Archive for the ‘Sanctions’ Category

Argentinian Travel Website to Pay $2,809,800 for Violations of the Cuban Assets Control Regulations

Wednesday, July 16th, 2014 by Brooke Driver

By: Brooke Driver

A Delaware company with its headquarters in Buenos Aires, Argentina, Decolar.com, recently agreed to pay OFAC $2,809,800 to settle for the charges against it. Apparently, between March 2, 2009 and March 31, 2012, Decolar allowed its foreign subsidiaries to aid 17,836 individuals with flight and hotel reservations for travel to and from Cuba. Of course, Decolar neglected to attain the proper licensure to do so. But, while the cost is high, Decolar must be relieved that OFAC did not enforce the full penalty charge of $4,460,000. In determining the settlement cost, OFAC claims to have considered the follow facts:

• Decolar disclosed the violations and cooperated with OFAC’s investigation
• Decolar has taken measures to develop a working OFAC compliance program
• Upon discovering the violations, Decolar immediately stopped offering Cuba-related travel services
• Decolar demonstrated reckless disregard for U.S. sanctions by failing to ascertain that its activities were not in violation of U.S. law (OFAC states here that Decolar naively took the word of an unidentified third party who assured Decolar management that it was in the clear. OFAC adds that Decolar should have been aware of the CACR restrictions on its activities).
• Decolar’s senior management was aware of its subsidiaries’ Cuba-related travel services

The two main take aways here, folks, are that:

1. When relying on a third party legal/export compliance advisor, do your homework. Before you stake your business’ reputation on his word, be sure that he knows what he’s talking about.
2. Recognize that you will be punished for violating laws you should know about, not just the ones you do know. OFAC made it very clear in this case that Decolar management reasonably should have known that it was in violation of U.S. law—and now the company is facing a fine with an uncomfortable amount of digits.
In other words, an untrained company is an unprotected company. Put in the hours, not the dough.

Washington State Resident Targeted by OFAC for Exporting Unlicensed Medical Goods to Iran

Wednesday, July 16th, 2014 by Brooke Driver

By: Brooke Driver

OFAC recently announced that Concord, CA company Sea Tel, Inc. has agreed to pay a settlement of $85,113 for its apparent violations of the Iranian Transactions and Sanctions Regulations. According to OFAC, between the dates of November 20, 2007 and February 26, 2009, Sea Tel invoiced a South Korean distributor for 16 orders of marine antenna systems totaling $378,281 in value. The California-based company then exported these products to South Korea with knowledge or reason to believe that they were intended for use on vessels owned by the National Iranian Tanker Company. Although OFAC emphasized that the illegal shipments caused significant harm to the American sanctions program and that Sea Tel’s actions revealed a pattern of reckless disregard for said sanctions, luckily for Sea Tel, OFAC chose to significantly lower its fine from the base penalty of $189,141, due to the facts that:

  • This was Sea Tel’s first offense
  • Sea Tel disclosed the violations to OFAC and cooperated throughout the investigation
  • Sea Tel had an OFAC compliance program in place when the violations occurred (although, obviously not a very good one)

Netherlands Company CWT Pays Whopping $5,990,490 to Settle CACR Violations

Friday, May 23rd, 2014 by Brooke Driver

By: Brooke Driver

One can only hope that Netherlands-based CWT B.V. learned its lesson when it was slapped with a nearly six million dollar penalty for violating the Cuban Assets Control Regulations. The supposed violations occurred between the dates of August 8, 2006 and November 28, 2012. During this period, the travel service provider CWT reportedly assisted no less than 44,430 people in travel to or from Cuba. As the company became majority-owned by U.S. persons in 2006, its actions became subject to U.S. law, and therefore, the Trading with the Enemy Act.

Although CWT did disclose the majority of these violations to OFAC, a small portion did take place after the voluntary disclosure. OFAC did not demand the base penalty of $11,093,500, but arrived at the still painful total of $5,990,490 based on the following factors:

  • CWT failed to exercise a minimal degree of caution or care regarding its obligations to comply with OFAC sanctions against Cuba by processing unauthorized travel-related transactions for more than four years before recognizing that it was subject to U.S. jurisdiction
  • CWT is a commercially sophisticated international corporation and travel services provider
  • CWT processed a high volume of transactions and assisted a large number of travelers, which caused significant harm to the objectives of the CACR
  • CWT had no compliance program at the time (or an inadequate one)
  • This instance was CWT’s first violation
  • CWT cooperated substantially with OFAC’s cooperation
  • CWT has taken significant remedial actions in order to improve its OFAC compliance procedures

Lesson learned: company ownership is just as important in determining U.S. jurisdiction as location. You may run your operation across the world, but if it is owned by United States citizens, it is subject to United States law, and you will suffer the consequences if you don’t comply accordingly.

OFAC Publishes Final Rule Amending the ITSR

Friday, May 23rd, 2014 by Brooke Driver

By: Brooke Driver

On March 31, 2014, OFAC published a final rule that came into effect April 7 amending the Iranian Transactions and Sanctions Regulations. The new rule expands an existing general license allowing the exportation or reexportation of food to Iran by including the broader category of agricultural commodities. It also adds a new general license enabling shipments of certain replacement parts for particular medical devices. Finally, the rule addresses a few definitions in OFAC regulations, clarifying some and adding others. Click here for more information.

Sea Tel, Inc. Pays $85,113 for Violating Iranian Sanctions

Friday, May 23rd, 2014 by Brooke Driver

By: Brooke Driver

OFAC recently announced that Concord, CA company Sea Tel, Inc. has agreed to pay a settlement of $85,113 for its apparent violations of the Iranian Transactions and Sanctions Regulations. According to OFAC, between the dates of November 20, 2007 and February 26, 2009, Sea Tel invoiced a South Korean distributor for 16 orders of marine antenna systems totaling $378,281 in value. The California-based company then exported these products to South Korea with knowledge or reason to believe that they were intended for use on vessels owned by the National Iranian Tanker Company. Although OFAC emphasized that the illegal shipments caused significant harm to the American sanctions program and that Sea Tel’s actions revealed a pattern of reckless disregard for said sanctions, luckily for Sea Tel, OFAC chose to significantly lower its fine from the base penalty of $189,141, due to the facts that:

  • This was Sea Tel’s first offense
  • Sea Tel disclosed the violations to OFAC and cooperated throughout the investigation
  • Sea Tel had an OFAC compliance program in place when the violations occurred (although, obviously not a very good one)

US Stops Approving Export Licenses for Russia and Adds Russians and Ukrainians to US Prohibited Parties Lists

Tuesday, May 6th, 2014 by Brooke Driver

By: Brooke Driver

Executive Summary:

1)     Both the State Department and the Commerce Department have stopped approving export and reexport license applications for products and technologies destined to Russia.  This is in response to Russian actions related to the Ukraine and Crimea.

2)    The Treasury Department has implemented US smart sanctions that prohibit involvement in transactions with listed Russian and Ukrainian persons/entities.  The prohibition applies to entities that are more than 50% owned by a listed person.

3)    There are no other changes in the export/reexport licensing requirements for sending things to Russia or Ukraine.

Expanding the scope of the executive order he signed March 6, President Obama has signed two new executive orders in response to the political situation in Ukraine. The first order, signed March 17, allows the US the right to block the property of certain Russian individuals if it is in the US, comes into the US or comes into the possession of a person in the US. The order is meant to block officials of the Government of the Russian Federation or those who choose to assist the Russian Federation. So far, the list includes high ranking Russian government officials, financial institutions, and Crimea-based separatist leaders, including former Ukrainian president Viktor Yanukovich, presidential aide Vladislav Surkov and advisor Sergei Glazyev, to name a few.

For the latest updates to the list, go to http://www.treasury.gov/ofac/downloads/t11sdnew.pdf

Three days after signing this order, President Obama released another, this one enabling the US to impose economic sanctions against Russia for its use of force and annexation of the Ukranian region of Crimea. Specifically, this executive order allows the Treasury Department the ability to designate any or all of these sectors of the Russian economy for additional sanctions: metals and mining, energy, financial services, engineering and defense and related material. Essentially, by signing this order, Obama has threatened to significantly damage the Russian economy by cutting off trade with the US. However, Treasury officials claim that the president must handle the execution of the new order “with care, given the fact that that could also impact the global economy.”  Importantly, so far the Treasury Department has not yet imposed these available sanctions against any of the sectors.

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, anita.esslinger@bryancave.com)

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.

Ubiquiti Networks Pays $504,225 for Violating the Iranian Transactions and Sanctions Regulations

Tuesday, May 6th, 2014 by Brooke Driver

By: Brooke Driver

On March 6, OFAC announced that the San Jose, California based company Ubiquiti Networks, Inc. has agreed to settle for $504,225 over its apparent violations of the Iranian Transactions and Sanctions Regulations. The company was accused of violating the ITSR between the dates of March 24, 2008 and February 2010 by both directly and indirectly supplying goods for broadband wireless connectivity to Iran and approving the reexportation of these goods to Iran through a United Arab Emirates provider. Ubiquiti again appears to have violated the ITSR during the period of December 1, 2009 to February 25, 2011 by engaging in 13 exports of goods related to broadband wireless connectivity to a Greek distributer, despite the fact that Ubiquiti had knowledge or reason to believe that the goods were intended for an Iranian customer.

Although OFAC chose to lower its required fine from the base penalty amount of $560,250, due to the facts that Ubiquiti had no prior sanctions history and had cooperated fully with the investigation, the Office of Foreign Assets Control did not reduce the penalty amount significantly, because:

  • Ubiquiti demonstrated reckless disregard for US sanctions
  • Ubiquiti was on notice in February 2010 that the conduct in question was a violation of US law
  • Ubiquiti senior management had knowledge or reason to know in both instances that their products were intended for reexportation to Iran
  • Ubiquiti’s conduct resulted in the provision of goods related to broadband wireless connectivity  to Iranian entities
  • The period of violation lasted over five years
  • Ubiquiti had no OFAC compliance program in place

Treasury Department Releases Foreign Sanctions Evaders List

Thursday, March 13th, 2014 by Brooke Driver

By: Brooke Driver

On February 6, the Treasury Department released its new Foreign Sanctions Evaders List, which you should incorporate into your screening process for selecting potential international clients and associates. The list identifies foreign individuals and entities that have either violated, attempted to violate, conspired to violate or caused a violation of U.S. economic and financial sanctions on Syria or Iran or facilitated deceptive transactions for or on behalf of persons subject to such sanctions. Individuals and entities included on the list are prohibited from working with U.S. commercial or financial systems. Likewise, U.S. persons or companies are forbidden to directly or indirectly enter into business relations with any of the listed parties unless OFAC grants permission or the transaction is exempt under the International Emergency Economic Powers Act.

To view the list, click here: http://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/fse_list.aspx.

BIS Settles with Ansell and Comasec for Attempted Transshipment of Industrial-Strength Gloves to Iran through UAE

Thursday, March 13th, 2014 by Brooke Driver

By: Brooke Driver

Well, folks, here’s yet another case of the consequences of defying U.S. embargoes. BIS has announced that it has reached a settlement agreement with Ansell Protective Products Inc. of New Jersey and Comasec of Gennevilliers, France. Specifically, Ansell was charged with two counts of engaging in prohibited conduct by exporting items to Iran without the required license and two counts of evasion, while Comasec was charged with two counts of causing, aiding or abetting and two counts of evasion. Between June 27, 2008 and September 19, 2008, Ansell entered into business with French company Comasec SAS and agreed to export 35,000 pairs of Nitrotough N115 and Blue Nitrile industrial-strength gloves with a total value of $43,500 to Comasec’s client Zhabeh Safety Co. of Tehran, Iran. To avoid the U.S. embargo, Ansell and Comasec chose to first ship the items to the UAE, where they would then be transferred to their final destination in Iran. The scheme was thwarted in March of 2009, when the violation was discovered and the items seized by CBP.

The two companies were certainly smart to settle, rather than go to court over these charges, as the investigation had uncovered a significant amount of evidence of both companies’ conscious efforts to continue with the transaction despite the U.S. sanction. The evidence ranged from invoices that explicitly stated the end user’s location in Iran to emails between Ansell and Comasec expressing their knowledge of the U.S. embargo against Iran and detailing their plan for avoiding the restrictive U.S. law. Considering the amount and gravity of the evidence, in fact, BIS’ settlement of a $190,000 fine for each company is surprisingly lenient.

Of course, the relatively low value of the items involved certainly played a role in determining the appropriate payment, but Ansell’s and Comasec’s blatant disregard for U.S. regulations seems to merit a more severe consequence. All the same, the case certainly proves the point yet again that it is never worth the cost to engage in business with an embargoed country and that BIS is cracking down on those that do.