Archive for the ‘Denied & Restricted Parties’ Category

US and EU Impose Economic Sanctions in Response to the Crisis in Ukraine

Tuesday, May 6th, 2014 by Brooke Driver

By: A. Esslinger, L. Grove & L. Van Buren
(Source: Anita Esslinger,

As part of the broad and ongoing international response to the crisis in Ukraine, the United States, the European Union and other countries have imposed or announced economic sanctions against persons involved in the crisis. While not explicit, the US sanctions include measures that will allow the United States to impose sanctions on persons that threaten peace and security in Ukraine, including those who are asserting governmental authority in the Crimean region. As yet, however, no person has been identified as a target of the sanctions. In contrast, the European Union’s sanctions specifically target former Ukrainian President Viktor Yanukovych and seventeen other members of his former regime, but at this time avoid targeting the Russian Federation.

Persons and entities that are engaging in business involving Ukraine and Russia should keep a close eye on these sanctions and future developments in order to comply with the law.

United States:

On March 6, President Obama signed an Executive Order imposing sanctions against and prohibiting entry into the United States by persons determined to be involved in the Ukrainian crisis. Persons targeted by these sanctions include those who (a) are involved in the breakdown of or threats to democratic processes or institutions, peace, security, stability, sovereignty, territorial integrity, or the proper disposition of assets in Ukraine; (b) have been determined “to have asserted governmental authority over any part or region of Ukraine without the authorization of the Government of Ukraine;” or (c) are either leaders of entities involved in such activities, have provided assistance or support for such activities or for a person sanctioned for such activities, or are owned or controlled by or acting on behalf of a person sanctioned for such activities.

Among other things, the Executive Order freezes sanctioned persons’ property and interests in property in, or that come into, the United States or that are in the control or possession of US persons (including persons in the United States, US citizens and permanent resident aliens, and US entities and their foreign branches). The Executive Order also prohibits the contribution or provision of funds, goods, or services by, to, or for the benefit of any sanctioned person-including donations of humanitarian articles-and the receipt of any funds, goods, or services from any sanctioned person.

The Executive Order does not yet list any person designated as a target of the sanctions. Administration officials have said that about a dozen persons are now subject to the travel ban although the list is being withheld for privacy reasons. Officials also have said that more people would be added to the travel ban over the coming days.

The United States had previously taken softer actions to protest Russia’s involvement with Ukraine, such as suspending trade, military, and multilateral engagement with Russia (including the G-8 summit). By including those asserting governmental authority over any part of Ukraine without the authority of the Ukrainian government the U.S. sanctions also target officials of Crimea who are cooperating with the Russian invasion. The Executive Order also provides the US Government sufficient latitude to designate officials of the Russian Federation who, in the US Government’s view, engage in such actions, threaten the peace or territorial integrity of Ukraine or provide material assistance for such activities.

US Secretary of State John Kerry has reportedly characterized the Executive Order as merely providing a tool. The US Congress is also considering legislation to deal with the crisis.

European Union:

On March 5, the Council of the European Union adopted a Regulation directly applicable in all the EU Member States, imposing sanctions against former Ukrainian president Viktor Yanukovych and seventeen other members of his former regime. Notably, these sanctions did not include any Russian nationals or entities. The former Ukrainian leaders are under investigation by the new Ukrainian government for embezzlement of state funds and the illegal transfer of those funds outside of Ukraine.

The Regulation applies with immediate effect. With limited exceptions, it requires funds and economic resources of the designated persons to be frozen and prohibits making available, directly or indirectly, funds or economic resources to or for the benefit of the designated persons. The term “economic resources” means all kinds of assets, including goods. Thus, supply of goods to designated persons is prohibited. The Regulation also requires certain reporting to competent authorities in the relevant EU Member States, such as with respect to information on accounts and amounts frozen in accordance with the Regulation.

The reach of the Regulation is broad, applying: 1) within the EU; 2) to individuals who are nationals of an EU member state, wherever located; 3) to all EU legal persons (companies and organizations incorporated or constituted under the laws of an EU member state), wherever they are in the world; and 4) to any legal person in respect of any business done in whole or in part within the EU.

Notably, while talk of travel and visa restrictions against the former regime was mentioned in previous European Council talks, no official announcement of such restrictions has yet been made, although they may be applied without public notice.

Meanwhile, the Council continued to meet in emergency session on March 6 and voted to suspend talks with Russia on a wide-ranging economic pact and a visa agreement. Further sanctions in line with the US asset freeze and travel ban aimed directly at Moscow will be held in reserve pending the outcome of diplomatic efforts.

Other Nations:

So far, the US remains the only nation to announce that it may impose sanctions against Russia. Several non-EU European nations, including Switzerland, Lichtenstein and Norway, have also announced asset freezes and travel bans on former Yanukovych regime members, but stopped short of sanctions on Russia. US neighbor Canada has also moved swiftly to follow the sanctions on the former Ukrainian president; but, although it has suspended participation in the Russian-Canadian Intergovernmental Economic Commission and recalled its ambassador to Russia, it too has taken no further steps against Russia.

Events in Ukraine continue to move quickly. Great vigilance is the order of the day.

Maryland Man Imprisoned for 8 Years for Participating in Conspiracy to Help Iran Launch First Satellite

Thursday, January 30th, 2014 by Brooke Driver

By: Brooke Driver

Nader Modanlo, a born Iraqi and naturalized U.S. citizen living in Potomac, Maryland, was recently sentenced to eight years in prison, three years of probation and a whopping $10,000,000 fine for violating the International Emergency Economic Powers Act, money laundering and obstructing bankruptcy proceedings. A number of government agencies were involved in constructing the case against Modanlo, including U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, the Internal Revenue Service’s Criminal Investigation and the Defense Criminal Investigative Service.

The 53-year-old took part in a complex conspiracy (that took place between the years of 2000 and 2007) to illegally provide satellite related services to Iran. According to the evidence presented at trial, Modanlo used his expertise as a mechanical engineer and his background in finance and strategic policy as they relate to space-based telecommunications to facilitate the creation and launch of Iran’s first satellite.

In 1994, as the principal owner and president of Final Analysis, Inc., Modanlo began a working relationship with POLYOT, an aerospace company owned by the Russian government. Between the years 1995 and 2000, Final Analysis provided POLYOT with telecommunication satellites. Modanlo filed for and received the required licenses for these transactions.

However, in 2001, after Final Analysis was forced into bankruptcy, Modanlo founded New York Satellites Industries, running the company out of his own home. While working for Final Analysis, Modanlo began his illegal contract with POLYOT to construct and launch a remote sensing and telecommunications satellite for Iran, an agreement he honored under the name of his new company. Knowing that direct financial transactions would be difficult due to the sanction against the country, Modanlo and a number of other interested parties, including a former Iranian ambassador, met in Switzerland to discuss the details of the launch and the money exchange. To solve the problem, they formed a fake company called Prospect Telecom and opened a Swiss bank account under that name. Investors transferred funds to this account for the project, including $10,000,000 that was almost immediately sent to Modanlo’s New York Satellite Industries bank account as payment for his help in the launch, which took place October 2005. In the two years following the launch, Modanlo made false statements and withheld information regarding the ownership and aim of Prospect Telecom in bankruptcy proceedings.

Chinese National Sentenced to Nearly 5 Years in Prison for Attempting to Illegally Export Aerospace-Grade Carbon Fiber

Tuesday, December 31st, 2013 by Brooke Driver

By: Brooke Driver

On December 10, 2013, Chinese citizen Ming Suan Zhang was sentenced to 57 months in prison for violating the International Emergency Economic Powers Act by attempting to export high-grade carbon fiber from the United States to China, which is controlled due to its applications in the defense and aerospace industries. Thankfully, Zhang’s attempt to negotiate a long-term contract for large amounts of the product to aid a Chinese company involved in the development of a military aircraft was intercepted by an undercover agent working with the Department of Commerce.

Federal authorities were first alerted to Zhang’s illegal activities when two Taiwanese buyers—at Zhang’s guidance—attempted to purchase several tons of specialized carbon fiber, including Toray type M60-JB-3000-50B (“M60″) on the Internet. Zhang intended to export the fiber to a Chinese customer. In their search for an entity selling the fiber, the two buyers contacted the UC, who informed them that a license was required to export the M60 outside the U.S. After the UC refused to do business with them without the necessary license, Zhang contacted him directly, claiming that one of his clients, an employee of a Chinese military company, required the fiber for a test flight of a “jet fighter plane.” Zhang emphasized that this “client” required the product as soon as possible, implying that the need for urgency outweighed licensure:

“Hello! Please find time to send me an email or call me to explain the situation, because the customer over here is rushing me. . . . On the 5th, [he] is handling the site of a new fighter aircraft test flight. He will return between the 10th and the 20th of next month. That’s why he requested that be done this month. . . . Thank you for your cooperation!”

Zhang was captured when he traveled to the United States to meet with the UC in order to obtain a sample of the specialized fiber. United States Attorney Lynch said of the case,

“The defendant brazenly disregarded U.S. law in an attempt to procure a highly sought after commodity and provide it to a foreign power. Foreign governments are willing to go to great lengths to acquire potentially dangerous materials such as specialized carbon fiber composites, which are of high value in the development of advanced weapons programs. We and our law enforcement partners will continue to use all of the tools in our arsenal to protect our technology and maintain the national security of the United States and its allies.”

Taiwanese Father and Son Arrested for Allegedly Shipping Weapons Machinery to North Korea

Tuesday, June 18th, 2013 by Brooke Driver

By: Brooke Driver

A 67-year-old Taiwanese man, Alex Tsai was arrested in Tallinn Estonia on May 1, 2013, for allegedly supplying weapons machinery to North Korea. His son, Gary Tsai, also connected to the illegal operation, was arrested the same day in his home in Glenview, Illinois.

Both men were charged in Chicago with identical accusations: one count of conspiring to defraud the United States in its enforcement of laws and regulations prohibiting the proliferation of weapons of mass destruction, one count of conspiracy 2 to violate the International Emergency Economic Powers Act (IEEPA) by conspiring to evade the restrictions imposed on Alex Tsai and two of his companies by the U.S. Treasury Department, and one count of money laundering. The father and son—as well as an unnamed “Individual A”—have been under investigation for some time for exporting goods and materials that could be used to produce weapons of mass destruction. The three men, now Denied Persons, are associated with at least three Taiwan-based companies and one US-based company suspected of criminal activity: Global Interface Company, Inc., Trans Merits Co., Ltd., Trans Multi Mechanics Co., Ltd and Factory Direct Machine Tools, all of which have also been added to the Debarred List. Specifically, Alex and Gary Tsai was debarred for dealing (since the late 1990’s) with the Korea Mining Development Trading Corporation, which was designated as a proliferator by President Bush in 2005. The Tsais has been transporting items to KOMID since the late 1990’s that could be used to support North Korea’s advanced weapons program.

The defendants may receive up to the maximum penalty of:

  • 20 years in prison and $1,000,000 fine for violating IEEPA
  • 20 years in prison and a $500,000 fine for money laundering
  • 5 years in prison and a $250,000 fine for conspiracy to defraud the US

RH International, LLC and Owner Mohammad Reza Suffer $10,000,000 fine, 4 Years of Prison and 10 Years on the Denial List

Tuesday, June 18th, 2013 by Brooke Driver

By: Brooke Driver

On October 18, 2012, RH International, LLC, and its owner, Mohammed Reza Hajian, were convicted of violating the International Emergency Economic Powers Act. RH International was specifically accused of knowingly violating the IEEPA and the Iranian Transactions Regulations by exporting computer and related equipment from the United States to Iran through the U.A.E without attaining the necessary license from the Office of Foreign Assets Control.

Based on the facts that:

  • RH management purposefully violated customs laws and
  • The company did not disclose its violations to BIS

RH International was sentenced to:

  • 10-year denial of export privileges
  • 12 months of unsupervised probation
  • $400 fine

Because the company’s owner and operator plead guilty to direct involvement in and knowledge of RH’s violations, and because he had displayed—by exporting to Iran through the U.A.E.—an affinity for finding illegal loopholes, Reza was charged separately. To prevent Reza from exporting his products as an individual, rather than representative of RH, and to punish him for his actions the court sentenced him to:

  • 10 years on the Denied Persons List
  • 12 months of unsupervised probation
  • 48 months in prison
  • $100 assessment

As if these consequences weren’t severe enough, the court found a loophole of its own; instead of directly demanding a huge fine of RH International, prosecution chose to “reroute” that $10,000,000 fine to Reza himself, who will likely rethink attempting to hoodwink the US government in the future.

Fails! University of Massachusetts at Lowell Pays $100,000 for Shipments to Pakistani Missile Entity

Tuesday, June 18th, 2013 by Brooke Driver

By: Brooke Driver

The University of Massachusetts at Lowell has chosen to settle with BIS for neglecting to obtain the necessary licenses required by Section 744.11 and Supplement No.4 to Part 744 of the Regulations for export to the Pakistan Space and Upper Atmosphere Research Commission (“SUPARCO”), an organization that has been on the Entity List since November 1998, as it was “determined to be involved in nuclear or missile activities.” In September 1, 2007, UML exported antennae and cables valued at $12,480 and designated as EAR99 to SUPARCO without an export license. UML again exported to SUPARCO without permission in October 6, 2007, this time transporting an atmospheric testing device valued at $191,870—also designated as EAR99.

Based on these charges, and had UML chosen to fight them, they could have faced:

  • The maximum civil penalty of up to the greater of $250,000 per violation or twice the value of the transaction that is the basis of the violation
  • Denial of export privileges and/or
  • Exclusion from practice

Luckily for UML, BIS was merciful, due to UML’s timely response to the charges and desire to settle. However, even these considerations could not save UML from:

  • A $100,000 fine
  • A two year probationary period

Freight Forwarder Pays $139,650 for Affiliates’ Shipments to Cuba and Iran

Tuesday, June 18th, 2013 by Brooke Driver

By: Brooke Driver

EGL, Inc. of Houston, Texas has agreed to pay $139,650 for alleged violations of the Cuban Assets Control Regulations, 31 C.F.R. part 515 (CACR) and the Iranian Transactions and Sanctions Regulations, 31 C.F.R. part 560 (ITSR). During 280 transactions between the dates of April 19, 2005 and December 15, 2008, EGL’s foreign affiliates provided freight forwarding services to and from Cuba, in violation of the CACR. The alleged violations of the ITR occurred between August 15, 2008 and October 27, 2008, when affiliates of EGL provided freight forwarding services for ten shipments that contained oil rig supplies to Aban VIII, an oil drilling rig off the Iranian coast owned by Petropars—an affiliate of the National Iranian Oil Company.
While the company voluntarily disclosed the CACR violations, it did not disclose the ITR violations, resulting in a base fine of $206,889. The lowered settlement amount and the case’s non-egregious classification reflect OFAC’s consideration of the following:

  • EGL had no history of prior sanctions violations
  • EGL substantially cooperated with OFAC’s investigation, including by entering into statute of limitations tolling agreements, and by producing responsive materials in a clear and organized fashion
  • EGL took remedial measures to prevent future OFAC violations

OFAC’s required fine of $139,650 was based on the facts that:

  • The alleged violations of the CACR and the ITR by EGL resulted in significant harm to OFAC’s sanctions programs
  • EGL had reason to know that the Aban VIII was an oil rig operated by an Iranian company in Iranian waters

So what have we learned?
1.    Be aware of the actions of your affiliates, because you are accountable for their mistakes.
2.    Speak up to pay less: The government will take your cooperation into consideration when determining consequences.
3.    Suspicion counts as knowledge: reason to believe that a violation may occur is reason enough for the government to dole out severe consequences.

7 Persons and 5 Companies Indicted for Conspiring to Export Military Aircraft Parts to Iran

Wednesday, July 13th, 2011 by Anna Barone

Seven individuals and five corporate entities based in the United States, France, the United Arab Emirates (U.A.E.) and Iran have been indicted in the Middle District of Georgia for their alleged roles in a conspiracy to illegally export military components for fighter jets and attack helicopters from the United States to Iran.  One of the defendants and his company were sentenced on June 22, 2011, with the individual receiving nearly five years in prison. Another defendant and his company have admitted their illegal conduct and also pleaded guilty in the investigation.


Export Compliance Training? Important? You betcha!

Monday, April 4th, 2011 by John Black

The risks of fines of hundreds of thousands — or even millions — of dollars for violations make export compliance important.  The complicated, arcane, and voluminous regulations that impose incredible burdens on your day-to-day business activities make export compliance difficult.  A thorough and effective multi-level company training program makes a reasonable level of export compliance achievable.

A company needs three levels of training (more…)

DDTC Puts Semi-Hold on Applications for Kyrgyzstan

Wednesday, June 9th, 2010 by John Black

The Directorate of Defense Trade Controls announced that due to recent events in Kyrgyzstan that the review of applications involving Kyrgyzstan “may be delayed.”  (Do not think to yourself that the processing of all applications for all countries has always been delayed.)  DDTC also advised applicants that “approvals should not be assumed.” (more…)