Archive for the ‘Terrorism’ Category

Russian Bank Pays $9.5 Million for Dealing with U.S. Prohibited Parties


By: Brooke Driver

The Office of Foreign Assets Control announced January 27 that the Bank of Moscow, run by the government-owned bank VTB, has agreed to pay nearly ten million dollars as recompense for its 69 violations of Executive Order 13382 of June 28, 2005 and the Weapons of Mass Destruction Proliferators Sanctions Regulations. Specifically, these violations consisted of illegal financial transfers for an Iranian bank involving the United States to or for a known weapons of mass destruction proliferator. The illicit transfers took place between 2008 and 2009 and totaled about $41 million. OFAC claims that it lowered the base penalty of $14.1 million due to the fact that:

  • The bank had not received a penalty notice or finding of violation of the OFAC in the five years prior to the alleged violations
  • The bank took remedial actions to improve its compliance with U.S. sanctions laws
  • The bank cooperated with OFAC throughout the investigation

These factors may have significantly lowered the Bank of Moscow’s fine, but OFAC still chose to assign a large penalty, because:

  • The bank did not voluntarily disclose its violations
  • Its many violations indicated a consistent lack of respect for U.S. sanctions and failure to construct an effective compliance program
  • The Bank of Moscow is a large and commercially sophisticated financial institution
  • The bank’s actions caused significant harm to U.S. sanctions program objectives

Taiwanese Father and Son Arrested for Allegedly Shipping Weapons Machinery to North Korea


By: Brooke Driver

A 67-year-old Taiwanese man, Alex Tsai was arrested in Tallinn Estonia on May 1, 2013, for allegedly supplying weapons machinery to North Korea. His son, Gary Tsai, also connected to the illegal operation, was arrested the same day in his home in Glenview, Illinois.

Both men were charged in Chicago with identical accusations: one count of conspiring to defraud the United States in its enforcement of laws and regulations prohibiting the proliferation of weapons of mass destruction, one count of conspiracy 2 to violate the International Emergency Economic Powers Act (IEEPA) by conspiring to evade the restrictions imposed on Alex Tsai and two of his companies by the U.S. Treasury Department, and one count of money laundering. The father and son—as well as an unnamed “Individual A”—have been under investigation for some time for exporting goods and materials that could be used to produce weapons of mass destruction. The three men, now Denied Persons, are associated with at least three Taiwan-based companies and one US-based company suspected of criminal activity: Global Interface Company, Inc., Trans Merits Co., Ltd., Trans Multi Mechanics Co., Ltd and Factory Direct Machine Tools, all of which have also been added to the Debarred List. Specifically, Alex and Gary Tsai was debarred for dealing (since the late 1990’s) with the Korea Mining Development Trading Corporation, which was designated as a proliferator by President Bush in 2005. The Tsais has been transporting items to KOMID since the late 1990’s that could be used to support North Korea’s advanced weapons program.

The defendants may receive up to the maximum penalty of:

  • 20 years in prison and $1,000,000 fine for violating IEEPA
  • 20 years in prison and a $500,000 fine for money laundering
  • 5 years in prison and a $250,000 fine for conspiracy to defraud the US

RH International, LLC and Owner Mohammad Reza Suffer $10,000,000 fine, 4 Years of Prison and 10 Years on the Denial List


By: Brooke Driver

On October 18, 2012, RH International, LLC, and its owner, Mohammed Reza Hajian, were convicted of violating the International Emergency Economic Powers Act. RH International was specifically accused of knowingly violating the IEEPA and the Iranian Transactions Regulations by exporting computer and related equipment from the United States to Iran through the U.A.E without attaining the necessary license from the Office of Foreign Assets Control.

Based on the facts that:

  • RH management purposefully violated customs laws and
  • The company did not disclose its violations to BIS

RH International was sentenced to:

  • 10-year denial of export privileges
  • 12 months of unsupervised probation
  • $400 fine

Because the company’s owner and operator plead guilty to direct involvement in and knowledge of RH’s violations, and because he had displayed—by exporting to Iran through the U.A.E.—an affinity for finding illegal loopholes, Reza was charged separately. To prevent Reza from exporting his products as an individual, rather than representative of RH, and to punish him for his actions the court sentenced him to:

  • 10 years on the Denied Persons List
  • 12 months of unsupervised probation
  • 48 months in prison
  • $100 assessment

As if these consequences weren’t severe enough, the court found a loophole of its own; instead of directly demanding a huge fine of RH International, prosecution chose to “reroute” that $10,000,000 fine to Reza himself, who will likely rethink attempting to hoodwink the US government in the future.

Fails! University of Massachusetts at Lowell Pays $100,000 for Shipments to Pakistani Missile Entity


By: Brooke Driver

The University of Massachusetts at Lowell has chosen to settle with BIS for neglecting to obtain the necessary licenses required by Section 744.11 and Supplement No.4 to Part 744 of the Regulations for export to the Pakistan Space and Upper Atmosphere Research Commission (“SUPARCO”), an organization that has been on the Entity List since November 1998, as it was “determined to be involved in nuclear or missile activities.” In September 1, 2007, UML exported antennae and cables valued at $12,480 and designated as EAR99 to SUPARCO without an export license. UML again exported to SUPARCO without permission in October 6, 2007, this time transporting an atmospheric testing device valued at $191,870—also designated as EAR99.

Based on these charges, and had UML chosen to fight them, they could have faced:

  • The maximum civil penalty of up to the greater of $250,000 per violation or twice the value of the transaction that is the basis of the violation
  • Denial of export privileges and/or
  • Exclusion from practice

Luckily for UML, BIS was merciful, due to UML’s timely response to the charges and desire to settle. However, even these considerations could not save UML from:

  • A $100,000 fine
  • A two year probationary period

Freight Forwarder Pays $139,650 for Affiliates’ Shipments to Cuba and Iran


By: Brooke Driver

EGL, Inc. of Houston, Texas has agreed to pay $139,650 for alleged violations of the Cuban Assets Control Regulations, 31 C.F.R. part 515 (CACR) and the Iranian Transactions and Sanctions Regulations, 31 C.F.R. part 560 (ITSR). During 280 transactions between the dates of April 19, 2005 and December 15, 2008, EGL’s foreign affiliates provided freight forwarding services to and from Cuba, in violation of the CACR. The alleged violations of the ITR occurred between August 15, 2008 and October 27, 2008, when affiliates of EGL provided freight forwarding services for ten shipments that contained oil rig supplies to Aban VIII, an oil drilling rig off the Iranian coast owned by Petropars—an affiliate of the National Iranian Oil Company.
While the company voluntarily disclosed the CACR violations, it did not disclose the ITR violations, resulting in a base fine of $206,889. The lowered settlement amount and the case’s non-egregious classification reflect OFAC’s consideration of the following:

  • EGL had no history of prior sanctions violations
  • EGL substantially cooperated with OFAC’s investigation, including by entering into statute of limitations tolling agreements, and by producing responsive materials in a clear and organized fashion
  • EGL took remedial measures to prevent future OFAC violations

OFAC’s required fine of $139,650 was based on the facts that:

  • The alleged violations of the CACR and the ITR by EGL resulted in significant harm to OFAC’s sanctions programs
  • EGL had reason to know that the Aban VIII was an oil rig operated by an Iranian company in Iranian waters

So what have we learned?
1.    Be aware of the actions of your affiliates, because you are accountable for their mistakes.
2.    Speak up to pay less: The government will take your cooperation into consideration when determining consequences.
3.    Suspicion counts as knowledge: reason to believe that a violation may occur is reason enough for the government to dole out severe consequences.

Bank of Tokyo-Mitsubishi UFJ, Ltd. Pays $8 Million for OFAC Violations


By: John Black

The Office of Foreign Assets Control (OFAC) of the US Treasury Department announced on December 12, 2012 that the Bank of Tokyo-Mitsubishi UFJ, Ltd. (“BTMU”), Tokyo, Japan, agreed to pay $8,571,634 to settle apparent violations of US embargoes and sanctions on Burma, Iran, Sudan, Cuba, and persons involved in the proliferation of weapons of mass destruction. The violations occurred between April 3, 2006, and March 16, 2007.

According to OFAC, BTMU’s Tokyo operations concealed the involvement of countries or persons subject to U.S. sanctions in transactions that BTMU processed through financial institutions in the United States. Pursuant to written operational instructions utilized in a Tokyo operations center, BTMU employees engaged in stripping activities, which means they systematically deleted or omitted from payment messages any information referencing U.S. sanctions targets that would cause the funds to be blocked or rejected, prior to sending the transactions through the United States. These activities are similar to the so-called stripping activities for which many of the largest European banks have agreed to pay over $2 billion combined penalties to the US Government in the past.

According to OFAC, using its stripping practices, BTMU processed at least 97 funds transfers, with an aggregate value of approximately $5,898,943, through BTMU’s New York branch or other banks in the United States, in apparent violation of OFAC regulations. In 2007, BTMU’s senior management learned of these practices, it took the textbook correct actions: It began an internal review of historical transaction data and made a voluntary self-disclosure to OFAC.

OFAC said that it decided on the settlement amount based on its General Factors under OFAC’s Economic Sanctions Enforcement Guidelines in its regulations at 31 CFR Part 501, app. A. OFAC said these are the key factors that determined the amount of the penalty:

  • BTMU’s conduct concealed the involvement of U.S. sanctions targets and displayed reckless disregard for U.S. sanctions;
  • The general manager of the Operations Center in Tokyo knew or had reason to know that procedures had been implemented instructing employees to manipulate payment instructions;
  • BTMU’s conduct conferred a substantial economic benefit to targets of OFAC sanctions;
  • BTMU is a large, commercially sophisticated financial institution;
  • BTMU has undertaken significant remediation to improve its OFAC compliance policies and procedures;
  • BTMU substantially cooperated with OFAC’s investigation, including providing detailed and organized information regarding the apparent violations, and entering into a tolling agreement with OFAC; and
  • BTMU has no history of prior OFAC violations.

OFAC determined that BTMU’s violations constitute an “egregious case” despite the BTMU internal investigation, voluntary disclosure, and clean record. Obviously, the fact that these violations were the result of intentional actions to evade the rules, as opposed to an oversight or misunderstanding of the rules, weighed heavily in OFAC’s decision to impose a significant penalty for this egregious case.

Updated List of Countries Not Cooperating Fully with US Antiterrorism Efforts



By: Danielle McClellan

The Department of State has recently published the countries that are not cooperating fully with the US antiterrorism efforts. These countries are Cuba, Eritrea, Iran, Democratic People’s Republic of Korea (North Korea), Syria, and Venezuela.

Whatever you do, please do not confuse this list of “countries not cooperating fully with US antiterrorism efforts” with the list of terrorism supporting countries.

More information:

GAO Study: Congress Is Surprised It Is Possible to Export Illegally



By: John Black

The Government Accountability Office (GAO) recently revealed some what is characterizes as serious flaws in the current export laws regarding sensitive dual-use and military exports. Over a 13-month investigation, the GAO created fake companies and purchased military and dual use items, both of which have military and commercial use in the US and then shipped “dummy” versions of these items to countries known for transshipment points for terrorist organizations and foreign governments. They purchased night-vision scopes, triggered spark gaps, electronic sensors and gyro chips-these items have military and nuclear weapons related applications.


“Gee, They Looked Like Model Airplane Components to Me!” Says Not-the-Smartest-Violator



By: Danielle McClellan

Yaming Nina Qi Hanson of Silver Spring, Maryland has been charged with exporting autopilot circuits to China without a license. Yaming’s husband, Harold Hanson has been named a co-conspirator but has not yet been charged. (more…)

BIS Announces New Procedures for Putting Parties on Its Entity List



By: Danielle McClellan

BIS has published a final rule in the Federal Register amending the EAR export and reexport requirements for persons and entities designated on the Entity List. 15 CFR Parts 730, 744 and 756 have been changed effective immediately The rule expands on the idea that certain exports and reexports to parties on the Entity List require a license from BIS and availability of License Exceptions in those transactions is limited.

A summary of the changes are as follows:

  • An End-User Review Committee will be formed consisting of representatives from the Department of Commerce, State, Defense, Energy, and Treasury. The committee will have the discretion to add, remove or modify a party on the Entity List.
  • The Entity List will be changed when there is reasonable cause to believe, based on specific facts, that an entity has been involved in, or poses a risk of being involved in activities that are contrary to the national security or foreign policy interests of the US. BIS stated that a guidance will be published in the near future regarding the ability of US persons to deal with parties related to those on the Entity List; BIS also stated that “US persons” will not be placed on the Entity List. (more…)