OFAC Hits Alleged Al Qaeda Bomb Maker with SDGT Designation

Today, the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated Abd al-Hamid Al-Masli pursuant to Executive Order 13224. Treasury cites Al-Masli as being a bomb maker for Al-Qaeda and acting as the leader of an Al Qaeda electronics and explosives workshop in Pakistan, which is responsible for producing IED components for Al Qaeda senior leadership. As a result of today’s action, any property in the United States or in the possession or control of U.S. persons in which ‘Abd-al-Hamid al-Masli has an interest is blocked, and U.S. persons are generally prohibited from engaging in transactions with him. Al-Masli has a right to request a reconsideration of his designation through OFAC’s administrative reconsideration process outlined at 31 CFR 501.807.

The identifying information for Al-Masli can be found below:

AL-MASLI, ‘Abd-al-Hamid (a.k.a. AL-DARNAVI, Hamza; a.k.a. AL-DARNAWI, Abu-Hamzah; a.k.a. AL-DARNAWI, Hamza; a.k.a. AL-DARNAWI, Hamzah; a.k.a. AL-MASLI, ‘Abd al-Hamid Muhammad ‘Abd al-Hamid; a.k.a. DARNAVI, Hamza; a.k.a. DARNAWI, Abdullah; a.k.a. DARNAWI, Hamza; a.k.a. DARNAWI, Hamzah; a.k.a. DIRNAWI, Hamzah; a.k.a. MASLI, Hamid; a.k.a. MUSALLI, ‘Abd-al-Hamid), Waziristan, Federally Administered Tribal Areas, Pakistan; DOB 1976; POB Darnah, Libya; alt. POB Danar, Libya; nationality Libya (individual) [SDGT].

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

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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OFAC Makes Large Scale Designation Under the Kingpin Act

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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OFAC Makes New Designations Pursuant to Somalia Sanctions

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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Are OFAC Sanctions Against Zimbabwe Pushing Diamonds Traders Further Underground?

For sometime many Zimbabweans have called for the West to lift sanctions against Zimbabwe, because of the belief that the sanctions are undermining the Zimbabwe diamond industry. According to recent reports Zimbabwe’s mining companies, particularly those nationally owned companies, have aggressively been seeking avenues to trade without being subjected to U. S. and E.U sanctions.

The United States has for sometime imposed sanctions against those involved in the Zimbabwean diamond trade. Some inside of Zimbabwe, however, believe that accountability will only occur in a sanctions-free environment, where the dictates of the market rule. These pundits believe that once a company has been designated by the United States Department of the Treasury Office of Assets Control (OFAC) they are more likely to find illegal or black market avenues to trade their products (in this case diamonds) then they would be otherwise. Therefore, once such entities are operating outside of traditional and open avenues there is no way to hold them accountable for their actions.

These sanctions have been and are increasingly being enforced. For example, recently $2-million deposited in South African-owned Stanbic Bank was blocked pursuant to the OFAC administered Zimbabwe Sanctions Regulations. In addition, the accounts of two Zimbabwean entities previously designated by OFAC as Specially Designated Nationals, Zimbabwe Mining Development Corporation (ZMDC) and Mineral Marketing Corporation of Zimbabwe (MMCZ), have been blocked by OFAC.

It was recently reported that a letter written by ZMDC chairman Godwills Masimirembwa to Zimbabwe Mines Minister Obert Mpofu, dated February 7 and marked “private and confidential”, reveals that the Zimbabwe government is now experiencing problems in receiving its diamond revenue. The letter, dated February 7, 2011, states that it has been difficult for Zimbabwe to “move, transfer and receive” its diamonds proceeds due to U.S. sanctions.

The real reason for this of course, is because in the global economy, most financial transactions eventually are routed through New York. Once a transaction involving a party blocked by OFAC touches a U.S. bank, that transaction is blocked. As such, any such transactions being routed through New York will eventually be blocked thereby making the financial transactions necessary for international trade nearly impossible. As such it is easy to believe that these OFAC measures are wreaking havoc on Zimbabwe’s diamond sales and payment system.

As I have written previously, foreign banks who are not necessarily under U.S. jurisdiction have also gotten into the act. For example, British-owned Standard Chartered Bank in Harare recently refused to process financial transactions involving ZMDC and China Uranium Corporation, citing ZMDC’s status as an entity on the OFAC SDN List.

Although it might seem incredibly difficult to do, ZMDC and/or MMCZ should embark upon a reconsideration process to remove their designation or at least obtain licensing for certain transactions. Implementation of an OFAC compliance program and greater transparency into their dealings might dissolve some of the U.S. government’s suspicions and allow for a slight loosening of the sanctions impacting them. Of course in a case of magnitude it might take years and lots of attorneys fees to accomplish the task, some of the African pundits do raise a valid point that OFAC sanctions could be pushing these diamond traders to pursue more trade in the black market.

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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Libya Sanctions Go Into Effect

Last Friday President Barack Obama issued an Executive Order leveling sanctions against the Government of Libya, its agencies, instrumentalities, and controlled entities, and the Central Bank of Libya. In addition, a number of individuals listed on an Annex to this Executive Order where also targeted by those sanctions.

In the Executive Order, President Obama found that Colonel Muammar Qadhafi, his government, and close associates have taken extreme measures against the people of Libya, by using weapons of war, mercenaries, and wanton violence against unarmed civilians. Furthermore, the Executive Order found that due to the measures mentioned above that there was a threat to the stability of Libya such that constituted an extraordinary threat to the United States and warranted the use of sanctions.

Amongst other things, President Obama’s action blocked and blocks in the future any property under U.S. jurisdiction belonging to parties sanctioned pursuant to the Executive Order. Furthermore, the Executive Order included a ban on exporting and/or transferring blocked property which also extened to the entire Government of Libya and the Central Bank of Libya.

Although, the potential instability of Libya is cited by President Obama as being one of the reasons sanctions are warranted, it will be interesting to see how these sanctions further impact that instability. Certainly the goal here seems to be to take out the financial support of the current regime, thereby making Qadhafi’s chances of staying in power less likely. If Qadhafi somehow manages to stay in power, it will be interesting to watch how aggressively these new sanctions will be enforced. As in every case sanctions are only as strong as their enforcement.

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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