Monthly Archives: March 2016

March 25, 2016

U.S. Treasury Sanctions UK Individuals and Businesses for Dealings with Iranian Commercial Airline

by Jeremy Paner

Yesterday, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated UK-based individuals and businesses for their dealings with Mahan Air, a commercial Iranian airline. OFAC designated this airline in 2011 pursuant to its counterterrorism authority for providing support to the IRGC-Qods Force. U.S. individuals and businesses are now generally prohibited from any dealings with these UK designees.  Secondary sanctions also attach to terrorism-related listings.  Foreign financial institutions that knowingly facilitate or conduct significant financial transactions for these designees could be prohibited from maintaining correspondent accounts at U.S. banks.

OFAC has firmly established authority to derivatively designate businesses that provide support or services to designated Iranians, irrespective of the nationality or location of those businesses. The recent lifting of certain secondary sanctions does not limit this authority.  In fact, derivative designations against companies in Europe and Asia will likely increase in the near term.

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March 22, 2016

Increased Sanctions on North Korea Focus on China and Russia

by Jeremy Paner

Last week, President Obama significantly increased sanctions on North Korea through Executive Order 13722, which implements the North Korea Sanctions and Policy Enhancement Act of 2016 (H.R. 757). The Executive Order’s prohibitions and blocking provisions, and designation criteria are substantially more expansive than that Act. Concurrently with the issuance of the Executive Order, OFAC announced the designations of 17 North Korean government officials and organizations, 15 entities, two individuals, and identified 40 blocked vessels under various sanctions authorities.

While neither Congress nor the President imposed secondary sanctions per se, China and Russia should  interpret the Executive Order as a clear warning about their economic ties with North Korea. In the Iran sanctions program, secondary sanctions require that a foreign financial institution “knowingly facilitate or conduct a significant financial transaction” for a particular individual or entity. This evidentiary standard greatly limited the use of those sanctions authorities. The new sanctions against North Korea are clearly aimed at foreign business interests, but unlike secondary sanctions, this new authority does not have an evidentiary impediment to its implementation.

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March 16, 2016

OFAC Provides Cuba Access to the U.S. Dollar

by Jeremy Paner

u-turn-istockYesterday, the U.S. Department of the Treasury and U.S. Department of Commerce announced  further amendments to the Cuban embargo that take effect today.  Changes involving travel and related transactions, banking and financial services, trade and commerce, and the authorization of certain grants and awards will be effective today.  Whereas the majority of the previous amendments sought to benefit the Cuban people by opening certain aspects of Cuban markets to U.S. businesses, many of the most recent revisions to the General Licenses more narrowly and directly benefit Cuban interests.

U-Turn Payments

The most significant change is likely the authorization of so-called U-turn payments, which notionally grants Cuba access to the U.S. dollar.  An amended General License found in 31 C.F.R. 515.584(d) permits funds transfers from foreign banks to pass through one or more U.S. financial institutions before being transferred to another foreign bank,  if neither the originator nor the beneficiary of that transfer is a person subject to the  jurisdiction of the United States.

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March 9, 2016

OFAC Targets Knowing Violations by Foreign Companies

by Jeremy Paner

Oil_Rig_Blue_Dark_shutterstock_17758444Late last month, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced  settlements with two Cayman Island subsidiaries of Halliburton Energy Services, Inc. and CGG Services S.A., a French geoscience exploration and production company. The settlements resolved apparent violations of the Cuban embargo. These penalties highlight the increased compliance expectations imposed on sophisticated international businesses operating in highly-regulated industries.

The violations involving the Halliburton foreign subsidiaries arise from the provision of goods and services to a consortium in which a Cuban state-owned company held a 5 percent interest in the oil and gas produced within an identified concession in Angola. This was not the first OFAC settlement involving Cuban participation in a consortium. In October 2013, OFAC entered into a settlement with Ameron International Corporation to resolve apparent violations of the Cuban Assets Control Regulations arising from the sale of concrete pipe to a consortium in which a Cuban company was a partner.

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