OFAC Designates One New Kingpin; Removals Nearly Two Dozen Others

Lost in all the hype surrounding the passive ING Bank settlement yesterday, was that the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued one new designation under the Foreign Narcotics Kingpin Designation Act (Kingpin Act) and released nearly two dozen SDNs from the Specially Designated Nationals List (SDN List) pursuant to anti-narcotics trafficking sanctions. The individual who was designated, Francisco Antonio Colorado Cessa, was also indicted by a federal grand jury in the Western District of Texas for involvement in a money laundering scheme on behalf of Las Zetas that involved purchasing, breeding, training, and racing American quarter horses in the United States. The indictment was returned on May 30, 2012; however, it was not unsealed until yesterday. The indictment also charges 14 other individuals for involvement in the conspiracy.

OFAC does not always rely on the returning of an indictment to designate a party under one of the sanctions programs they administer. Moreover, there are different burdens of proof for indictments, criminal convictions and OFAC designations. For an indictment to be returned the grand jury only must find that there is probable cause to charge the party or parties being investigated by the grand jury. As most people know, for a criminal conviction the charges have to be proven by the government beyond a reasonable doubt. However, for an OFAC designation, OFAC only needs a reasonable cause to believe that the party they seek to designate is involved in some activity for which one of their sanctions programs permits designation.

There have been a large number of removals from the OFAC SDN List this year. However, the overwhelming majority of those removals have been related to counter narcotics trafficking. This may be because the majority of designations are made pursuant to OFAC’s counter narcotics trafficking sanctions, or because the Office of Global Targeting’s focus is placed more firmly upon those types of designations. An additional consideration, however, could be the fact that many of those designated find themselves also charged with narcotics and money laundering criminal violations in the U.S. and may cooperate with the government in exchange not only to reduce their potential sentence but also to have their names removed from the OFAC SDN List. This is a tactic that has previously been utilized by a few criminal defense attorneys with some modicum of success.

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.

Game of Lists: OFAC SDN List vs. BIS Lists

A lot of time folks dealing with import-export compliance issues get confused by the lists; namely, the List of Specially Designated Nationals and Blocked Persons (SDN List) administered by the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the Proscribed Persons Lists administered by the Bureau of Industry and Security at the U.S. Department of Commerce which is comprised of the Entity List and the Denied Person’s List. The following should offer some insight into the differences between these lists and why you need to know about all of them if you are planning to import or export internationally.

The OFAC SDN List is a list of over 6,000 persons and entities that have been blocked pursuant to any number of U.S. economic sanctions programs. What this means is that the assets of any person, be it an individual or an entity, appearing on this list which is subject to U.S. jurisdiction is to immediately be blocked and U.S. persons are prohibited in engaging in almost all types of transactions with them. This list is updated frequently and also includes individuals, entities, vessels, and banks all over the world who are owned, controlled by, or acting on behalf of targeted governments or groups.

On the other hand, the two BIS Lists are quite different. For example, the BIS Entity List imposes upon foreign persons license requirements supplemental to those found elsewhere in the Export Administration Regulations (EAR). The export, reexport, or transfer of an item to a party on this list without a license required by the Entity List is a violation of the EAR.

The BIS Denied Persons List differs even from the Entity List because it can target both U.S. and foreign persons, and imposes strict licensing requirements which typically come with a presumption of denial. Parties are added to this list by issuance of a Temporary or Permanent Denial Order, and the export, reexport, or transfer of an item to a party on this list constitutes a violation of the EAR.

Despite their differences, these lists have one thing in common: an administrative reconsideration process. While those processes differ, there at least is a way to be removed from these lists if one was so inclined and willing to undergo the process.

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.

OFAC Designates Syria International Islamic Bank

Despite maintaining their own OFAC compliance program, Syria International Islamic Bank winds up on the OFAC SDN List

The United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) has added Syria International Islamic Bank (SIIB) to their list of Specially Designated Nationals (SDN) pursuant to the Non-Proliferation of Weapons of Mass Destruction (NPWMD) sanctions program. As a result all assets of SIIB under U.S. jurisdiction are blocked and U.S. persons are prohibited from engaging in transactions with the bank. It is not clear if the designation was made by OFAC or by the State Department. Both have authority to designate individuals and entities under the NPWMD sanctions. Typically, if OFAC is behind the designation they will issue a press release through the Department of the Treasury’s website. There was no such press release from them, so I am assuming this designation came from the Department of State.

SIIB is the largest privately owned financial institution in Syria and is 49% owned by Qatari nationals, of which 30% is owned by the Qatar International Islamic Bank. The remaining 51% of the bank was sold in an initial public offering to over 15,000 subscribers. It will be interesting to see if any of these private parties are willing to push the bank to seek a reconsideration of its SDN designation since the bank will undoubtedly suffer a loss in business as a result of the designation.

What is perhaps more interesting though, is that SIIB publishes their Anti-Money Laundering (AML) procedures on their website, and believe it or not, SIIB’s AML policy requires checks against the OFAC List. According to this policy:

“It is the policy of the Bank that all Money Transmission transactions performed by the customer of the Bank are checked against the FIU & UN & OFAC lists. If a customer appears as a hit on the UN or OFAC list it is the policy of the Bank to review the transaction to determine if in fact the customer is not listed on OFAC or UN Lists but has the same name. It is the Policy of the Bank that if a transaction was done for money transmission activity, a send transaction, and the sender is listed on the FIU UN & OFAC, the assets are immediately frozen.”

It’s strange to see an entity which is not required to abide by OFAC regulations, maintain an OFAC compliance program, and yet, still find themselves on the OFAC SDN List. Clearly, their compliance department is going to have fits over this 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@ferrari-legal.com.

OFAC SDNT/SDNTK Removals: OFAC Compliance for Foreign Counsel?

Yesterday, the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) removed a number of individuals and entities from the OFAC List of Specially Designated Nationals and Blocked Persons, commonly referred to as the OFAC SDN List, who had be designated as Specially Designated Narcotics Traffickers and Specially Designated Narcotics Trafficking Kingpins. Among these individuals was one of my clients, to remain unnamed, whose designation provides an important lesson on OFAC SDN designations and reconsiderations for lawyers in foreign countries. A brief overview of this individual’s case will help you understand what I mean.

My client was an attorney assisting in the formation of corporate entities in the country which he practiced law. In that country, attorneys forming corporations for their clients and performing other duties on behalf of that corporation are required to have a power of attorney over that corporation on record with the authorities of that country. My client was only involved in the initial formation of a number of entities that were later linked to money laundering operations on behalf of drug traffickers. My client’s services to these entities ended shortly after their initial formation and there was no further contact with them for many years prior to their designation. However, since my client was still on record as having a power of attorney for them, OFAC thought that my client was providing material assistance to these entities and therefore also designated my client. As a result, my client spent nearly four and a half years on the OFAC SDN List and nearly two years pursuing a reconsideration. In the end, through rescission of the powers of attorney for these companies and the provision of numerous documents, my client was removed.

I think there is an important lesson here for lawyers in foreign countries. Often times, counsel publicly sign their names, file documents, and makes other representations on behalf of their clients. However, how much do you really know about your clients? Sure, the big firms in the U.S. are pretty thorough in vetting clients before they take them on, but what about solo practitioners and firms in other countries? Should they also be worried about OFAC compliance?

Well given the case of my client, surely they should. Foreign counsel in countries with a high number of nationals designated pursuant to OFAC administered sanctions programs should carefully screen potential clients and current clients to ensure they aren’t engaged in business with someone who is involved in sanctionable activity. My reason for saying this is because it is clear that OFAC will consider the that a certain level of provision of legal services to an such parties as a basis for designation. Therefore, foreign counsel would be wise to avoid the severe consequences of an OFAC designation and screen their clients carefully.

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.

The Foreign Sanctions Evaders Sanctions a/k/a “The President and OFAC Are Not Messing Around” Sanctions

I didn’t see this coming at all, but yesterday President Obama signed an executive order which will prohibit certain activities with, and entry into the United States of any individuals found to have engaged in violations of U.S. economic sanctions targeting either Iran or Syria. These sanctions will have a huge impact in further blocking parties engaged in sanctionable activity, by sanctioning those who are merely engaged in violating sanctions. Whereas before, someone would have to be engaged in any number of nefarious activities to find themselves on the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) Specially Designated Nationals and Blocked Persons (SDN) List; now just the simple act of transacting with parties on the OFAC SDN List will be enough to be placed on the list.

In essence, this new executive order targets foreign individuals and entities who violate or attempt to violate U.S. economic sanctions targeting Iran or Syria or who have facilitated deceptive practices on behalf of those parties already targeted for sanctioning by U.S. economic sanctions against Iran or Syria. In sum, this means that those foreign parties who have violated U.S. sanctions against Syria or Iran can be placed on the OFAC SDN List, even if those parties are not traditionally subject to U.S. jurisdiction. This is akin to what the U.S. government has already engaged in when they prohibited the maintenance of correspondent or payable through accounts by U.S. depository institutions for foreign financial institutions engaged in significant transactions with designated Iranian banks. The difference now is that it doesn’t just cover financial institutions but any dealings with those parties designated under these new sanctions.

This new executive order, if implemented aggressively, could be devastating. For example, if Treasury uses this new authority to designate and cut off transactions with those parties facilitating funds transfers on relating to dealings with Iran or Syria it could lead to large scale designations of foreign financial institutions, money exchange services, and those trading with Iran and Syria on a barter basis. Again, depending on how aggressively these new sanctions are utilized, such measures could have a chilling effect on the willingness of foreign parties to transact with Iran and that could go a long way in cutting off both unlawful and lawful dealings with Iran and Syria.

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.

New Sanctions Coming for…..Venezuela?

Over a year ago, I wrote a couple of blog postings regarding the growing concerns of the U.S. Government surrounding Venezuela’s ties to the FARC and to Iran. I had noted that, as a result of these concerns, it could be possible that Venezuela could come under increased scrutiny for sanctioning from the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC). As readers of this blog know OFAC has designated several Venezuelans for sanctions, placing those individuals on the OFAC Specially Designated Nationals and Blocked Persons List (SDN List).

On Monday, OFAC Director Adam Szubin gave an interview which confirmed OFAC’s and the U.S. Government’s concern over current activities in Venezuela and the possibility of new sanctions. Szubin also indicated the manner in which those placed on the list can be removed, describing the OFAC SDN administrative reconsideration process set forth in 31 C.F.R. 501.807. Szubin noted that in the last three (3) years over 400 parties had been removed from the OFAC SDN List.

As late as last week the OFAC SDN List contained 258 references to “Venezuela”. This includes designated companies, organizations and persons. According to Szubin, there is a disturbing trend in Venezuela that is leading to the designation of numerous parties under the Foreign Narcotics Kingpin Designation Act (Kingpin Act). This trend has lead to the designations of Venezuela’s current Defense Minister Henry Rangel Silva and the former head of Military Intelligence Hugo Armando Carvajal Barrios.

Szubin stated that Rangel Silva’s designation occurred because of his alleged provision of material assistance to drug trafficking activities of the Revolutionary Armed Forces of Colombia (FARC), another OFAC designated entity. Furthermore, Szubin cited Rangel Silva’s call for greater cooperation between the Government of Venezuela and the FARC as a basis for the designation.

Szubin went on to indicate that members of Specially Designated Global Terrorist organization, Hezbollah, were living in Venezuela. These individuals are Ghazi Nasr Aldin and Fawzi Kan’an. It was also stated that Kan’an owns two travel agencies in Venezuela. Moreover, he noted that two Venezuelan entities, the International Bank for Development Program and Petropars, were designated due to their ties with Iran.

In light of Szubin’s interview it seems that my suspicions from a year ago are confirmed and that OFAC is and has been indeed looking closely at Venezuela as a new hotbed for sanctionable activity. While there hasn’t been any public discussion of a country based sanctions program targeting Venezuela, it could one day come to that as OFAC is clearly concerned about ongoing activities in Venezuela on a variety of fronts. Will the culminations of Venezuela’s ties to designated SDN narco-trafficking organizations, their support for Iran, and their harboring of designated terrorists lead to a full scale OFAC administered sanctions program targeting Venezuela? Only time will tell.

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.

One Way Guatemalan OFAC Kingpin Overdick-Mejia Could Get Off SDN List

Yesterday, the United States Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) designated a Guatemalan spice buyer, Horst Walter Overdick-Mejia, a Specially Designated Narcotics Trafficking Kingpin (SDNTK), calling him a “critical link” between Colombian producers and a Mexican cartel.

Mr. Overdick-Mejia was indicted on trafficking and gun charges on January 19, 2012 and according to reports has already been placed into extradition proceedings. Mr. Overdick-Mejia’s SDNTK designation blocks all of his assets under U.S. jurisdiction and prohibits U.S. persons from engaging in transactions with him.

OFAC alleges that Mr. Overdick-Mejia was responsible for the trafficking of thousands of kilograms of cocaine into Mexico, and is accused of being the driving force behind the entrance of Los Zetas into Guatemala.

It is not uncommon for those foreign individuals indicted in large drug trafficking cases to find their way onto the OFAC SDN List. However, when reviewing reconsiderations of those designations, there have been more than a few instances in which those individuals who plead guilty and cooperate with the government have had their designations rescinded. These scenarios usually play out in large scale drug trafficking designation reconsiderations stemming from SDNT (“Specially Designated Narcotics Trafficker”) and Tier II SDNTK designations such as Mr. Overdick-Mejia’s.

If Mr. Overdick-Mejia was so inclined to attempt to work out such a deal with the government, there is one major obstacle standing in Mr. Overdick-Mejia’s way. Any U.S. counsel that will represent him either in the extradition matter, the criminal prosecution, or the OFAC SDN reconsideration will need to obtain a specific license authorization before collecting any legal fees or reimbursement for expenses. The licenses are obtainable, however, these types of licenses generally take 6-8 weeks for OFAC to issue. As such, until such time as the license is applied for and issued, Mr. Overdick-Mejia may have a hard time finding U.S. counsel willing to take on the case.

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.

OFAC Issues More Iran SDN Designations for the Second Day in a Row

For the second day in a row the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) has designated individuals and entities in Iran under one of their sanctions programs. Today, OFAC designated two individuals and four entities pursuant to Executive Order 13382 and the Non-Proliferation of Weapons of Mass Destruction Sanctions. This differs from yesterday’s designations which were made pursuant to Executive Order 13224 and the Global Terrorism Sanctions.

Executive Order (E.O.) 13382 is the legal authority OFAC utilizes to freeze the assets of those they believe to be proliferators of weapons of mass destruction (WMD) and their supporters. OFAC does this to isolate such individuals and entities from the U.S. financial and commercial systems. Today’s action involved the designation of the following parties:

1. Iran Maritime Industrial Company SADRA (SADRA);
2. Deep Offshore Technology PJS;
3. Malship Shipping Agency Ltd.;
4. Modality Limited;
5. Seyed Alaeddin Sadat Rasool; and
6. Ali Ezati

OFAC has accused the above parties of being involved with either the Iranian Revolutionary Guards Corps or the Islamic Republic of Iran Shipping Lines (IRISL), two organizations which have previously been designated by OFAC.

In its press release OFAC has acknowledged that the IRGC has continued to expand its control over the Iranian economy, stating that “in particular in the defense production, construction, and oil and gas industries – subsuming increasing numbers of Iranian businesses and pressing them into service in support of the IRGC’s illicit conduct.” Many critics of the country based sanctions program maintained against Iran state that the reason the IRGC has been able to gain more influence in the Iranian economy is because the private sector has been stripped away due to the impact the broad based trade embargo imposed against Iran have had.

What is most notable about these designations is what I commented upon yesterday when the other Iranian entities were designated; namely, that the sanctions seem to be increasingly directed towards Iran’s transportation industry. Again, today we see a number of designations of those parties alleged to be affiliated with IRISL, an entity involved in the transportation industry. OFAC has long touted the success of their designations against IRISL, these recent designations make it seem as if they plan on sticking to that strategy as they believe it is yielding results.

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.

Ninth Circuit Denies Government’s Petition for Rehearing in Al Haramain

Yesterday, the Ninth Circuit Court of Appeals denied the government’s petition for rehearing in Al Haramain Islamic Foundation, Inc. v. United States Department of the Treasury. In doing so the Ninth Circuit made a few changes to the decision they had issued on September 23, 2011.

The first change was to delete the following language from the September 23, 2011 opinion: “In any event, we are puzzled by OFAC’s concerns related to the allegedly unknown location of the entity’s assets. In order to block assets effectively, OFAC must know which assets it is blocking.”

The second, and more notable change, came from the inclusion of a footnote to the slip opinion which stated that while OFAC has raised interesting arguments, that the Ninth Circuit does not and will not address them at this time. In coming to such a determination, the Ninth Circuit only sought to address the facts of the case; namely, the seizure of assets under U.S. jurisdiction of a U.S. entity, and not the Fourth Amendment requirements for designation of foreign parties or the warrant requirements for blocking subsequent designations of the targeted U.S. entity. However, the Ninth Circuit did state that a designation order does not need to specify all details of any potentially blockable asset to meet the Fourth Amendment particularity requirement.

The Ninth Circuit’s decision not only on appeal, but also on the petition for rehearing, constitutes a big win for the constitutional rights of those U.S. parties designated under OFAC administered sanctions programs. Regardless, it should be remembered that most of the parties who have been blocked by OFAC are foreign nationals and as such are not afforded constitutional rights. For most of these parties, the only real recourse lies in the administrative reconsideration process, a process that can take many years and can be a difficult undertaking.

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.

OFAC Levels Kingpin Designations Against Alleged Kingpins And Narco-Traffickers

In its last major action of 2011, the United States Department of the Treasury Office of Foreign Assets Control (OFAC) designated Lebanese-Colombian nationals Jorge Fadlallah Cheaitelly (“Cheaitelly”) and Mohamad Zouheir El Khansa (“El Khansa”) as Specially Designated Narcotics Traffickers (SDNTs) due to their alleged role in international money laundering activities involving drug trafficking proceeds.  In addition to these designations, OFAC also designated as Foreign Narcotics Kingpins (SDNTKs) nine other individuals and 28 entities in Colombia, Panama, Lebanon, and Hong Kong with ties to Cheaitelly and El Khansa. As a result of these designations U.S. persons are prohibited from conducting financial or commercial transactions with these designated entities and individuals and any assets that they had under U.S. jurisdiction have been blocked. In making their designation, OFAC relied on information provided by the Drug Enforcement Administration (DEA), Immigration and Customs Enforcement (ICE) and the New York City Police Department.

These latest designations target key Colombian members alleged to be tied to the Cheaitelly/El Khansa criminal organization, including Jaime Edery Crivosei, Benny Issa Fawaz and Ali Mohamad Saleh.  Cheaitelly’s key financial associates are also targeted, including his siblings, Jaime Fadlallah Cheaytelli, Guiseppe Ali Cheaitelli Saheli, and Fatima Fadlallath Cheaitilly, and two Lebanon-based associates, Fawaz Mohamad Rahall and Ahmed El Khansa.

In addition to the above, OFAC’s action also targets 28 companies controlled by these individuals in Panama, Colombia and Hong Kong.  Amongst these companies are several money exchange businesses in Panama — Eurocambio, S.A., Euro Exchange Y Financial Commerce, Inc. (a.k.a. Eurex) and General Commerce Overseas, Inc. ­– as well as Junior International S.A., Global Technology Import & Export, S.A. (GTI), and Fedco Import & Export, S.A., and import/export businesses located in Panama’s Colon Free Zone.  Another designated entity, Junior International S.A., is reportedly linked to Ayman Joumaa, who was designated under the Foreign Narcotics Kingpin Designation Act in January 2011. Cheaitelly replaced Ayman Joumaa as director of Junior International S.A. following Joumaa’s designation and operates the company with Joumaa’s brothers who are also designated as narcotics traffickers. Several other companies located in Maicao, Colombia were also designated. These included electronics stores Bodega Electro Giorgio and Almacen Electro Sony Star, general merchandise businesses Family Fedco and Comercial Globanty, and luggage stores Almacen Batul and Comercial Estilo y Moda.  

Readers of this posting might notice that the designations made by OFAC fell into two categories: SDNTs and SDNTKs. The SDNT designation is a designation made pursuant to the Columbia Sanctions program which targets narcotics traffickers operating in Columbia and those who materially assist them. Such a designation is made pursuant to an executive order issued under the authority granted to the President through the International Emergency Economic Powers Act (IEEPA). On the other hand, the SDNTK designation refers to a designation under the Foreign Narcotics Kingpin Designation Act (Kingpin Act), which provides a separate legislative authority for designation and which can serve as the basis of a designation for any narcotics trafficker or person providing them with material assistance, not just those engaged in narcotics trafficking activities in Columbia.

In the end these sanctions programs are fairly similar on their face, however, requesting a reconsideration of each one can be quite different.

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.