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.

Bookmark and Share
Advertisements

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

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.

Bookmark and Share

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.

Bookmark and Share

Seeking Help in Expediting an OFAC SDN Reconsideration?

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.

Bookmark and Share