Archive for the ‘Syria’ Category

OFAC Reaches $5 Million Settlement with JPMorgan Chase Bank


By: Danielle Hatch

The US Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced this month that it had reached a $5,263,171 settlement with JPMorgan Chase Bank, N.A. for 87 violations of the Cuban Assets Control Regulations, the Iranian Transactions and Sanctions Regulations, and the Weapons of Mass Destruction Proliferators Sanctions Regulations.

The transactions were net settlement payments with a very small portion being provided to the interests of airlines that were on OFAC’s List of Specially Designated Nationals and Blocked Persons (SDN List), blocked pursuant to OFAC sanctions, or located in countries subject to OFAC sanctions. The transactions included airline freight charges which are not exempt from the prohibitions of the International Emergency Economic Powers Act (IEEPA).

On a separate issue, OFAC issued a Finding of Violation to JPMC for violations of the Foreign Narcotics Kingpin Sanctions Regulations and the Syrian Sanctions Regulations. Between 2011 and 2014 JPMC processed 85 transactions worth $46,127.04 held accounts on behalf of six customers who were on the SDN list.

In both situations JPMC voluntarily disclosed the violations and they were considered to be non-egregious violations by OFAC.

Settlement Agreement:

Treasury Publishes List of Countries Requiring Cooperation with an International Boycott


Source: Federal Register

The Department of the Treasury has named the following countries as requiring or may requiring participation in, or cooperation with, an international boycott (within the meaning of section 999(b)(3) of the Internal Revenue Code of 1986).

  • Iraq
  • Kuwait
  • Lebanon
  • Libya
  • Qatar
  • Saudi Arabia
  • Syria
  • United Arab Emirates
  • Yemen

Federal Register:

Treasury Fingers Countries Enforcing the Arab League Boycott of Israel


Editorial By: John Black

Note:  I love this list.  It gives me a chance to say tertiary.   As my career winds down its things like this that I will miss.

N.B.:  I don’t remember ever seeing anybody write an editorial piece about Treasury publishing this list, probably for good reason.  If I don’t do this now, nobody ever will. 

Once again the Treasury Department has published its list of countries that more or less enforce certain aspects of the Arab League Boycott of Israel. Or, as Treasury clearly states, they are countries “which may require participation in, or cooperation with, an international boycott (within the meaning of section 999(b)(3) of the Internal Revenue Code of 1986).”

You see, way back whenever, the US Congress decided it doesn’t like US persons cooperating with the secondary and tertiary elements of the Arab Boycott of Israel so it told the Treasury Department to put something in the tax code so that US person who illegally cooperate can’t claim foreign tax credits. Congress also told the Commerce Department to put something in its export control regulations so the Commerce rules make such cooperation illegal without telling anybody which countries it applies to.

You see, Congress and the US Government don’t want to have actual rules that say Arab League Boycott of Israel to make it clear that US person can’t cooperate with the unmentionable boycott on the unmentionable close ally of the United States.  Because, what the wizards* in Washington figured out is, if they don’t write little known rules that ban cooperation with the “Arab Boycott of Israel,” nobody will know that US foreign policy in many ways has long favored Israel over the Arab League.

(*Sorry, I did not mean to disparage indirectly the Washington Wizards NBA basketball team but this raises an important issue.  Years ago the Washington Bullets NBA team decided to change their name to the Washington Wizards. I always knew that they dropped the Bullets name to reduce violent crime in the capital city (how is that working?)  But, after wondering for years why the Washington team chose “Wizards,” I just now realized it is because most of the people in Congress and the US Government are wizards—either, if you are old like me, the type of wizards who wear pointy hats and robes with stars on them and have a magic wand or, if you are not old, those in Harry Potter movies; or, if you ask Congress, the type of wizards who are generally highly adept at what they do.  Now that’s another life knowledge breakthrough thanks to export regs.)

Treasury noted that this list is “based on currently available information,” which, I personally found to be a great relief because if the list had been based on only information available prior to 1975, it would have looked quite different.  And who knows what the list would have looked like if it were based on information that is not currently available—We could have ended up with Mexico and China on the list, seriously.

FYI, this paragraph contains information that is important:  Treasury listed these countries:

  • Iraq
  • Kuwait
  • Lebanon
  • Libya
  • Qatar
  • Saudi Arabia
  • Syria
  • United Arab Emirates
  • Yemen

The Commerce Department traditionally does not publish a similar list of countries for its antiboycott rules in Part 760 of the Export Administration Regulations (“EAR”).  EAR 760 prohibits a US person from cooperating with (or agreeing to do so) the secondary and tertiary elements of the Arab League boycott of Israel.  Instead of ever mentioning the Arab League or Israel, Commerce and the EAR brandish the terms “boycotting countries” and “boycotted countries” to adeptly hide the US pro-Israel foreign policy bias.

A reasonable person might assume that since the Commerce and Treasury rules have the same objective and are implemented by the same US Government, the Commerce Department considers its rules are applicable to the same countries as Treasury.

Editorial Note: I am not saying that the EAR rules are limited to the list of countries Treasury published. I am merely pointing out what a reasonable person might assume.

Useful Information:  In any event, when you do a risk based assessment of your EAR compliance issues and, based on that, decide how to allocate your limited compliance resources, it may be cost-effective to focus your EAR antiboycott rules compliance on the countries on the Treasury list.  And while you are doing risk assessments and deciding how to cost-effectively allocate your limited resources for EAR compliance, you may decide to allocate only a small portion of your total EAR compliance resources to compliance with the EAR antiboycott rules.  That is because antiboycott EAR fines are frequently well under $100k.  I recommend you allocate most of your EAR compliance resources to focus on compliance with the standard EAR export controls where it is not unusual for Commerce (along with OFAC) to impose fines of hundreds of millions of dollars, or in the case of ZTE, $1 billion and membership on an export denial list.

Federal Register:

U.S. Antiboycott Compliance: New Federal List Published


By: Melissa Proctor, Polsinelli PC

Companies doing business in the Middle East take note: The Treasury Department recently published its quarterly list of countries that currently require participation or cooperation with an international boycott, such as the Arab League‘s boycott of Israel.

Even though many of these countries are WTO members and were required to shut down their Arab League offices as a condition of membership, many boycott-related requests are still being issued by government agencies and companies in these countries. The countries that are designated on this list, which by the way are the very same countries that were listed in the Third Quarter list, are:

  • Iraq
  • Kuwait
  • Lebanon
  • Libya
  • Qatar
  • Saudi Arabia
  • Syria
  • United Arab Emirates
  • Yemen

To view the list, click here.

If you are not familiar with U.S. antiboycott requirements, Part 750 of the Export Administration Regulations (EAR) prohibits U.S. companies and their foreign affiliates from complying with requests related to a foreign boycott that is not sanctioned by the U.S. Government. Specifically, U.S. companies and their overseas affiliates are prohibited from agreeing to:

  1. Refuse to do business with or in Israel or with blacklisted companies
  2. Discriminate against other persons based on race, religion, sex, national origin or nationality
  3. Furnish information about business relationships with or in Israel or with blacklisted companies, or
  4. Furnish information about the race, religion, sex, or national origin of another person

Foreign boycott-related requests can take many forms, and can be either verbal or written. They can appear in bid invitations, purchase agreements, letters of credit and can even be seen in emails, telephone conversations and in-person meetings. Some recent examples of boycott-related requests include:

  • “Provide a certificate of origin stating that your goods are not products of Israel.”
  • “Provide the religion and nationality of your officers and board members.” 
  • “Suppliers cannot be on the Israel boycott list published by the central Arab League.”  
  • “Provide a signed statement from the shipping company or its agent containing the name, flag and nationality of the carrying vessel and its eligibility to enter Arab ports “

In addition, implementing letters of credit that contain foreign boycott terms or conditions is also prohibited under the EAR.

Antiboycott compliance is a key issue for U.S. companies doing business in the Middle East, and personnel on the front lines with customers and supply chain partners in these countries should be trained to identify potential foreign boycott-related requests and escalate them to senior compliance personnel or in-house counsel to determine the applicable OAC and IRS reporting requirements.

Companies that receive boycott-related requests must submit quarterly reports to the Office of Antiboycott Compliance (OAC) unless an exemption applies. Failing to timely report a boycott request or complying with the request itself can lead to the imposition of civil penalties by the OAC. The IRS also requires U.S. taxpayers to report their operations in countries that require participation or cooperation with an international boycott on IRS Form 5713 (International Boycott Report) – the forms are submitted annually with U.S. tax returns.  Failure to comply with the Internal Revenue Code’s antiboycott requirements can lead to the revocation of certain international tax credits and benefits.

© Polsinelli PC, Polsinelli LLP in California

Lebanon Company Fined $450,000 for Reexporting Items to Syria


By: Danielle McClellan

Tecnoline SAL (Tecnoline )of Sin El Fil, Beirut, Lebanon pled guilty to 7 charges of Causing, Aiding, or Abetting a Violation of the Regulations and will pay a civil penalty of $450,000. Tecnoline reexported US-origin mass spectrometers, gas chromatographs and consumables, liquid chromatograph-mass spectrometer systems, and liquid chromatograph modules (ECCN 3A999), controlled for anti-terrorism reasons, to Syria. There is a long standing US Embargo against Syria which makes a BIS license required for all exports/reexports subject to the EAR with the only exception being food and certain medicines).

The items were manufactured by Agilent Technologies (Agilent), a US company, and Technoline was an authorized distributor and reseller of Agilent’s products. In 2004, Technoline signed an agreement with Agilent that acknowledged their awareness of US export control laws and regulations and agreed to comply with them as a reseller and distributor of controlled products. Between August 2009 and October 2010, Technoline negotiated price discounts on the items with Agilent and eventually ordered the items for the Syrian Government ministries or entities. Technoline falsely identified the ultimate destination of the items as being Iraq or Lebanon (BIS license not required) and on one or more occasions they failed to disclose the ultimate destination of the items. Agilent shipped the items to TEchnoline in Beirut, Lebanon via Agilent’s German subsidiary. Once Technoline received the items they transferred them to Syria, there they were installed at Syrian Government ministries within a month or so. There were never any authorizations from BIS to export the items from the US to Syria, or to reexport them from Germany to Syria.

View Order:

Antiboycott Violation Nets $238,000 Fine for Furnishing Prohibited Business Information


By: Danielle McClellan

Coty Middle East FZCO (UAE) has agreed to pay $238,000 to settle 70 violations of 15 CFR §760.2(d) – Furnishing Information about Business Relationships with Boycotted Countries or Blacklisted Persons.

Coty Middle East FZCO is a foreign affiliate of Coty Inc., a US company located in Delaware thus are they are defined as a US person under 760.1(b) of the Export Administration Regulations (EAR). From 2009-2013 Coty Middle East engaged in transactions involving the sale and/or transfer of goods or services from the US to Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Oman, Pakistan, Qatar, Saudi Arabia, Syria, UAE, and Yemen, activities in the interstate or foreign commerce of the United States. In connection with these activities Coty Middle East furnished the following statement 70 times:  “WE HEREBY CERTIFY…. THAT ABOVE MENTIONED GOODS DO NOT CONTAIN ANY MATERIAL OF ISRAEL ORIGIN…”

View Order:

It’s Not A Good Time for Iran Violations: Company Fined Over $16 Million for Medical Supplies Exported to Iran, Sudan and Syria


By: Danielle McClellan

Alcon Laboratories, Inc., (Fort Worth), Alcon Pharmaceuticals Ltd. (Fribourg, Switzerland) and Alcon Management, SA (Geneve, Switerland) (collectively, “Alcon”) have agreed to settle a potential civil liability with the US Department of Treasury’s Office of Foreign Assets Controls (OFAC) and with the Department of Commerce’s Bureau of Industry and Security (BIS).

Between 2008 and 2011 Alcon exported end-use surgical and pharmaceutical products from their United States location to their sister companies in Switzerland and then along to distributors in Iran, Sudan and Syria. The charges are broken down as follows:

OFAC Charging Details

On 452 occasions Alcon violated the Sudanese Sanctions Regulations (SSR) when they sold and exported medical supplies to distributors in Sudan. On 61 occasions they violated the Iranian Transactions and Sanctions Regulations (ITSR) when they sold and exported their products to Iranian distributors. Alcon will pay $7,617,150 related to the OFAC violations. The statutory maximum monetary penalty amount was $138,982,584 and the base penalty amount for the Apparent Violations was $16,927,000.

OFAC considered the following to be aggravating factors in this case:

  1. Alcon demonstrated reckless disregard for U.S. sanctions requirements by having virtually no compliance program, despite significant business involving the exportation of goods from the United States to Iran and Sudan, and by failing to take adequate steps to investigate a third-party freight forwarder’s cessation of shipments to Iran on behalf of Alcon;
  2. Alcon and its then-senior management knew of the conduct giving rise to the Apparent Violations; and
  3. Alcon is a sophisticated multinational corporation with extensive experience in international trade.

OFAC considered the following to be mitigating factors in this case:

  1. The harm to U.S. sanctions program objectives was limited because the exports involved medical end-use products that were licensable under the Trade Sanctions Reform and Export Enhancement Act of 2000, and in fact had been previously and subsequently licensed by OFAC for Alcon;
  2. Alcon has no prior OFAC sanctions history, including receipt of a Penalty Notice or Finding of Violation in the five years preceding the date of the earliest transaction giving rise to the Apparent Violations, making it eligible for “first violation” mitigation of up to 25 percent;
  3. Alcon took remedial action by ceasing the unlicensed exports to sanctioned countries, initiating an internal investigation of the Apparent Violations, and instituting a robust compliance program that now includes:
    1. Updated or newly-created corporate export and trade sanctions compliance documents,
    2. Enhanced trade compliance training, and (c) enhanced compliance procedures for requesting OFAC licenses; and (4) Alcon substantially cooperated with OFAC’s investigation, including by providing detailed and well-organized information and entering into several statute of limitations tolling agreements with OFAC.

BIS Charging Details

Alcon has received 100 charges of Acting with Knowledge of a Violation, 45 charges of Unlicensed Reexports to Syria, and 43 Charges of Unlicensed Exports to Iran. In the cases of unlicensed exports, Alcon Pharmaceuticals (Switzerland) sent orders and invoices to Alcon labs (United States) with instructions to ship the orders to warehouses and distribution centers that it used in various countries, most specifically Switzerland. The facilities would receive the products and then Alcon Pharmaceuticals transferred and/or forwarded the items to Iran and Syria without required government licenses.

Alcon collectively has been accessed a civil penalty from BIS in the amount of $8,100,000, all of which is due, and will accrue interest if not paid on time. Alcon must also pay the penalty amount due to OFAC in a timely manner and comply with all of the terms related to the OFAC Settlement Agreement.

OFAC Information:

BIS Information:

3 Men & Illegal Exports to Syria


By: Danielle McClellan

In November 2012, three individuals and one company were indicted with charges of criminal conspiracy, wire fraud, illegal export of goods, money laundering, and false statements. Until now the indictment remained under seal pending the arrest of the defendants.

Between 2003 and 2012, d-Deri Contracting & Trading (owned by Ahmad Feras Diri of London) was exporting goods originally from the US from Global Parts Supply (owned by Harold Rinko of Hallstead, PA) to his brother and business partner Moawea Deri who was located in Syria.  The goods purchased from Rinko’s US company were done so based on false invoices, undervalued and mislabeled goods.  Then the purchased goods were exported by falsely listing their identity and final geographic location on all documentation. The items would be shipped from the US to Jordan, the UAE, and the UK, and finally transshipped to Syria.

The items exported allegedly included:

  • a portable gas scanner used for detection of chemical warfare agents by civil defense, military, police and border control agencies;
  • a handheld instrument for field detection and classification of chemical warfare agents and toxic industrial chemicals;
  • a laboratory source for detection of chemical warfare agents and toxic industrial chemicals in research, public safety and industrial environments;
  • a rubber mask for civil defense against chemicals and gases;
  • a meter used to measure chemicals and their composition;
  • flowmeters for measuring gas streams;
  • a stirrer for mixing and testing liquid chemical compounds;
  • industrial engines for use in oil and gas field operations and a device used to accurately locate buried pipelines

Note: Nearly all exports to Syria will be denied, other than a few items categorized under humanitarian food and medicine. The goal of the embargo on Syria is to shut down the supply chain used by the Syrian state to support terrorism and create proliferate weapons of mass destruction, and in this specific case, chemical weapons.

Fast forward to this month, Ahmad Feras Diri (age 43) of London has plead guilty to conspiracy to illegally export items used to detect chemical warfare agents to Syria. He lost his extradition fight in the UK in November 2015 at which point he was brought to the US to face the charges. Diri admitted that he conspired to export items from the US through third party countries to customers in Syria without obtaining the required US Commerce Department licenses.

Harold Rinko (age 73 of Hallstead, PA) was indicted by a grand jury in November 2012 and admitted in court that he conspired to export the items from the US through third party countries to customers in Syria without an export license.

Moawea Deri remains at large and is considered a fugitive but will likely remain in Syria as extradition is unlikely to occur.

“This extradition demonstrates HSI’s commitment to use all its resources to prevent sensitive and restricted technology from being exported to Syria through the black market,” said HSI Philadelphia Special Agent in Charge John Kelleghan. “No good comes of illegal exports to Syria, especially during this time of gross misgovernment and civil strife. As the principal enforcer of export controls, HSI will continue to do everything in its power to ensure that sensitive technology doesn’t fall into the wrong hands in Syria. I applaud our colleagues at the Department of Commerce, the U.S. Attorney’s Office for the Middle District of Pennsylvania, along with our law enforcement counterparts in the United Kingdom. This coordinated effort helped us make this complex investigation a success.”

More Information:

Foreign Subsidiary of Robbins & Myers Pleads Guilty to Illegal Export of Drilling Equipment to Syria


By: Brooke Driver

Robbins & Myers Belgium S.A., a subsidiary of Myers & Robbins Inc. has agreed to pay a total of $1 million in criminal fines and to serve a term of corporate probation for four separate violations of the International Emergency Economic Powers Act and the Export Administration Regulations.

Around the date of May 2006, an internal auditor of the U.S. parent company to the Belgium branch discovered that Robbins & Myers Belgium had illegally shipped stators made from U.S. steel to a Syrian customer. Although, after this discovery, the parent company informed the foreign branch of the violation and ordered that it stop these shipments, the subsidiary to do business with the Syrian customer between August and October 2006 and attempted to hide related documents from government investigators.

Under Secretary of Commerce Eric L. Hirschhorn said of the case that it:

“…shows that the United States will vigorously enforce its export laws against companies doing business with Syria, a state-sponsor of terrorism and home to one of the most brutal regimes on earth…The Department of Justice will hit companies that do business with Syria where it hurts most: the bottom line. This company will pay fines, penalties, and forfeitures more than 50 times greater than the proceeds of the sales.”

“The significant civil and criminal penalties in this case show our resolve to pursue and prosecute those who flout our export control laws. We will continue to work in concert with our partner agencies to ensure that U.S. technology stays out of the wrong hands.”

UAE Freight Forwarder Pays $125,000 Penalty for Exports and Reexports of Monitoring Devices to Syria


By: Brooke Driver

In May, BIS announced that Aramex Emirates, LLC, based in Dubai, has settled for $125,000 to resolve the charges against it. BIS claims that in December of 2010 and February of 2011, Aramex facilitated the export or reexport of unlicensed network devices and software to Syria via the U.A.E. Under Secretary of Commerce, Eric L. Hirschhorn explained the importance of controlling the related items in announcing the settlement:

“Today’s settlement shows the importance of compliance with U.S. law by foreign freight forwarders handling items subject to U.S. export controls…The items in question could be used by the Syrian government to monitor internet activity and block pro-democracy websites as part of its brutal crackdown against the Syrian people.”

The case against Aramex strengthened significantly when it was discovered that the company’s cargo system team, including employees directly involved in carrying out the illegal transactions had been specifically informed of U.S. sanctions against Syria and advised to avoid U.S. shipments to Syria in the 2009 company-wide circular “Exporting U.S.-made Products to Countries Under the U.S.A. Trade Ban.”

Although BIS pursued action against Aramex, due to its seemingly purposeful violations of U.S. customs law, BIS reduced the demanded penalty to reflect the complete cooperation it received during its investigation.