u.s. department of the treasury office of foreign assets control

U.S. Department of the TreasuryU.S. Department of the Treasury

Office of Foreign Assets ControlOffice of Foreign Assets Control

AgendaAgenda What is OFAC? Relevance for Corporate Registration Legal Authority for U.S. Sanctions Jurisdiction Sanctions Programs

– Current List of Sanctions– Comprehensive Sanctions– Limited Sanctions– Recent OFAC Actions– Specially Designated Nationals (SDNs) and Blocked Persons

Penalties and Consequences Effective Compliance Strategies

What is OFAC?What is OFAC?Office of Foreign Assets Control (OFAC) of the

U.S. Department of the Treasury

OFAC administers and enforces economic sanctions against targeted:- Foreign governments (e.g. Iran, Sudan, Cuba)

- Individuals (e.g. terrorists, int’l narcotics traffickers)

- Entities (e.g. drug front companies, charities that send money to terrorist groups)

- Practices (e.g. trade in non-certified rough diamonds, proliferation of weapons of mass destruction)

Importance of the “SDN List”

Relevance for Corporate RegistrationRelevance for Corporate Registration

OFAC regulations prohibit doing business with sanctions targets – you need to know who those targets are!

9/11 emphasized the need to “know your customer” by screening applicants

Cooperation of corporate filing offices and businesses who facilitate this process contributes to the effectiveness and success of OFAC sanctions programs.

For example…For example…

U.S. business filing company contracted with Yugoslavian entity to file incorporation papers*

Prohibited under the embargo of Yugoslavia (can’t do business with company in an embargoed country)

Adequate screening was not done by the filing company or the state registration office

Newly incorporated U.S. corporation used to avoid economic sanctions

* This violation occurred prior to the lifting of the Yugoslavian sanctions on May 28, 2003.

Legal Authority for U.S. SanctionsLegal Authority for U.S. Sanctions

Legal Authority: TWEALegal Authority: TWEA Trading with the Enemy Act (“TWEA”)

(50 U.S.C. app. § § 1-44)

– Primary legal authority for Cuba and North Korea programs

Legal Authority: IEEPALegal Authority: IEEPA International Emergency Economic Powers Act

(“IEEPA”)(50 U.S.C. § § 1701-06)

– Primary legal authority for most non-TWEA programs

Legal Authority: OtherLegal Authority: OtherOTHER STATUTES: Antiterrorism and Effective Death Penalty Act

8 U.S.C. 219, 18 U.S.C. 2332d and 18 U.S.C. 2339b

Foreign Narcotics Kingpin Designation Act

Pub. L No. 106-120, tit. VIII Stat 1606, 1626-1636

IMPLEMENTATION AUTHORITIES: Title 31 U.S. Code of Federal Regulations, Chapter V Various Executive Orders

Jurisdiction: IndividualsJurisdiction: Individuals American citizens and permanent resident

aliens anywhere they are located

Any individual, regardless of citizenship, who is physically located in the United States

Jurisdiction: BusinessesJurisdiction: Businesses

Under the International Emergency Economic Powers Act (IEEPA) programs:

– Corporations organized under U.S. law, including foreign branches of U.S. companies

– Any corporation or company physically located in the United States, including U.S. branches, agencies and representative offices of foreign corporations

Jurisdiction: BusinessesJurisdiction: Businesses Under Trading With the Enemy Act

(TWEA) programs (Cuba, North Korea):

– Corporations organized under U.S. law, including foreign branches and foreign-organized subsidiaries of U.S. companies

– Any corporation or company physically located in the United States, including U.S. branches, agencies and representative offices of foreign corporations

Current List of Sanctions ProgramsCurrent List of Sanctions Programs

Cuba Iran Sudan Burma Nonproliferation Diamond Trading Liberia

Zimbabwe Syria Terrorism Narcotics Trafficking The Balkans Iraq North Korea

Comprehensive Sanctions ProgramsComprehensive Sanctions Programs

In general the following are prohibited under comprehensive sanctions programs:– Exports of goods and services– Imports of goods and services– Trade brokering, financing, or facilitation

Sudan

Cuba

Iran See OFAC’s website for details on each of these programs: www.treas.gov/ofac

Comprehensive Sanctions ProgramsComprehensive Sanctions Programs

Current comprehensive sanctions programs:

Under comprehensive OFAC sanctions, persons subject to OFAC jurisdiction must “block” (“freeze”) assets/property of a sanctions target under their control.

For corporate registration industry, must refuse to do business with all sanctions targets.

Comprehensive Sanctions ProgramsComprehensive Sanctions Programs

Zimbabwe- Block property of persons undermining democratic processes/

institutions in Zimbabwe.

(Robert Mugabe, etc.)

Limited Sanctions ProgramsLimited Sanctions Programs Balkans

– Block property of Milosevic supporters and persons who threaten international stabilization efforts in the Western Balkans

Burma/Myanmar– No import of goods or

services from Burma.– All major banks blocked.– No new investment.

Limited Sanctions ProgramsLimited Sanctions Programs

Iraq– General License– Most new transactions

allowed– Cannot do business with

designated members of the insurgency.

Limited Sanctions ProgramsLimited Sanctions Programs

Recent OFAC ActionsRecent OFAC Actions Liberia

– Block property of Charles Taylor and his supporters and persons who have undermined Liberia’s transition to democracy.

Recent OFAC ActionsRecent OFAC Actions Libya

– Sanctions lifted– All blocked funds

released– Doing business with

Libya is now permitted

Specially Designated NationalsSpecially Designated Nationals Specially Designated Nationals (SDNs)

– Individuals and entities all over the globe– Owned, controlled by or acting on behalf of targeted

governments or groups– May be front companies, parastatals, high-ranking

officials or specifically identified persons– Designated terrorists or narcotics traffickers

Specially Designated NationalsSpecially Designated Nationals

Over 3,000 unique SDNs and blocked persons identified by OFAC

Published and accessible on:– Federal Register– http://www.treas.gov/offices/eotffc/ofac/sdn/index.html

Specially Designated NationalsSpecially Designated Nationals

Holy Land Foundation for Relief and Development (SDGT)

Atlas Air Conditioning, U.K. (IRAQ)

Treviso Trading Corporation, Panama (CUBA)

Al-Hamati Sweets Bakeries (SDGT)

Usama Bin Ladin (SDT/SDGT)

Mamoun Darkazanli Import-Export, Germany (SDGT)

Myanma Foreign Trade Bank (BURMA)

Penalties and ConsequencesPenalties and Consequences Criminal Penalties

– Up to $10 million and 30 years in jail

Civil Penalties– Trading With the Enemy Act: $65,000– International Emergency Economic Powers Act: $11,000– Iraqi Sanctions Act: $325,000– Foreign Narcotics Kingpin Designation Act: $1,075,000– Anti-Terrorism and Effective Death Penalty Act: $55,000

Violations may result in:– Blocked funds and seized goods– Negative publicity and loss of business good will

Effective Compliance StrategiesEffective Compliance Strategies Screen corporate

registrations for sanctions references– Screen against sanctioned

countries, including cities and territories within such countries.

– Screen all parties connected with registration

““Due Diligence”Due Diligence”

Is the “hit” against the OFAC SDN list? Organization vs. individual vs. vessel? Is it a full name match? Have you gathered enough information to

compare?

Example 1Example 1 Your potential customer:

– Arnulfo Marquez; ABC Import-Export Limited; POB Chiapas, Mexico; US Citizenship; SSN: 222-22-222

Similar to the OFAC SDN listing: – TREJOS MARQUEZ, Arnulfo, Carrera 4 No. 9-

17 of. 308, AA 38028, Cali, Colombia; c/o CONSTRUCTORA TREMI LTDA., Cali, Colombia; Cedula No. 6090595 (Colombia) (individual) [SDNT]

Example 2Example 2

Your potential customer: – CIMEX N.V., Antwerp, Belgium

Similar to the OFAC SDN listing: – CIMEX (a.k.a. CIMEX CUBA; a.k.a.

COMERCIO INTERIOR, MERCADO EXTERIOR; a.k.a. CORPORACION CIMEX S.A.), Edificio Sierra Maestra, Avenida Primera entre 0 y 2, Miramar Playa, Ciudad de la Habana, Cuba; and all other locations worldwide [CUBA]

Example 3Example 3 Your potential customer:

– Abubaker Ahmed; DOB: August 1, 1970; Address: Dar es Salaam

Similar to the OFAC SDN listing: – AHMED, Abubakar K. (a.k.a. GHAILANI,

Ahmed Khalfan; … a.k.a. KHALFAN, Ahmed; a.k.a. MOHAMMED, Shariff Omar); DOB 14 Mar 1974; alt. DOB 13 Apr 1974; alt. DOB 14 Apr 1974; alt. DOB 1 Aug 1970; POB Zanzibar, Tanzania; citizen Tanzania (individual) [SDGT]

Effective Compliance StrategiesEffective Compliance Strategies Make sure your sanctions information is up-

to-date!– Sanctions and SDN list can be updated or revised

at any time– Updates not on a regular basis– Set your browser to automatically check the

OFAC web site for updates– Subscribe to email notification service on OFAC

home page

Effective Compliance StrategiesEffective Compliance Strategies Make sanctions compliance an integral part

of your business– Don’t treat OFAC compliance as an

afterthought– Ensure that all employees are familiar with U.S.

sanctions– Make compliance a part of training program for

new hires

Effective Compliance StrategiesEffective Compliance Strategies

Take advantage of OFAC compliance resources– OFAC publishes an extensive library of on-line

reference manuals, brochures etc.– These and other useful materials are available

free of charge through: OFAC’s web site: http://www.treas.gov/ofac OFAC’s automated fax on demand service:

202- 622-0077

For compliance counseling…For compliance counseling…

202-622-2490 or 1-800-540-6322 Monday through Friday 8 a.m. to 7:00 p.m EST www.treas.gov/ofac

Erin Ghelber

Compliance Programs Division

Tel: 202-622-2490 or

1-800-540-6322

Fax: 202-622-2426

Web: www.treas.gov/ofac