Archive for the ‘Iran’ Category

White House Releases Frequently Asked Questions Regarding the Re-Imposition of Sanctions Relating to the Joint Comprehensive Plan of Action (JCPOA)

2018/05/30

The White House released this document to help companies understand how pulling out of the Iran nuclear deal will affect them. Some questions answer in the document are:

  • Effective May 8, 2018, what sanctions snap back into place?
  • Which sanctions will be re-imposed after the 90-day wind-down period ending on August 6, 2018?
  • Which sanctions will be re-imposed after the 180-day wind-down period ending on November 4, 2018?

Full Document: https://www.treasury.gov/resource-center/sanctions/Programs/Documents/jcpoa_winddown_faqs.pdf


Turkish Banker Receives 32 Months for Violating U.S. Sanctions Against Iran Involving Billions of Dollars

2018/05/30

By: Ashleigh Foor

On January 3, 2018, a five-week jury trial wrapped up and convicted Mehmet Hakan Atilla, 47, a resident and citizen of Turkey, to 32 months for conspiring with others in a scheme to violate U.S. economic sanctions imposed on the Islamic Republic of Iran. The violation involved billions of dollars’ worth of Iranian oil proceeds held at Atilla’s employer (Turkish Bank-1).

Atilla, a Turkish banker, Reza Zarrab, an international gold trader, and others defrauded U.S. financial institutions by using them to conduct transactions on behalf of the government of Iran and other Iranian entities which were barred by U.S. sanction. They did so by making these transactions falsely appear as if they involved food, therefore falling within humanitarian exceptions to the sanctions regime.

Atilla lied to U.S. Treasury officials about Turkish Bank-1’s activities and its supposed compliance efforts to avoid subjecting the bank to U.S. sanctions. Atilla and his co-conspirators’ deceptions led U.S. banks to unknowingly process international financial transactions in violation of the IEEPA, and to launder through the U.S. financial system funds promoting the scheme.


Summary of the Presidential Memorandum: “Ceasing U.S. Participation in the JCPOA and Taking Additional Action to Counter Iran’s Malign Influence and Deny Iran All Paths to a Nuclear Weapon”

2018/05/30

By: Ashleigh Foor

(Source: The White House)

On May 8, 2018, President Trump addressed the United States in a Presidential Memorandum, “Ceasing U.S. Participation in the JCPOA and Taking Additional Action to Counter Iran’s Malign Influence and Deny Iran All Paths to a Nuclear Weapon”. He started by stating that the safety and security of the United States and the American people is his highest priority. He then stated that since the inception of the Islamic Republic of Iran in 1979, the revolutionary theocracy has declared its hostility toward the United States and remains the world’s leading state sponsor of terrorism, listing other offenses such as human rights abuses and proving assistance to Hezbollah, Hamas, the Taliban, al-Qa’ida, and other terrorist networks.

“There is no doubt that Iran previously attempted to bolster its revolutionary aims through the pursuit of nuclear weapons and that Iran’s uranium enrichment program continues to give it the capability to reconstitute its weapons-grade uranium program if it so chooses,” stated the President. Therefore, as President, he has approved an “integrated strategy for Iran that includes the strategic objective of denying Iran all paths to a nuclear weapon.”

Trump then goes on to explain the preceding administration’s participation in the Joint Comprehensive Plan of Action (JCPOA) as an attempt to meet the threat of Iran’s pursuit of nuclear capabilities. Although some believed the JCPOA would moderate Iran’s behavior, he said, Iran has only escalated its destabilizing activities. “Iran’s behavior threatens the national interest of the United States,” said the President. On January 12, 2018, Trump outlined two paths moving forward – that the JCPOA’s “disastrous flaws would be fixed by May 12, 2018, or, failing that, the United States would cease participation in the agreement.” He states that these issues were not fixed and that he is making good on his pledge to end the United States’ participation in the JCPOA. “Further, I have determined that it is in the national interest of the United States to re-impose sanctions lifted or waived in connection with the JCPOA as expeditiously as possible,” Trump stated.

The changes are outlined below:

Section 1.  Policy.  It is the policy of the United States that Iran be denied a nuclear weapon and intercontinental ballistic missiles; that Iran’s network and campaign of regional aggression be neutralized; to disrupt, degrade, or deny the Islamic Revolutionary Guards Corps and its surrogates access to the resources that sustain their destabilizing activities; and to counter Iran’s aggressive development of missiles and other asymmetric and conventional weapons capabilities.  The United States will continue to pursue these aims and the objectives contained in the Iran strategy that I announced on October 13, 2017, adjusting the ways and means to achieve them as required.

Sec. 2.  Ending United States Participation in the JCPOA.  The Secretary of State shall, in consultation with the Secretary of the Treasury and the Secretary of Energy, take all appropriate steps to cease the participation of the United States in the JCPOA.

Sec. 3.  Restoring United States Sanctions.  The Secretary of State and the Secretary of the Treasury shall immediately begin taking steps to re-impose all United States sanctions lifted or waived in connection with the JCPOA, including those under the National Defense Authorization Act for Fiscal Year 2012, the Iran Sanctions Act of 1996, the Iran Threat Reduction and Syria Human Rights Act of 2012, and the Iran Freedom and Counter-proliferation Act of 2012.  These steps shall be accomplished as expeditiously as possible, and in no case later than 180 days from the date of this memorandum.  The Secretary of State and the Secretary of the Treasury shall coordinate, as appropriate, on steps needed to achieve this aim.  They shall, for example, coordinate with respect to preparing any recommended executive actions, including appropriate documents to re-impose sanctions lifted by Executive Order 13716 of January 16, 2016; preparing to re-list persons removed, in connection with the JCPOA, from any relevant sanctions lists, as appropriate; revising relevant sanctions regulations; issuing limited waivers during the wind-down period, as appropriate; and preparing guidance necessary to educate United States and non-United States business communities on the scope of prohibited and sanctionable activity and the need to unwind any such dealings with Iranian persons.  Those steps should be accomplished in a manner that, to the extent reasonably practicable, shifts the financial burden of unwinding any transaction or course of dealing primarily onto Iran or the Iranian counterparty.

Sec. 4.  Preparing for Regional Contingencies.  The Secretary of Defense and heads of any other relevant agencies shall prepare to meet, swiftly and decisively, all possible modes of Iranian aggression against the United States, our allies, and our partners.  The Department of Defense shall ensure that the United States develops and retains the means to stop Iran from developing or acquiring a nuclear weapon and related delivery systems.

Sec. 5.  Monitoring Iran’s Nuclear Conduct and Consultation with Allies and Partners.  Agencies shall take appropriate steps to enable the United States to continue to monitor Iran’s nuclear conduct.  I am open to consultations with allies and partners on future international agreements to counter the full range of Iran’s threats, including the nuclear weapon and intercontinental ballistic missile threats, and the heads of agencies shall advise me, as appropriate, regarding opportunities for such consultations.

Sec. 6.  General Provisions.

(a)  Nothing in this memorandum shall be construed to impair or otherwise affect:

(i)   the authority granted by law to an executive department or agency, or the head thereof; or

(ii)  the functions of the Director of the Office of Management and Budget relating to budgetary, administrative, or legislative proposals.

(b)  This memorandum shall be implemented consistent with applicable law and subject to the availability of appropriations.

(c)  This memorandum is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.


Company Pays $1,220,400 for 37 Violations of the Iranian Transactions and Sanctions Regulations

2018/02/08

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced in December 2017, a $1,220,400 settlement with DENTSPLY SIRONA INC. (DSI), a US company with the successor in interest to DENTSPLY International Inc. (“DII” and, together with DSI, “DENTSPLY”) to settle a potential civil liability for 37 apparent violations of § 560.204 of the Iranian Transactions and Sanctions Regulations, 31 C.F.R. Part 560 (ITSR).

Around November 26, 2009 and July 5, 2012, DII subsidiaries UK International (“UKI”) and DS Healthcare Inc. (d.b.a. Sultan Healthcare), (“Sultan”), exported 37 shipments of dental equipment and supplies from the US, directly or indirectly to Iran, to distributors in third-countries, with knowledge or reason to know that the goods were ultimately destined for Iran.  OFAC determined that DII did not voluntarily disclose the apparent violations and that the apparent violations constitute a non-egregious case.

Full Details: https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20171206.aspx


Impact of President Trump’s Iran Policy Announcement: No Changes for Now, but the Future of the JCPOA Remains Uncertain

2017/11/15

By: Glen Kelley, Doug Jacobson, Michael Burton & David Brummond Jacobson Burton Kelley PLLC

www.jbktradelaw.com

On October 13, 2017 President Trump announced the long-awaited results of his Administration’s Iran policy review. The key aspect of the announcement was that President Trump will not renew certification of Iranian compliance with the Joint Comprehensive Plan of Action (“JCPOA”) as required by the Iran Nuclear Agreement Review Act of 2015 (“INARA”), a law passed by the US Congress to provide oversight of the JCPOA. President Trump stated that his decision was made because Iran “has committed multiple violations of the JCPOA” and “has not lived up to the spirit of the agreement.”

President Trump also stated that he will “terminate” US participation in the JCPOA unless the parties to the JCPOA agree to make various changes to the JCPOA and that he will request the US Congress to modify INARA to reflect the Administration’s concerns. Following President Trump’s announcement, OFAC designated the Iranian Revolutionary Guard Corps (“IRGC”) as a Specially Designated Global Terrorist (SDGT) as required by Congress in a law passed in August 2017. While there has been much discussion on the designation of the IRGC as a SDGT, in practice the designation was purely symbolic as the IRGC has been listed on OFAC’s Specially Designated National List since 2007 under various Executive Orders.

Though significant, these announcements do not trigger any changes in the status of the JCPOA or to existing US sanctions.

Following the President’s announcement, Secretary of State Rex Tillerson indicated that staying in the JCPOA “was in the best interests of the US.” In addition, Treasury Under Secretary for Terrorism and Financial Intelligence Sigal Mandelker said yesterday that it “is important not to confuse the internal US legal process of certification under INARA with our continued implementation of the JCPOA.”

President Trump’s decision not to certify Iran’s compliance with the JCPOA under Inara now shifts the burden to the US Congress, which could in the coming months reimpose some or all of the secondary sanctions on Iran that were waived on January 16, 2016 when the JCPOA was implemented. In addition, President Trump could in the future refuse to waive the secondary sanctions on Iran that remain suspended and could direct OFAC to terminate OFAC General License H.

While the US position on Iran should become clearer in the coming months, President Trump’s continued criticism of the JCPOA increases the uncertainty regarding (1) the future of US sanctions relief that was a key part of the nuclear agreement with Iran, and (2) whether non-US companies will continue to be able to conduct business with Iran without fear or being subject to US sanctions.

Increased Risk of US Withdrawal from JCPOA and “Snap-Back” of US Sanctions on Iran

It is important to recall that the US has suspended only a small portion of its Iran sanctions for US companies (relating to commercial aircraft), and “US persons” remain prohibited from nearly all transactions involving Iran or its government.

Nearly all of the suspended US sanctions were “secondary” sanctions primarily directed at non-US companies and individuals. The recent events increase the risk of reimposition or “snap-back” of US sanctions, which could be done in one of the following ways:

1. Reimposition of Sanctions Within Next 60 Days – Once the President fails to certify Iran’s compliance with the JCPOA, Congress can pass “qualifying legislation” under INARA in 60 days choosing to reimpose all or some of the Iranian sanctions that have been suspended. However, there does not appear to be significant interest by Congress to proceed in this direction at this time and it is not likely that the necessary votes can be obtained to proceed under this route.

2. Contingent Future Sanctions – Another scenario that is being contemplated by congressional leadership (the Corker-Cotton proposal) is to amend INARA to automatically reimpose US sanctions on Iran’s nuclear program in the future if Iran crosses key thresholds. Among the thresholds being considered is if weapons-grade nuclear material accumulates to the point where there is less than a one-year “breakout” period for obtaining a nuclear weapon.

3. Failure to Waive Suspended Sanctions – Under the JCPOA the President must waive the various sanctions that were suspended. Depending on the underlying law, these waivers must be renewed every 120 days to every six months. It is possible that the Trump Administration could simply choose not to renew one or more of the waivers, which would automatically reimpose the US sanctions. The next waiver deadline is in mid-January 2018. Such action would not require congressional approval and would effectively snap-back sanctions on Iran.

4. Unilateral Withdrawal from JCPOA – The JCPOA does not specifically authorize any party to the agreement to “withdraw.” However, the US could choose to cease implementing its commitments under the agreement, which would effectively lead to US abrogation of the JCPOA.

Next Steps and Practical Impact

Because the JCPOA is a multilateral arrangement, a decision by the US to withdraw from the agreement or to reimpose sanctions would have significant ramifications. Iran has threatened to stop complying with its commitments to curtail its nuclear program if the US reimposes sanctions. The costs of Iran’s reinitiating its nuclear program, however, could undercut the sanctions relief it has received from trading partners other than the US. The EU has made clear that if the suspended US sanctions are reimposed, the EU intends to continue to abide by the terms of the JCPOA so long as Iran does. If US sanctions are reimposed, the EU member states would likely support their companies in their Iranian activity and would strongly oppose any US government move to penalize them under reimposed sanctions. There is also the possibility that the EU would expand its sanctions blocking legislation (sometimes referred to in the EU as antiboycott laws) to cover US secondary sanctions on Iran. If Iran stopped complying with the JCPOA, the EU member states would likely withdraw their support for their companies’ activities in Iran, and might even move to the dispute resolution procedures of the JCPOA or a UN Security Council review, which could lead to the reimposition of EU sanctions.

While we are currently in uncharted waters and are dealing with an unpredictable US Administration, the following is a summary of the possible changes to impact on the JCPOA and US sanctions:

1. Incremental non-nuclear additional sanctions are likely, but the reimposition of the suspended US secondary sanctions or other major changes in the near future seem unlikely at this time. It is important to recall that there have been no immediate changes to US sanctions on Iran.

2. The Trump Administration could terminate US participation in the JCPOA and reimpose sanctions in the future, if insufficient progress is made with the parties to the JCPOA to address certain concerns relating to Iran. There are early indications that EU leaders might try to find a way to provide these additional assurances from Iran regarding their activities of concern.

3. The US could reimpose the suspended secondary (extraterritorial) sanctions. While appearing dramatic, this may not have much practical impact on many non-US companies. Moreover, if discreet secondary (extraterritorial) sanctions are “snapped-back”, it seems likely the EU and its member states would defend EU-based companies from the adverse economic consequences of a reimposition of sanctions.

4. If US sanctions are reimposed, there is reason to believe that Iran, after protesting, would continue to abide by its JCPOA commitments, particularly if it remains clear that the EU and other countries involved in the JCPOA intend to continue to abide by its terms and authorize business with Iran. Of course it is possible that Iran would follow through on its threat to pull out, and this likely would have a more dramatic practical impact.

Whatever the outcome, the OFAC policy that authorizes the export of US-origin humanitarian products to Iran, including medicine, medical devices, and agricultural products, will remain unchanged, just as it was during the height of US sanctions. However, payments for these transactions remains difficult due to the reluctance of many non-US banks to handle Iran-related payments.


US Citizen CEO Sentenced to 57 Months in Prison for Conspiring to Export Specialty Metals to Iran

2017/10/16

By: Ashleigh Foor

On Friday, September 8, 2017, Erdal Kuyumcu, a US citizen and the chief executive officer of Global Metallurgy, LLC, based in Woodside, New York, was sentenced to 57 months in prison for conspiring to export specialty metals to Iran. The sentencing took place at the federal courthouse in Brooklyn, New York and proceedings held before Chief United States District Judge Dora L. Irizarry. In June 14, 2016, Kuyumcu plead guilty to conspiracy to violate the International Emergency Economic Powers Act by exporting specialty metals from the United States to Iran.

According to court documents, Kuyumcu conspired to export from the United States to Iran a metallic powder primarily composed of cobalt and nickel, without having obtained the required license from the US Treasury Department’s Office of Foreign Assets Control (OFAC). It was determined after a two-day presentencing evidentiary hearing that the metallic powder has potential military and nuclear uses. In order to prevent nuclear proliferation and terrorism, the US Department of Commerce requires a license to export and exporting without the required license is illegal.

In addition, Kuyumcu and others planned to obtain more than 1,000 pounds of the metallic powder from a US-based supplier, and hid the true destination of the goods by having it shipped first to Turkey and then to Iran. Coded language was used to keep this all secret, for instance, referring to Iran as the “neighbor.”  Once a shipment was sent from Turkey to Iran, a steel company in Iran would send a letter-sized package to Kuyumcu’s Turkey-based co-conspirator.

The Iranian steel company had the same address as an OFAC-designated Iranian entity under the Weapons of Mass Destruction proliferators’ sanctions program that was associated with Iran’s nuclear and ballistic missile programs.


Expanded Russia, Iran, and North Korea Sanctions: Top 10 Takeaways

2017/10/16

(Source: Latham & Watkins LLP)

Authors: Les P. Carnegie, Esq., les.carnegie@lw.com, 202-637-1096; and William M. McGlone, Esq., william.mcglone@lw.com, 202-637-2202

President Trump signs the “Countering America’s Adversaries Through Sanctions Act,” which – among other measures – requires Congressional review to ease Russia-related sanctions.

On Wednesday, August 2, 2017, President Trump signed into law the Countering America’s Adversaries Through Sanctions Act (the Act). The Act significantly expands and codifies US sanctions targeting Russia, and it adds several measures to the already comprehensive US sanctions on Iran and North Korea. The Act passed both houses of Congress last week, with a vote of 419-3 in the House of Representatives and 98-2 in the Senate.

The Act is particularly significant because it codifies many of the Russia-related sanctions measures introduced by President Obama through executive orders, effectively requiring President Trump to secure Congressional approval before easing the targeted US sanctions relating to Russia. Russian President Vladimir Putin has announced his intention to impose retaliatory sanctions in response to the Act, and the Russian Foreign Ministry reportedly ordered a more than 60% cut in US diplomatic staff and suspended use of two US facilities in Russia.

Here are the top 10 takeaways from the Act:

RUSSIA-RELATED SANCTIONS

(1) Codifying and Expanding Existing Sanctions.

The Act codifies the following Executive Orders issued by President Obama: Executive Orders 1366013661136621368513694, and 13757. Among other measures, these Executive Orders imposed a virtual embargo on the Crimea region of Ukraine; imposed sanctions against perpetrators of malicious cyber activity and designated Russian and Ukrainian individuals, including government officials and oligarchs; and provided the underlying authority for Office of Foreign Assets Control (OFAC) Directive 1Directive 2Directive 3, and Directive 4.

The first three OFAC Directives prohibit US persons from extending medium- to long-term credit, or otherwise dealing in “new” debt (and in some cases “new” equity), of designated Russian financial institutions, energy firms, and companies in the defense sector. Directive 4 prohibits US persons from providing goods, software, technology, and services in support of certain non-conventional oil projects in Russia.

The Act expands certain of these Executive Orders and Directives:

* The Act gives the US Treasury Secretary the power to impose sanctions pursuant to Executive Order 13662, including the financing-type sanctions found in the OFAC Directives, against state-owned parties in Russia in the railways, metals, and mining sectors of the Russian economy. Prior to the Act, the targeted sectors were limited to the financial, energy, and defense sectors.

* No later than 60 days after enactment of the Act (or approximately the beginning of October), the US Treasury Secretary must modify Directive 1 to reduce the “new” debt prohibition to 14 days, down from the current 30 days, and Directive 2 from the current 90 days to 60 days. These 14-day and 60-day changes will be effective 60 days after the Directives are modified, which provides some time for US parties to adjust to this change. Notably, current OFAC interpretation (see OFAC FAQ # 419) is that extending payment terms of more than 30 days to a Directive 1 target violates the “new debt” prohibition, meaning that payment terms to Directive 1 parties will need to be reduced to no more than two weeks. The same is the case with respect to Directive 2 targets, for which the payment term requirement will be reduced to 60 days.

– The Act also requires the US Treasury Secretary to, within 180 days of enactment, submit to Congress a report “describing in detail the potential effects of expanding sanctions under Directive 1 … to include sovereign debt and the full range of derivative products.”

* No later than 90 days after the Act’s enactment (or approximately the beginning of November), the US Treasury Secretary must modify Directive 4, to prohibit US persons not only from providing goods, services (other than financial services), and technology to projects in Russia relating to the exploration or production for oil for deepwater, Arctic offshore, or shale projects, but to such projects anywhere in the world. Notably, the Directive’s expansion appears to reach non-conventional exploration and production beyond Russia, applies only to “new” deepwater, Arctic offshore, or shale projects, and only those projects where the Directive 4 target “has a controlling interest or a substantial non-controlling ownership interest in such a project defined as not less than a 33 percent interest.”

– This “new” and “substantial non-controlling ownership interest” language was added by the House to the Senate version, in an attempt to ease concerns raised by US energy firms and European allies regarding the breadth of the provision. This new provision will be effective 90 days after the US Treasury Secretary modifies Directive 4.

(2) Congressional Oversight of the President’s Russia-Related Actions.

Notably, the Act gives the US Congress the opportunity during a 30-day review period to disapprove of any effort by the President to reduce, waive, or eliminate US sanctions relating to Russia. Section 216 of the Act gives Congress the power to review (i) any action to terminate the application of the sanctions in the Act, the codified Executive Orders mentioned above, and certain other statutes; (ii) any action to waive the application of sanctions targeted at certain persons, such as parties added to the Specially Designated Nationals and Blocked Persons list (SDN List) or the List of Sectoral Sanctions Identifications parties (SSI List), or (iii) any “licensing action that significantly alters United States’ foreign policy with regard to the Russian Federation.”

(3) Energy Pipeline Secondary Sanctions.

The Act gives the President the power to impose, but does not require, secondary sanctions on foreign persons that knowingly (i) make an investment of US$1 million or more (or US$5 million or more over a 12-month period) that directly and significantly contributes to enhancing Russia’s ability to construct energy export pipelines or (ii) sell, lease, or provide to the Russian Federation, goods, services, technology, information, or support (valued at US$1 million or more, or during a 12-month period with an aggregate value of US$5 million or more) that could directly and significantly facilitate the maintenance or expansion of the construction, modernization, or repair of energy pipelines.

* The Act appears to require the President to impose any such sanctions “in coordination with allies of the United States.” This language was added to the House version of the Act in response to concerns raised by European allies, in light of such projects as the proposed Nord Stream 2 natural gas pipeline from Russia to Germany.

(4) Cybersecurity Sanctions.

On or after 60 days of enactment, the Act requires the President, subject to a national security interest waiver, to impose asset-blocking as well as travel sanctions, including certain secondary sanctions, on any person who knowingly engages in significant activities that undermine the cybersecurity of any person or government, including a democratic institution, on behalf of the Russian government. Any national security interest waiver submitted by the President to avoid the imposition of sanctions must be accompanied by a certification that the Russian government has “made significant efforts to reduce the number and intensity of cyber intrusions conducted by that Government.” The Act includes a definition of what constitutes “significant activities undermining cybersecurity,” which includes, among other activities, significant destructive malware attacks.

(5) Secondary Sanctions Targeting Certain Activities Relating to Russian Intelligence and Defense Sectors, Sanctions Evaders, and Privatizations.

The Act requires the President to impose secondary sanctions on those (including non-US persons) who he determines:

* Have knowingly engaged in a significant transaction with “a person that is part of, or operates for or on behalf of, the defense or intelligence sectors of the Government of the Russian Federation, including the Main Intelligence Agency of the General Staff of the Armed Forces of the Russian Federation or the Federal Security Service of the Russian Federation.” Secondary sanctions are to be imposed 180 days after enactment of the Act. The Act requires the President to issue guidance or regulations no later than 60 days after the date of the Act’s enactment to “specify the persons that are part of, or operate for or on behalf of, the defense and intelligence sectors of the Government of the Russian Federation.”

* Are responsible for, complicit in, or have supported serious human rights abuses in any territory forcibly occupied or otherwise controlled by the Russian government. The Act also requires sanctions on foreign persons that (i) knowingly have materially violated, attempted to violate, or conspired to violate or caused a violation of US sanctions or the Ukraine Freedom Support Act of 2014, or (ii) “facilitates a significant transaction or transactions, including deceptive or structured transactions” for or on behalf of a person that is a target of US sanctions, or for that person’s child, spouse, parent, or sibling.

* With actual knowledge make an investment of US$10 million or more (or any combination of investments not less than US$1 million each, which in the aggregate equals or exceeds US$10 million in a 12-month period), or facilitate such an investment, if the investment “directly and significantly” contributes to the ability of the Russian government to “privatize state-owned assets in a manner that unjustly benefits” Russian government officials or “close associates” or family members of those officials. The Act does not define the terms “investment,” “unjustly benefit,” and “close associates.”

(6) Sanctions Targeting Crude Oil Projects and Corruption.

The Act limits the discretion of the President under the Ukraine Freedom Support Act of 2014 by requiring the President to impose secondary sanctions on a foreign person that knowingly makes a “significant investment” in a “special Russian crude oil project” as well as foreign financial institutions that support such investments. The Ukraine Freedom Support Act does not define the term “significant investment” and defines a “special Russian crude oil project” to be a crude oil extraction project in Russian deepwater (i.e., more than 500 feet deep), Arctic offshore locations, or shale formations. The President can waive the imposition of such secondary sanctions by invoking a national interest waiver.

* The Act also limits the President’s discretion under the Sovereignty, Integrity, Democracy, and Economic Stability of Ukraine Act of 2014, requiring him to impose secondary sanctions against a Russian government official or close associate or family member involved in an act of significant corruption in Ukraine, Russia, or elsewhere.

(7) Sanctions Relating to Support for the Syrian Government.

The President is required to impose asset-blocking and travel sanctions on any person determined by the President to have knowingly exported, transferred, or otherwise provided significant financial, material, or technological support to the Syrian government in acquiring or developing advanced conventional weapons, ballistic, or cruise missile capabilities, as well as biological, chemical, and nuclear weapons and related technologies.

(8) Secondary Sanctions Described.

The so-called “secondary sanctions” described in the Act target the activities of non-US persons. These secondary sanctions can be applied to parties beyond the jurisdiction of the United States, and they effectively take the form of a denial of US benefits, as opposed to monetary penalties available under US “primary” sanctions (which apply to US persons).

* In the context of the Act, the menu of secondary sanctions from which the President can select (generally, he must select up to five) includes the following:

– Denial of export-import bank financing and assistance

– Denial of US export licensing

– Prohibition against US financial institution making loans or providing credits of more than US$10 million in any 12-month period

– Use of US government power to oppose a loan from a non-US financial institution to the sanctioned party

– Denial of US Government procurement

– Prohibition against transactions in foreign exchange that are within US jurisdiction

– Prohibition against transfers of credit or payments between financial institutions or by, through, or to any financial institution, if within US jurisdiction

– For foreign financial institutions, (i) loss of designation as a primary dealer in US Government debt instruments by the Board of Governors of the Federal Reserve System and the Federal Reserve Bank of New York and/or (ii) revocation of right to serve as an agent of the US Government or to serve as repository for US Government funds

– Effect on the property rights of sanctioned persons for property within US jurisdiction (i.e., asset blocking similar to those on OFAC’s SDN List)

– Prohibition against US persons investing in or purchasing significant amounts of equity or debt instruments of the sanctioned persons

– Travel prohibitions directed at corporate officers, principals, or controlling shareholders or principal of, or a shareholder with a controlling interest in

– Placement of any of these secondary sanctions on the principal executive officer or similar officers of the sanctioned person

IRAN

Largely in response to Iran’s ballistic missile tests, the Act imposes new sanctions targeting Iran’s defense sector and the Islamic Revolutionary Guard Corps (IRGC).

(9) Asset-Freezing and Terrorism-Related Sanctions.

The Act requires the President to impose asset-freezing sanctions (and for non-US persons, a travel ban) against any US or foreign person that knowingly engages “in any activity that materially contributes to the activities of the Government of Iran with respect to its ballistic missile program” or programs to develop, deploy, or maintain weapons of mass destruction. Subject to his exercise of a national security interest waiver, the President must also impose asset-freezing sanctions (and for non-US persons, a travel ban) against any US or foreign person who knowingly contributes to the “supply, sale, or transfer” to Iran of “battle tanks, armored combat vehicles, large caliber artillery systems, combat aircraft, attack helicopters, warships, missiles or missile systems … or related materiel, including spare parts.”

* The Act also requires the President to impose the same sanctions on those who knowingly provide “technical training, financial resources or services, advice” or other services in supporting the use of the material listed. 90 days after the Act’s enactment, the President must impose terrorism-related sanctions pursuant to Executive Order 13224 against the IRGC and its “officials, agents or affiliates.” Notably, significant transactions with the IRGC can already subject non-US persons to US secondary sanctions, which survived the implementation of the Nuclear Agreement with Iran in January 2016.

NORTH KOREA

Largely in response to North Korea’s successful test of an intercontinental ballistic missile on July 4, 2017, the House of Representatives recently introduced certain North Korea-related provisions to the Act. Among other measures, the Act requires the US Secretary of State to provide Congress, within 90 days of enactment, a determination as to whether North Korea should be considered a state sponsor of terrorism.

(10) Additional Designation Authority and Human Rights Provisions.

The Act broadens the list of persons the President must impose asset-blocking measures under the North Korea Sanctions and Policy Enhancement Act of 2016 (NKSPEA). These additional targets include those who knowingly procure certain precious metals from North Korea; sell or transfer rocket, aviation or jet fuel to North Korea; provide fuel or supplies for designated North Korean vessels or aircraft; provide insurance services to vessels owned or controlled by the North Korean government; or maintain a correspondent account with any North Korean financial institution.

* The Act also expands the President’s discretionary authority to designate parties under the NKSPEA, including parties who knowingly acquire coal, iron, or iron ore from the North Korean government; purchase significant amounts of textiles from North Korea; or sell or transfer significant amounts of crude oil, condensates, petroleum products, or natural gas resources to the North Korean government, among other activities. Under the human rights-related provisions, the Act prohibits most goods produced by North Korean labor from entering the US and allows for the imposition of sanctions on most parties who knowingly employ North Korean labor.

* These new North Korea sanctions presumptively increase the prospects of designations of parties from China in the coming weeks.


CSE Global Limited and CSE TransTel Pte. Ltd. Pay Settlement for Apparent Violations Involving Iranian Companies

2017/10/16

By: Ashleigh Foor

A solely-owned subsidiary of CSE Global Limited (an international technology group), CSE TransTel Pte. Ltd., appears to have violated § 1705 (a) of IEEPA and § 560.203 of the ITSR and has agreed to pay a $12,027,066 settlement for the apparent 104 violations of the International Emergency Economic Powers Act 1 (IEEPA) and the Iranian Transactions and Sanctions Regulations, 31 C.F.R. part 560 (ITSR). The apparent violations occurred on or around June 4, 2012 through March 27, 2013 when TransTel appears to have involved at least six different financial institutions in the unauthorized exportation or re-exportation of services from the United States to Iran, a prohibition of § 560.204 of the ITSR.

OFAC concluded that TransTel did not voluntarily make known these apparent violations, which OFAC found to be grounds for a serious case. The maximum and base civil monetary penalty for the apparent violations was $38,181,161.

TransTel first signed contracts with and received purchase orders from Iranian companies starting August 25, 2010 through November 5, 2011. The purchase orders were for multiple energy projects taking place in Iran and/or Iranian territory. In order to carry out the orders to deliver and install telecommunications equipment, TransTel hired several Iranian companies to deliver these goods and services on its behalf.

Preceding these interactions with Iranian companies, CSE Global and TransTel opened separate Singapore bank accounts (the “Bank”). Then-Managing Director and CSE Global’s then-Group Chief Executive Officer signed and sent a letter titled “Sanctions – Letter of Undertaking” to the Bank with the following statement: “In consideration of [the Bank] agreeing to continue providing banking services in Singapore to our company, we, CSE TransTel Pte. Ltd … hereby undertake not to route any transactions related to Iran through [the Bank], whether in Singapore or elsewhere.”  The Bank continued to provide financial services to the company after receiving the Letter of Undertaking and around June 2012, less than two months after the Letter of Undertaking was delivered, TransTel began transferring USD funds related to its Iranian business.

On or around the dates of June 4, 2012 to March 27, 2013 Transtel appears to have violated § 1705 (a) of IEEPA and/or § 560.203 of the ITSR when it initiated 104 USD wire transfers totaling more than $11,111,000 involving Iran. Transfers from the Bank went to several different third-party contacts including Iranian vendors. There was never any mention of Iran, the Iranian projects, or any Iranian parties on documentations involved in these transactions.

The settlement amount reflects OFAC’s consideration of the following facts and circumstances, pursuant to the General Factors under OFAC’s Economic Sanctions Enforcement Guidelines, 31 C.F.R. part 501, app. A. OFAC considered the following to be aggravating factors:

(1) TransTel willfully and recklessly caused apparent violations of U.S. economic sanctions by engaging in, and systematically obfuscating, conduct it knew to be prohibited, including by materially misrepresenting to its bank that it would not route Iran-related business through the bank’s branch in Singapore or elsewhere, and by engaging in a pattern or practice that lasted for 10 months;

(2) TransTel’s then-senior management had actual knowledge of – and played an active role in – the conduct underlying the apparent violations;

(3) TransTel’s actions conveyed significant economic benefit to Iran and/or persons on OFAC’s List of Specially Designated Nationals and Blocked Persons by processing dozens of transactions through the U.S. financial system that totaled $11,111,812 and benefited Iran’s oil, gas, and power industries; and

(4) TransTel is a commercially sophisticated company that engages in business in multiple countries.

 

OFAC considered the following to be mitigating factors:

(1) TransTel has not received a penalty notice, Finding of Violation, or cautionary letter from OFAC in the five years preceding the date of the earliest transaction giving rise to the apparent violations;

(2) TransTel and CSE Global have undertaken remedial steps to ensure compliance with U.S. sanctions programs; and

(3) TransTel and CSE Global provided substantial cooperation during the course of OFAC’s investigation, including by submitting detailed information to OFAC in an organized manner, and responding to several inquiries in a complete and timely fashion.

This enforcement action reflects compliance obligations for all companies that conduct business in OFAC-sanctioned jurisdictions or process transactions through or related in any way to the United States. Prior to signing agreement letters, representatives should be certain they and their company are willing and able to abide by rules set forth.


Illegal Exporting of IED Components Lands Singapore Native in Prison

2017/06/08

By: Ashleigh Foor

Illegal exporting of goods lands Singapore native, Lim Yong Nam (aka Steven Lim), 43, in a lot of trouble. Forty months in prison kind of trouble to be exact. On December 15, 2016 Lim plead guilty to charges of conspiracy to defraud the US.

The conspiracy involved Lim’s and others’ involvement in the shipment of thousands of radio frequency modules from a Minnesota-based company to Iran.  The frequency transmitting technology used in these modules is related to that which connects office computers and printers wirelessly. The same technology is also used for remote detonation systems. Connected with the right antenna, the wireless capabilities can stretch 40 miles. But this technology was not shipped with the intention of setting up networks in an office building. Of the 6,000 modules shipped from Minnesota to Iran, 14 were later found in Iraq in unexploded improvised explosive devices (IEDs). According to case files, IEDs were the main source of American casualties in Iraq from 2001-2007.

Charges were first filed against Lim in June 2010, when he plead guilty to falsifying documents and breaking US law in order for 6,000 modules to ship from Minnesota to Singapore and finally to Iran through 5 shipments.  Lim admitted that he and his co-conspirators were aware of US restrictions on shipments to Iran and made false statements to indicate Singapore as the final destination.

After reaching Singapore, these shipments were combined with other electronic devices and stored with a freight forwarding company before being re-exported to Iran. There is no evidence of Lim having any physical contact with the modules.

From 2008 to 2009 several of these modules originating from Minnesota were found in Iraq being used for the remote detonation system for IEDs. With US request for extradition, Indonesia detained Lim in 2014. After being extradited to the US in 2016, Lim plead guilty to charges of conspiracy against the US and will be deported after his sentence.

Interestingly, the Minnesota supplier has not been charged for any violations related to the exports in question.


Company Fined $500K for 56 ITSR Violations by OFAC

2017/03/30

By: Danielle McClellan

United Medical Instruments, Inc. (UMI) agreed to a settlement of $515,400 with the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) based on 56 alleged violations of the Iranian Transactions and Sanctions Regulations (31 C.F.R. Part 560). Between 2007 and 2009 it was found that UMI sold medical imaging equipment with knowledge that the goods were going to be reexported from the United Arab Emirates to Iran. The total value of the goods associated with the transactions was approximately $2,493,597.

OFAC considered the following to be mitigating factors:

  1. The alleged violations occurred due to the actions of a single UMI employee rather than a systemic pattern of company-wide conduct;
  2. UMI took remedial action in response to the alleged violations, including by voluntarily ceasing transactions involving Iran and by implementing new procedures and updating its compliance program to prevent the recurrence of similar sanctions violations;
  3. UMI has not received a penalty notice or Finding of Violation from OFAC in the five years preceding the earliest date of the transactions giving rise to the alleged violations;
  4. UMI cooperated with OFAC’s investigation by providing timely responses to OFAC’s correspondence and by entering into multiple statute of limitations tolling agreements; (5) UMI is a small business, as determined by the size standards set forth by the Small Business Administration; and (6) based on the financial condition of UMI, including significant financial difficulties experienced by the company in recent years, additional mitigation is warranted.

Settlement: https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20170228.aspx