Archive for the ‘Treasury Dept’ Category

U.S. Antiboycott Compliance: New Federal List Published

Tuesday, January 31st, 2017 by Danielle McClellan

By: Melissa Proctor, Polsinelli PC

Companies doing business in the Middle East take note: The Treasury Department recently published its quarterly list of countries that currently require participation or cooperation with an international boycott, such as the Arab League‘s boycott of Israel.

Even though many of these countries are WTO members and were required to shut down their Arab League offices as a condition of membership, many boycott-related requests are still being issued by government agencies and companies in these countries. The countries that are designated on this list, which by the way are the very same countries that were listed in the Third Quarter list, are:

  • Iraq
  • Kuwait
  • Lebanon
  • Libya
  • Qatar
  • Saudi Arabia
  • Syria
  • United Arab Emirates
  • Yemen

To view the list, click here.

If you are not familiar with U.S. antiboycott requirements, Part 750 of the Export Administration Regulations (EAR) prohibits U.S. companies and their foreign affiliates from complying with requests related to a foreign boycott that is not sanctioned by the U.S. Government. Specifically, U.S. companies and their overseas affiliates are prohibited from agreeing to:

  1. Refuse to do business with or in Israel or with blacklisted companies
  2. Discriminate against other persons based on race, religion, sex, national origin or nationality
  3. Furnish information about business relationships with or in Israel or with blacklisted companies, or
  4. Furnish information about the race, religion, sex, or national origin of another person

Foreign boycott-related requests can take many forms, and can be either verbal or written. They can appear in bid invitations, purchase agreements, letters of credit and can even be seen in emails, telephone conversations and in-person meetings. Some recent examples of boycott-related requests include:

  • “Provide a certificate of origin stating that your goods are not products of Israel.”
  • “Provide the religion and nationality of your officers and board members.” 
  • “Suppliers cannot be on the Israel boycott list published by the central Arab League.”  
  • “Provide a signed statement from the shipping company or its agent containing the name, flag and nationality of the carrying vessel and its eligibility to enter Arab ports “

In addition, implementing letters of credit that contain foreign boycott terms or conditions is also prohibited under the EAR.

Antiboycott compliance is a key issue for U.S. companies doing business in the Middle East, and personnel on the front lines with customers and supply chain partners in these countries should be trained to identify potential foreign boycott-related requests and escalate them to senior compliance personnel or in-house counsel to determine the applicable OAC and IRS reporting requirements.

Companies that receive boycott-related requests must submit quarterly reports to the Office of Antiboycott Compliance (OAC) unless an exemption applies. Failing to timely report a boycott request or complying with the request itself can lead to the imposition of civil penalties by the OAC. The IRS also requires U.S. taxpayers to report their operations in countries that require participation or cooperation with an international boycott on IRS Form 5713 (International Boycott Report) – the forms are submitted annually with U.S. tax returns.  Failure to comply with the Internal Revenue Code’s antiboycott requirements can lead to the revocation of certain international tax credits and benefits.

© Polsinelli PC, Polsinelli LLP in California

Treasury Releases List of Boycotted Countries

Wednesday, July 16th, 2014 by Brooke Driver

By: Brooke Driver

The Department of Treasury released the most current list of countries which require or may require participation in, or cooperation with, an international boycott, which includes:

• Iraq
• Kuwait
• Lebanon
• Libya
• Qatar
• Saudi Arabia
• Syria
• United Arab Emirates
• Yemen

This list relates to the US antiboycott provisions in the IRS tax code that prohibit US persons in the US and abroad from complying with the Arab League boycott of Israel. While the Commerce Department does not publish a similar list for its antiboycott rules in the Export Administration Regulations, this Treasury list is certainly a clear indicator of where companies should focus their limited compliance resources when it comes to the EAR antiboycott rules.

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.

Treasury Identifies Countries Requiring Cooperation With an International Boycott

Thursday, January 17th, 2013 by Danielle McClellan

By: John Black

Once again the Treasury Department has identified the countries cooperating with an international boycott that raises issues related to claiming foreign tax credits under the Internal Revenue Service (IRS), specifically section 999(a)(3) of the IRS Code of 1986. The countries are:

  • Iraq
  • Kuwait
  • Lebanon
  • Libya
  • Qatar
  • Saudi Arabia
  • Syria
  • United Arab Emirates
  • Yemen

The IRS antiboycott rules come into play in many of the same situations in which the antiboycott provisions in Part 760 of the Export Administration Regulations (EAR) come into play. While the Commerce Department does not publish a list of countries for its EAR Part 760 antiboycott rules, as a practical matter the IRS list certainly represents many of the highest risk countries for EAR purposes so it is a good starting point for the focus of your EAR antiboycott compliance program. For EAR compliance purposes, US persons should also be aware that certain other Moslem countries cooperate with the Arab League boycott of Israel and present antiboycott compliance issues. These other countries include Bangladesh, Malaysia, Indonesia and Pakistan.

For the actual Federal Register notice go to http://www.gpo.gov/fdsys/pkg/FR-2012-11-16/html/2012-27737.htm

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.

US Publishes Rules to Prohibit Foreign Subsidiaries of US Companies from Doing Business with Iran

Thursday, January 17th, 2013 by Danielle McClellan

By: John Black

As we described in past issues, on December 26, 2012, the United States published a Federal Register notice to revise the Iranian Transaction and Sanctions Regulations (ITSR) to prohibit foreign-based subsidiaries of US companies from being involved in most activities with Iran. The Office of Foreign Assets Control (OFAC) in the US Treasury Department revised the ITSR to implement elements of the Iran Threat Reduction and Syria Human Rights Act of 2012 and multiple executive orders.

One of the key changes is that a new section 560.215 was added to the ITSR to prohibit entities owned or controlled by a United States person and established or maintained outside the United States from “knowingly” engaging in activities in which US persons have long been prohibited from engaging. These entities outside the United States, let’s call them foreign subsidiaries, are “owned or controlled by a US person if the US person:

  • Holds a 50 percent or greater equity interest by vote or value in the entity;
  • Holds a majority of seats on the board of directors of the entity; or
  • Otherwise controls the actions, policies, or personnel decisions of the entity.

Now, foreign subsidiaries, like US persons, are prohibited from knowingly engaging in any transaction directly or indirectly with Government of Iran or any person subject to the jurisdiction of Iran (for example, any entity located in Iran). “Knowingly” means having actual knowledge or reason to know. If you combine “reason to know” with engaging “indirectly” in an activity, you have a broad prohibition that could create huge compliance challenges for large and complex organizations.

There are two key exemptions from this new prohibition on foreign subsidiaries. The first applies to certain activities related to the natural gas pipeline from the Shah Deniz natural gas field in Azerbaijan’s sector of the Caspian Sea to Turkey and Europe (and related pipeline projects). The second exemption applies to authorized intelligence activities of the US Government, which frees up the US CIA and its affiliates from having to file voluntary disclosures for actions in Iran.

The ITSR includes a “winding down” general license provision that gives foreign subsidiaries a short time period to end their activities involving Iran. ITSR 560.555 authorizes activities normally incident to winding down newly prohibited activities through March 8, 2013 as long as no US persons are involved in those activities.

On a related point, section 4 of an October 9, 2012 Executive Order says that the penalties for a foreign subsidiaries violations may be assessed against the owning/controlling US company but the penalties will not be applied if the US person divests or terminates its business with the entity by February 6, 2013.

When the US Government imposed its trade embargo on Iran back in the mid-1990’s it intentionally allowed foreign subsidiaries to do business with Iran as long as the US parent company was not involved. Not only are those days gone, but now US persons face the difficult, and in some cases nearly impossible, task of ending their foreign subsidiaries activities in Iran or ending their ownership/control of the foreign subsidiary. Good luck will be needed for this impossible task, even for those companies who began ending their Iran activities long before these new rules entered into force.

For the complete Federal Register notice go to http://www.treasury.gov/resource-center/sanctions/Programs/Documents/fr77_75845.pdf

Treasury Lists Countries Requiring Cooperation With an International Boycott

Tuesday, January 3rd, 2012 by Holly Thorne

The Department of the Treasury published a current list of countries which require or may require participation in, or cooperation with, an international boycott (within the meaning of section 999(b)(3) of the Internal Revenue Code of 1986).  The purpose of this list is to provide guidance regarding compliance with the antiboycott compliance aspects of the US tax code.  While this advice is not technically specific to the antiboycott provisions in Part 760 of the Export Administration Regulations (EAR), it certainly is a reasonable basis for a company to use when it decides how to allocate its compliance resources for compliance with the EAR antiboycott rules.

Treasury identified the following countries that “require or may require participation in, or cooperation with, an international boycott (within the meaning of section 999(b)(3) of the Internal Revenue Code of 1986),” e.g., the Arab boycott of Israel:

– Kuwait

– Lebanon

– Libya

– Qatar

– Saudi Arabia

– Syria

– United Arab Emirates

– Yemen

Iraq is not included in this list, but its status with respect to future lists remains under review by the Department of the Treasury.

Treasury Lists – Countries Requiring Cooperation with an International Boycott

Wednesday, October 5th, 2011 by Holly Thorne

The Department of the Treasury has published a current list of countries which require or may require participation in, or cooperation with, an international boycott (within the meaning of section 999(b)(3) of the Internal Revenue Code of 1986).

The countries are:

  • Kuwait
  • Lebanon
  • Libya
  • Qatar
  • Saudi Arabia
  • Syria
  • United Arab Emirates
  • Yemen

Republic of Iraq is not included in this list, but its status with respect to future lists remains under review by the Department of the Treasury.

While this list officially applies to the Internal Revenue Service (IRS) antiboycott rules, it is a reasonable indicator of the high risk countries for the EAR antiboycott regulations.

Treasury Identifies Countries Participating in the Secondary and Tertiary Arab League Boycotts of Israel

Monday, June 27th, 2011 by Anna Barone

By: Anna Barone

In accordance with section 999(a)(3) of the Internal Revenue Code of 1986, the Department of the Treasury is publishing the following list of countries which require or may require participation in, or cooperation with, an international boycott:

Kuwait, Lebanon, Libya, Qatar, Saudi Arabia, Syria, United Arab Emirates, and Yemen (more…)

US Lifts Sanctions on High Level Libyan Government Defector

Tuesday, May 3rd, 2011 by Anna Barone

Two weeks after President Obama implemented sanctions against Muammar Qadafi and the Government of Libya, Treasury designated Libya’s then Foreign Minister, Moussa Koussa for sanctions pursuant to Executive Order 13566 for being a senior official of the Government of Libya.

Koussa has since severed ties with the Qadhafi regime, and today the United States is lifting sanctions against him as he is no longer subject to sanctions for being a senior official of the Government of Libya. Koussa’s name will be removed from Treasury’s Specially Designated Nationals (SDN) List, and he is no longer subject to an asset freeze.

Koussa’s defection and the subsequent lifting of sanctions against him should encourage others within the Libyan government to make similar decisions to abandon the Qadhafi regime.

There are currently 13 senior Libyan government officials on the SDN List, and we expect to announce additional sanctions against other officials in the coming days. Those who continue to serve in the Libyan government should be put on notice that Treasury will continue to aggressively identify and target senior officials for sanctions.

More Information Available:

http://www.treasury.gov/connect/blog/Pages/Lifting-Sanctions-Against-Libyas-Former-Foreign-Minister.aspx