Then There Was One: OFAC Removes Iraqi Bank from the Part 561 List

May 22, 2013 Leave a comment

Last week, the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced that it was releasing Elaf Islamic Bank (Elaf) from the Part 561 List. The Part 561 List targets those foreign financial institutions facilitating certain significant financial institutions on behalf of certain Iranian financial institutions by barring their ability to establish and maintain correspondent banking relationships with the U.S. The name comes from Part 561 of Title 31 of the Code of Federal Regulations which contains the Iranian Financial Sanctions Regulations (IFSR), a set of regulations promulgated pursuant to the Comprehensive Iran Sanctions Accountability, Divestment Act of 2010. Prior to Elaf’s removal, it was one of two banks on the Part 561 List, the other being Kunlun Bank.

In their press release concerning Elaf’s removal, Treasury cited the fact that Elaf undertook a number of steps which led to their removal, which by OFAC standards occurred very rapidly. First, Elaf engaged Treasury immediately upon their designation. Second, Elaf appropriately identified the basis of their designation, the provision of significant financial transactions for Export Development Bank of Iran (EDBI), and took steps to terminate that relationship. Those steps included freezing EDBI’s accounts, and reducing their overall exposure to the Iranian financial sector. As I have noted previously, speed, accurate identification of the basis of the designation, and addressing that basis, are the keys to being removed from the OFAC Specially Designated Nationals and Blocked Persons List (SDN List). It appears the same holds true for the Part 561 List, which follows the same administrative removal process as the SDN List.

Treasury’s actions demonstrate once again that removal of an OFAC designation is possible if addressed in the appropriate manner. Foreign financial institutions still dealing with Iran may want to pay heed to the actions of Elaf. The U.S. Congress and many pro sanctions groups in Washington are pushing for more aggressive enforcement and implementation of the types of sanctions that Elaf faced. If they get their way, a number of foreign financial institutions may find themselves having to follow the model Elaf set forth for removal from the Part 561 List or from the OFAC SDN List itself.

The author of this blog is Erich Ferrari, an attorney specializing in OFAC matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrariassociatespc.com.

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State and Treasury Split Duties in Designating New Individual and Entities to OFAC SDN List

December 14, 2012 Leave a comment

Yesterday, the United States Departments of State and of the Treasury designated a number of Iranian individuals and entities pursuant to Executive Order (E.O.) 13382. E.O. 13382 targets those parties involved in Iran’s proliferation of weapons of mass destruction activities. Once designated pursuant to this authority, any assets owned or controlled by the designated parties under U.S. jurisdiction are blocked. Moreover, U.S. persons are prohibited from engaging in most transactions with the designated parties. Under E.O. 13382, both the Treasury Department and the State Department have the authority to designate parties for sanctions. Treasury’s designations are administered through the Office of Foreign Assets Control (“OFAC”) who also maintain the list of Specially Designated Nationals and Blocked Persons (SDN List) in which these designated parties names will now appear.

OFAC designated the following individuals and entities: Fereidoun Abbasi-Davani, Morteza Ahmadali Behzad, Seyed Jaber Safdari, Aria Nikan Marine Industry, Iran Pooya, and Pouya Control (Tejarat Gostar Nikan Iranian Company). The State Department added the following designations: Amir Hossein Rahimyar, Mohammad Reza Rezvanianzadeh, Faratech, Neda Industrial Group, Tarh O Palayesh, and Towlid Abzar Boreshi Iran. All of these entities are alleged to have engaged in activities to further Iran’s nuclear proliferation efforts. In addition, these individuals and entities have also had designations under the Iranian Financial Sanctions Regulations placed upon them. This indicates that those foreign financial institutions who deal with these individuals and entities could be subject to secondary sanctions under the Comprehensive Iran Sanctions, Accountability and Divestment Act of 2010 (CISADA).

These individuals do have some recourse under OFAC’s regulations to contest their designation. There is an administrative reconsideration process that can be engaged in with the agency, however, it is often a long and burdensome process involving the production of significant documents and information to OFAC in order to prove that their evidentiary basis for making the designation is flawed. This is a task that becomes even more difficult because OFAC rarely provides any of the information that forms the basis of their designation, leaving the designated party to guess what OFAC’s basis is and to try to provide arguments and evidence to counter that. That said, designations do occur regularly and if any of these blocked parties believe they have been wrongly designated they should pursue such reconsideration.

The author of this blog is Erich Ferrari, an attorney specializing in OFAC matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrariassociatespc.com.

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OFAC Places Two Mali Nationals, One Mali Entity on SDN List

December 10, 2012 Leave a comment

Last Friday, the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) placed two individuals, Hamad El Khairy and Ahmed El Tilemsi, from Mali and one entity in Mali, Movement for Unity and Jihad in West Africa (MUJWA) on the Specially Designated Nationals and Blocked Persons List (“SDN List”) under the authority of Executive Order (E.O) 13224. The targeting of these parties was actually directed by the U.S. Department of State, who also have authority to utilize sanctions under E.O. 13224. E.O. 13224 was issued shortly after September 11, 2001, in an effort to give the U.S. additional authorities under which to apply economic sanctions to parties engaged in international terrorism and those providing material support to those engaged in such activities. As a result of these designations, U.S. persons can no longer engage in any transactions with the designated parties and any assets under U.S. jurisdiction belonging to those parties are to be blocked.

In addition to their E.O. 13224 designation, MUJWA is also listed by the United Nations 1267/1989 al-Qa’ida Sanctions Committee. As part of their UN listing all member states are ordered to implement assets freezes, travel bans, and arms embargoes against MUJWA. When effectively implemented UN sanctions can be extremely effective, much more so than unilateral sanctions such as the one imposed by the U.S. In addition, UN sanctions may procedurally be more sound than the U.S. sanctions regime, as those designated under UN sanctions have recourse to challenge their designation through submission of the case to an independent Ombudsman who reviews the cases to determine whether or not the designation was made in error or whether the circumstances had changed to such a degree that the designation was no longer warranted. At a meeting last week in New York, it was confirmed that in the overwhelmingly majority of cases reviewed by the Ombudsman that the recommendation was ultimately made to remove the designated party from the sanctions list.

OFAC also allows for reconsideration of the designations made to the Specially Designated Nationals and Blocked Persons List (SDN List), whether they be made by Treasury or State. However, in that process there is no independent arbiter to review the designation, the review is often carried out by the very same officials that placed the party on the list in the first place. In addition, OFAC is under no mandated timeline to process the reconsideration, and I personally have worked on cases where the reconsideration has been pending for nearly eight years. Finally, OFAC will also turn over very little, if any evidence, serving as the basis of the designation, opting instead to engage in back and forth communications with the designated party where OFAC requests additional information and the designated party supplies such information. Once OFAC is satisfied with the information it has received it makes its decision as to whether to rescind the designation.

Despite the problems with the OFAC SDN reconsideration process, parties are frequently removed from the list. As such, any party seeking to have such a designation reconsidered should engage with OFAC as soon as possible and begin the steps towards removing their designation.

The author of this blog is Erich Ferrari, an attorney specializing in OFAC matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrariassociatespc.com.

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OFAC Issues New Kingpin, Terrorist SDN Sanctions

November 20, 2012 Leave a comment

Today the United States Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) announced two sets of designations. The first targeted the Ibarra Cardona Drug Trafficking Network. The other targeted a hawala operation with alleged ties to the Taliban.

The hawala operation, Rahat Ltd., has branches in Afghanistan, Pakistan, and Iran which OFAC states have been used by the Taliban to facilitate their illicit financial activities. OFAC also designated the owner of Rahat Ltd, Mohammed Qasim, and the owner and manager of its Quetta, Pakistan branch, Musa Kalim. OFAC believes the hawala operation has been involved in providing financial services to the Taliban’s shadow governor for Helmand Province Barich. Allegedly, these services are used to pay other Taliban commanders to carry out operations in Southern Afghanistan as well and last year $500,000 of Taliban money was deposited in Rahat’s Quetta, Pakistan branch, while hundreds of thousands of dollars in Taliban accounts flowed through Rahat.

The other set of designations targeted five individuals and three entities in Tijuana, Mexico. These parties are alleged to have been involved in the Sinaloa Cartel’s methamphetamine production by providing the Cartel with precursor chemicals needed for meth production.

As is the case with almost all OFAC designations on the Specially Designated Nationals and Blocked Persons List (“SDN List”), any assets falling under U.S. jurisdiction belonging to these parties will be blocked and U.S. persons are prohibited from engaging in transactions with such designated parties.

All of these designations can be challenged under 31 C.F.R. 501.807, the Treasury regulation which outlines the administrative reconsideration process of SDN listings. To effectively challenge a designation under that regulation, the party designated must submit evidence and arguments to show either a case of mistaken identity in the designation, or a change of circumstances sufficient to warrant a delisting. Although, I have assisted a number of parties in being removed from the list, it is often a difficult task and requires a tremendous amount of patience. If any of those parties targeted today wish to seek a reconsideration, they have likely have a long road ahead of them.

The author of this blog is Erich Ferrari, an attorney specializing in OFAC matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.

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OFAC Makes Large Scale Designation Under the Kingpin Act

August 15, 2012 Leave a comment

Today, the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced the designation of two individuals and a number of entities under the Foreign Narcotics Kingpin Designation Act (Kingpin Act). The two individuals designated, Christina Stetanel Castellanos Chacon and Maria Corina Saenz Lehnhoff, were Guatemalan nationals who are believed by OFAC to be engaged in the laundering of narcotics trafficking proceeds on behalf of Marllory Chacon Rossell. In addition to these two individuals were twenty-four (24) entities designated including a hotel, a construction company, an import-export company, a clothing store, and a household goods store. It is believed by OFAC that all of these companies were used as fronts for laundering proceeds of illegal narcotics sales.

Under the Kingpin Act there are two types of designations: Tier I designations and Tier II designations. Tier I designations are made by the President on or about June 1st of every year and identifies those individuals who are believed to be significant foreign narcotics traffickers. The Tier II designations are made by OFAC and identify those parties believed to be providing materials support or assistance to the Tier I kingpins. Tier II designations can be made at any time of the year and are made frequently.

It is interesting to note that there have been cases where Tier I Kingpin designations were placed upon individuals who were considered U.S. persons, particularly U.S. permanent legal residents. This presents an issue of whether or not a party can be designated as a significant foreign narcotics trafficker if they are actually not a foreign person. The case law on the issue is pretty much non-existent and from what I have seen and heard OFAC has not found such arguments compelling when considering a reconsideration of the designation. That said, it would be interesting to see how a court would deal with an OFAC Kingpin with U.S. person status contesting their designation as a significant foreign narcotics trafficker on the basis that they are not a foreign person. We may see this argument employed sooner or later and I think it’s an important question that needs to be settled by the courts.

The author of this blog is Erich Ferrari, an attorney specializing in OFAC matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.

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Seeking Help in Expediting an OFAC SDN Reconsideration?

July 29, 2012 Leave a comment

Removing a Specially Designated National (“SDN”) designation imposed by the United States Department of the Treasury’s Office of Foreign Assets Control can be a very difficult process. Often times when contesting such a designation it takes months, and sometimes even years, for OFAC to respond to the a petition for reconsideration, and even then they only ask more questions which could have or should have been asked earlier. In order to expedite the process of seeking an OFAC SDN reconsideration follow these three key rules:

1. Submit early: The OFAC SDN reconsideration process is long and in almost all cases takes at least a few years to resolve. As such, as soon as the circumstances warrant a reconsideration of the designation a reconsideration should be submitted. In some cases this may be upon designation if the designation was made in error, or in cases of changed circumstances, the reconsideration should be made once connections with other designated parties are severed or the conduct engaged in has ceased.

2. Provide official documentation: Although OFAC often relies upon newspaper reports, it doesn’t mean that you should. Any type of official and/or legal documentation showing ownership and assets should be provided to OFAC to show that there is no criminal background of the party requesting reconsideration and there is no shared assets or ownership by other SDNs. Any documentation can be helpful, but official and legal documentation are the most compelling to OFAC.

3. Lean on home countries to assist: OFAC has limited resources and personnel to handle reconsiderations. As such, responding to requests becomes a matter of priority, and priority is generally dicatated by who needs to be responded to. As such, a request for reconsideration is going to receive less attention coming from a private individual with no follow up by that party’s home country, then it would if the home country was requesting information on the reconsideration through diplomatic channels. Thus, once a request for reconsideration is submitted, it is useful to have officials from the designated party’s home country or their embassy communicate with OFAC regarding the reconsideration.

The author of this blog is Erich Ferrari, an attorney specializing in OFAC matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.

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OFAC Makes New Designations Pursuant to Somalia Sanctions

July 5, 2012 Leave a comment

Today the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated six (6) individuals they believe to be engaged in fueling violence and instability in Somalia. These individuals included two Eritrean government officials, Tewolde Negash and Taeme Goitom; a Sudanese al-Shabaab foreign fighter, Suhayl Salim Muhammad `Abd-el-Rahman (aka Abu-Faris), and three Kenyan al-Shabaab supporters, Abubaker Shariff Ahmed, Omar Awadh Omar and Aboud Rogo Mohammed. The aforementioned individuals are all alleged to have different roles, however, the allegations all have one overarching theme and that is their support of al-Shabaab and al-Qaeda and for activities aimed at the disruption of the Transitional Federal Government in Somalia.

Today’s designations were all made pursuant to Executive Order 13536 which imposed sanctions on those parties engaged in activities threatening the peace, stability, and security of Somolia. As a result of these designations, U.S. persons are prohibited from engaging in transactions with any of the designated parties and any assets owned by the designated parties which are under U.S. jurisdiction have been blocked. Executive Order 13536 is implemented through the President’s authority under the International Emergency Economic Powers Act (IEEPA). Designations made pursuant to IEEPA are much more difficult to remove than those made under the Foreign Narcotics Kingpin Designation Act (Kingpin Act), which is the underlying authority for a much more fluid sanctions program where designated parties come off and on to the list all the time. That said, there is an advantage when dealing with IEEPA based designations as opposed to Kingpin Act based designations, because disclosure of the evidence used in IEEPA designations is permitted under Freedom of Information Act (FOIA), whereas the Kingpin Act doesn’t permit disclosure under FOIA.

The Somalia designations have caused quite a bit of problems for non-governmental organizations (NGOs) providing humanitarian relief in the impoverished country. The reason for this is that it becomes difficult for NGOs, already operating on limited resources, and in high risk areas, to completely avoid those high profile individuals and organizations which have been designated. Any transactions done knowingly or unknowingly with such parties will lead to liability for the NGOs for sanctions violations. As more Somalia designations are made, the higher risk of sanctions violations the NGOs face in Somalia. As such, NGOs have more to worry about in Somalia than just helping alleviate human suffering.

The author of this blog is Erich Ferrari, an attorney specializing in OFAC matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.

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