by Jeremy Paner
Last week the Office of Foreign Assets Control (OFAC) announced its settlement with Crédit Agricole Corporate and Investment Bank (CA-CIB) for violations of the Sudanese, Iranian, Cuban, and Burmese Sanctions Regulations. The bank concurrently entered into a deferred prosecution agreement and agreed to pay $787.3 million in criminal and civil penalties to various federal and state agencies. The New York State Department of Financial Services (DFS) also ordered the bank to terminate the employment of an identified relationship manager and retain an independent consultant chosen by the Department to conduct a comprehensive review of its AML and OFAC compliance programs.
According to the OFAC Settlement Agreement, CA-CIB and many of its predecessor banks illegally provided Sudan, Iran, Cuba, and Burma access to the U.S. financial system. The banks provided this access to the U.S. Dollar by “stripping” references to the embargoed countries from payment instructions. This stripping led U.S. banks to unknowingly export prohibited financial services.
by Jeremy Paner
On September 28, the District Court for the District of Columbia issued a Memorandum Opinion granting the government’s Motion for Summary Judgment in the matter of OKKO Business PE v. Lew, et al., Civil Action No. 1:14-cv-925 (CKK), __ F.Supp.3d __ (D.D.C. 2015). This case arises from the denial of a Release of Blocked Funds license application OKKO Business PE (OKKO) submitted to the Office of Foreign Assets Control (OFAC) in May 2012. This license sought the unblocking of a 200,000 Euro transfer that originated from an OKKO account at Citi Bank Ukraine. Citi Bank blocked the transfer in the United Kingdom pursuant to the Belarus Sanctions Regulations. The payment instruction identified the Belarusian Oil Trade House as the beneficiary of the payment. OFAC designated that entity pursuant to Executive Order 13405 on May 15, 2008.
OKKO operates gas stations throughout Ukraine. In April 2012 it entered into a deposit agreement with the Belarusian Oil Trade House for an oil auction. The Release of Blocked Funds license application states that the purpose of the blocked payment was for “participation in auctions to purchase petroleum products from Belarusian oil refineries.” OFAC denied the license request in October 2012, because the funds transfer represents an “interest in property of a sanctions target described in Executive Order 13405.” Subsequent to this denial, OKKO cancelled its deposit agreement with the SDN, and requested reconsideration of the license. OKKO asserted that the funds should be released, because an SDN no longer has an interest in the blocked property. After its request for reconsideration was denied, OKKO sought a de novo judicial review. Continue reading
by Jeremy Paner
In late September, the U.S. Department of the Treasury and U.S. Department of Commerce amended the regulations that form the Cuban embargo. These revisions further support the policy shift President Obama announced in December 2014. This new policy seeks to increase the free-flow of information to and within Cuba, facilitate people-to-people travel, and empower the nascent Cuban private sector. The business community influenced the September amendments through its dialogue with the Office of Foreign Assets Control (OFAC) and the Bureau of Industry and Security (BIS). Although additional relaxation of the Cuban embargo may not be possible without Congressional action, U.S. businesses should continue to seek specific licenses when their activity furthers the new Cuba policy, but does not fall within the general licenses.
Physical Presence in Cuba
The most significant change in the new Cuba regulations is the authorization for the following businesses and organizations to establish and maintain a presence in Cuba to conduct ongoing operations:
- News bureaus;
- Exporters of certain goods authorized for export or reexport by Commerce and OFAC to Cuba;
- Mail and parcel transmission, and cargo transportation service providers;
- Telecommunication and internet-based services providers;
- Organizers and providers of certain educational activities;
- Religious organizations; and
- Carrier and certain travel service providers. (31 CFR 515.573).
The second category of permitted physical presence facilitates the U.S. Commerce Department’s Support for the Cuban People license exception, which authorizes the export of EAR99 building materials, equipment, tools, supplies and instruments for use by the private sector in Cuba. (15 CFR 740.21(b)). Although this license exception seems quite broad, it does not permit partnership with the Cuban government, as its purpose is the promotion of independent economic activity.