• California company accused of sanctions violations challenges U.S. Treasury Department
  • Appeals court generally sides with government but remands because of arbitrary and capricious decision related to five alleged violations
  • Traditional interpretation of “inventory exception” is considered by Court

It is rare for companies to go to court to fight penalties imposed by the Office of Foreign Assets Control (OFAC) for violations of U.S. sanctions. It is even more rare for a court to make any sort of finding against the agency.  Yet that is exactly what happened when the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) recently considered OFAC’s imposition of penalties against Epsilon Electronics (Epsilon) for alleged violations of U.S. sanctions against Iran.

Continue Reading Rare Court Case Sheds Light on U.S. Sanctions Enforcement

  • American Honda Finance Corporation pays for alleged violations of U.S. sanctions on Cuba
  • Violation committed by American Honda’s subsidiary in Canada
  • Penalty underscores breadth of U.S. jurisdiction, importance of compliance reviews

On June 8, the Office of Foreign Assets Control (OFAC) announced a monetary penalty against American Honda Finance Corporation (American Honda) for alleged violations of the Cuban Assets Control Regulations (CACR), the primary regulations by which the United States imposes economic sanctions on Cuba.  A copy of the OFAC press release announcing the penalty is available here.

Continue Reading The Long Arm of U.S. Sanctions: Penalty Imposed Against Canadian Subsidiary of U.S. Subsidiary of Japanese Company

  • Proposed legislation targets current gaps in U.S. financial crime law and enforcement
  • Bi-partisan Senate legislation would likely expand compliance obligations for banks and others in financial services industry
  • Proposed legislation is in line with U.S. and international efforts to fight terrorism and trafficking through economic sanctions and anti-money laundering (AML) rules

On May 25, 2017, Sen. Chuck Grassley (R-IA) introduced the “Combating Money Laundering, Terrorist Financing, and Counterfeiting Act of 2017” (the “Act”).  The full text of the bill is available here.

Continue Reading Proposed Legislation Would Combat Terrorist Financing, Money Laundering

In an article published in the May/June 2017 issue of ABA Bank Compliance (a publication of the American Bankers Association), I provided insight on how banks can mitigate violations with the Office of Foreign Assets Control (OFAC). In January 2017, OFAC announced a settlement in which a large Canadian bank agreed to pay more than $500,000 in monetary penalties for 170 alleged violations of U.S. sanctions against Iran and Cuba. This especially costly example of financial stakes for banks and other financial institutions illustrates the importance of compliance, despite the challenges they face as they process millions of transactions on a daily basis and across international boundaries. While all risks cannot be eliminated, through careful investigation, compliance enhancements, monitoring and record keeping, financial institutions can help mitigate most risks.

For more details on key strategies to protect against violations and to remediate them when they do occur, access the PDF of the article, “Mitigating Economic Sanctions Risk,” below.

Download Document – ABA Bank Compliance May June 2017

  • Boeing announces deal to sell aircraft to Iran Aseman
  • The deal was apparently authorized by the U.S. Treasury Department, but Congressional foes fight to block it
  • If the deal goes through, further loosening of sanctions could follow

This story begins in July 2015, when the United States and its allies entered into a now-famous nuclear agreement with Iran which, among other things, paved the way for the United States to scale back economic sanctions on Iran – including those relating to commercial aircraft.  Executing that deal, in January 2016, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued a new, favorable licensing policy for many transactions relating to the sale of commercial passenger aircraft and related parts and services to Iran.

Continue Reading The Long Road: Boeing Continues the March into Iran

  • One of largest export and sanctions penalties ever imposed
  • Reminder of U.S. government’s broad jurisdiction over export and sanctions matters
  • Cooperation could have helped ease the penalty significantly

On March 7, 2017, Chinese telecommunications company, Zhongxing Telecommunications Equipment Corp. (ZTE), signed on to three separate settlement agreements with the United States, agreeing to pay $892 million for violations of U.S. sanctions and export controls. Even more could be due if ZTE strays from the commitments it has made under the settlement agreements.  This is one of the largest penalties ever imposed by the U.S. government for export and sanctions violations.

It is impossible in the space of this blog article to provide a detailed summary of this matter.  In addition, while the details of the matter would make good copy, we think (hope!) that this is something of an isolated incident.  At the same time, we think several lessons can be derived from this action.

Continue Reading Lessons from the Historic ZTE Enforcement Action

  • Canadian bank pays penalties for U.S. dollar transactions involving Cuba and Iran
  • Bank receives Finding of Violation – but no penalty – for violations by European subsidiaries
  • Disclosure and cooperation with OFAC mitigated penalties

Earlier this month, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced a $516,000 settlement with a large Canadian bank for allegedly violating U.S. sanctions against Iran and Cuba 167 times. OFAC also issued a separate finding of 3,491 additional violations by two of the bank’s European subsidiaries – an investment services company and another small bank.  Yet OFAC imposed no penalty for the subsidiaries’ alleged violations.

Continue Reading OFAC Sanctions: No Entity Too Small or Too Far for Enforcement

  • Virtually all U.S. sanctions on Sudan lifted effective January 17, 2017
  • Sanctions could be permanently lifted in six months
  • There continue to be practical challenges to doing business in Sudan

In an unexpected development, on Friday, January 13, 2017, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced changes to lift U.S. sanctions on Sudan and thereby pave the way for trade with the North African country.  The U.S. government is authorizing virtually “all prohibited transactions [involving Sudan], including transactions involving property in which the Government of Sudan has an interest.”  Moreover, the United States is dangling the possibility that sanctions could be permanently lifted after six months.  The amendments, announced by Executive Order, became effective on Tuesday, January 17.

Continue Reading Freaky Friday – U.S. Unexpectedly Eases Sanctions on Sudan

  • New sanctions prohibit U.S. business with designated cyber attackers
  • Russia opts not to retaliate for now
  • Congressional briefings, and Republican senators, may force Trump’s hand

For those of us who live and breathe U.S. economic sanctions, we are used to most people largely ignoring what goes on in our world.

The United States’ recent imposition of new sanctions against Russia, however, was not one of those times.

Continue Reading Hey! Did You Hear? The United States Imposed Sanctions Against Russia

Effective December 23, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) amended the Iranian Transactions and Sanctions Regulations (ITSR) to expand the scope of medical devices that can be exported to Iran.

Now, unless specifically excluded by ITSR section 530(a)(3)(ii)-(iv), an item that qualifies as a “device” under section 201 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. § 321) and is designated EAR99 (or would be if it were located in the United States) can be exported or re-exported to Iran without specific authorization from OFAC.  (Previous restrictions on payment terms and shipping dates remain in effect.)

Continue Reading Happy New Year: OFAC Expands Exports of Medical Devices to Iran