct in the future. SCB is also required to provide OFAC with copies of submissions to the Board of Governors of the Federal Reserve System (Board of Governors) relating to the OFAC compliance review that it will be conducting as part of its settlement with the Board of Governors.