Our friends at the Office of Foreign Assets Control (OFAC) have been busy lately. We not only have enforcement news for you, but procedural news, a new Executive Order responding to human rights abuses in Syria and Iran, and a Burma program General License. But before we get into the details of program changes, I want to use a recently settled case to remind readers that OFAC sanctions apply to EVERYONE regardless of how small a company is or how harmless a product might seem. Rules are rules. They apply equally, and this month OFAC ensures us that they plan to enforce that way. So step up your compliance game — OFAC is playing hardball.
Case Study – Don’t Export to Iran Without a License
This month Essie Cosmetics Ltd. and one of its corporate officers agreed to a settlement with OFAC concerning unlicensed exports to Iran of about $33,000 worth of nail care products. While nail care products are not the type of export that might raise eyebrows, seem inherently dangerous, or tend to support a hostile government regime, unlicensed exports to Iran are prohibited and it’s clear that OFAC isn’t tolerating any attempts to circumvent those rules. OFAC determined that there was no voluntary self-disclosure and considers the case egregious because there were intentional efforts to evade the sanctions. After taking mitigating factors into account, including no history of violations and cooperation with the investigation, OFAC reduced the settlement from the base penalty of $750,000 to $450,000! The investigation also lead to prosecution agreements in the Southern District of New York and a civil forfeiture to the Department of Homeland Security.
Take away – JUST DON’T DO IT.
Case Study — Be Careful Who You Do Business With…You Never Know
Working for or with U.S. Government blocked parties may lead to less money for you. When the blocked party tries to pay you, the funds will be seized by the USG and you won’t get paid. On April 23, the U.S. government issued a new Executive Order blocking anyone that supports human rights abuses in Iran and Syria through the use of technology. See the White House Fact Sheet. This new law reminds EVERY exporter to ensure that you check the lists before exporting. This means:
- Check the restricted parties lists at all agencies
- Review the red flags
- Review embargoed and sanctions prohibitions and
- Review the transshipment country prohibitions list under 15 CFR Part…(General Prohibition 8)
Burma/Myanmar License Change
On April 17, OFAC replaced and superseded Burma General License No. 14-B (14-B) with General License No. 14-C (14-C). 14-C expands upon 14-B authorizations and allows for the export and reexport to Burma of financial services in support of certain not-for-profit activities in the country. Qualifying activities include: projects to meet basic human needs, democracy building and good governance projects, educational activities, sports activities, certain non-commercial development projects and religious activities. For more details, see General License 14-C.
Modernization of OFAC Licensing Process
As of March 26, there is a new licensing numbering system. Moving forward, expect the new system to be reflected in new licenses, denial letters and other correspondence. Amended licenses will continue to use the old system. For a complete description of the new numbering system, see here.