Monthly Archives: February 2016

February 19, 2016

The Department of Homeland Security Further Restricts the Visa Waiver Program

by Jeremy Paner

visa_istockYesterday, the Department of Homeland Security (DHS) announced additional “countries of concern” under the Visa Waiver Program Improvement and Terrorist Travel Prevention Act of 2015.  Individuals who traveled to Libya, Somalia, or Yemen since March 1, 2011 are now ineligible to enter the United States under the Visa Waiver Program. In December 2015, the United States Congress stripped waiver eligibility for both travelers to and dual-nationals of Iran, Iraq, Sudan, or Syria. This disqualification will also be applicable to travelers to and dual-nationals of any other country later designated as a State Sponsor of Terrorism.

The Visa Waiver Program generally permits citizens and nationals of 28 participating countries to travel to the United States without obtaining a visa. Participant countries include close U.S. allies such as Australia, Germany, Italy, Japan, the Netherlands, and the United Kingdom. Travelers who have been in countries of concern since March 1, 2011, and individuals such as German-Iranian dual-nationals, should carefully consider the new visa requirements prior to scheduling travel to the United States.  Continue reading

February 9, 2016

OFAC Announces Its First “50 Percent Rule” Penalty

by Jeremy Paner

Yesterday, the U.S. Department of the Treasury’s Office of Foreign Assets Control announced the first settlement of apparent violations based on its “50 Percent Rule.” This interpretive guidance, first articulated in February 2008, was expanded in August 2014. Under the current guidance, entities that are 50 percent or greater directly or indirectly owned by one or more blocked persons[1] in the aggregate are considered to be blocked. U.S. companies are therefore generally prohibited from any dealings with entities owned by blocked persons, even if those entities are not specifically listed by OFAC.

This penalty highlights the fundamental due diligence aspect of sanctions compliance, which requires assessments beyond screening against the Specially Designated Nationals (SDN) List, the Sectoral Sanctions Identification (SSI) List and the countries against which the United States maintains partial or comprehensive sanctions programs.

Violations of the Zimbabwe Sanctions Regulations

Barclays Bank Plc agreed to pay $2,485,890 to resolve apparent violations of the Zimbabwe Sanctions Regulations (31 C.F.R. Part 541), arising from the provision of financial services through the United States. Barclays New York branch, and other U.S. banks processed transactions between July 2008 and September 2013 for three corporate customers of Barclays Bank of Zimbabwe Limited. Although not specifically listed, these entities are blocked as a matter of law, because they are owned 50 percent or more by the Industrial Development Corporation of Zimbabwe (IDCZ). OFAC designated IDCZ pursuant to Executive Order 13469 on July 25, 2008. As of that date, all property IDCZ owned 50 percent or more was also blocked.

OFAC determined that Barclays did not voluntarily self-disclose the violations. It appears that other financial institutions blocked and reported some of the transactions. These reports would have notified OFAC of “substantially similar apparent violation[s],” thereby precluding Barclays of receiving credit for voluntary self-disclosure.

50 Percent Rule Enforcement Factors

The settlement announcement sets forth three factors that may determine whether a civil penalty is appropriate for violations arising from the 50 Percent Rule.

  1. A direct customer relationship with the entities that are not listed, but blocked as a matter of law;
  2. Failure to act on records that demonstrate ownership by a blocked person; and
  3. Publically available information about ownership by one or more blocked persons.

The availability of public information will likely weigh heavily toward a civil penalty if the peers of the violating business act on that information.

We will continue to monitor OFAC enforcement actions and publish updates as significant developments arise.


 

[1] The 50 Percent Rule also applies to entities owned by persons on the Sectoral Sanctions Identification (SSI) List. Sectoral Sanctions restrictions apply to entities owned 50 percent or more in the aggregate by one or more persons on the SSI List.

February 8, 2016

OFAC Issues a Warning: High Risk International Trade Managers Must be Trained on Prohibited Facilitation

by Jeremy Paner

Training Business People Team Teamwork Success Strategy Concept

Last week, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced a Finding of Violation against Johnson & Johnson (Middle East) Inc. for violations of the Sudanese Sanctions Regulations. Although such a finding does not result in a monetary penalty, Johnson & Johnson will not be eligible for a 25 percent “first violation” reduction for any violations that may occur over the next five years. See OFAC Economic Sanctions Enforcement Guidelines, available here.

Johnson & Johnson (Middle East) is a New Jersey corporation and wholly owned subsidiary of Johnson & Johnson. Following a corporate restructuring in 2009, Johnson & Johnson (Middle East) managed Johnson & Johnson (Egypt) S.A.E., including its trade with Sudan. This management led to the prohibited facilitation of five shipments of goods to Sudan from  Johnson & Johnson (Egypt) S.A.E. over a seven month span in 2010.

The United States maintains a comprehensive embargo on Sudan, which prohibits the exportation of goods and services to that country. The Sudanese Sanctions Regulations explicitly prohibit facilitation of such exportation. 31 C.F.R. 538.206 and 407. Continue reading

February 2, 2016

Continued International and Domestic Coordinated Focus on Money Laundering

by Jeremy Paner

stack_100_dollar_bills_iStock_000005509580XSmallYesterday, the U.S. Drug Enforcement Agency (DEA) announced an unspecified number of arrests of Hizballah money launderers, including Mohamad Noureddine. These arrests followed the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) designation of Noureddine pursuant to its counterterrorism authority. The OFAC press release for this designation identifies Noureddine as a key Hizballah money launderer. According to OFAC,  Noureddine and his company Trade Point International S.A.R.L. established a money laundering network across Asia, Europe, and the Middle East that provides bulk cash shipping and black market currency exchange services for those seeking to hide their ill-gotten gains.

Hizballah International Financing Prevention Act of 2015

Irrespective of the detention of Noureddine, foreign financial intuitions that knowingly facilitate or conduct significant financial transactions for Trade Point International S.A.R.L. may have their U.S. correspondent or payable through accounts severed. OFAC has this authority under Section 102 of the Hizballah International Financing Prevention Act of 2015, which authorizes secondary sanctions on Hizballah. Continue reading