OFAC Reporting Requirements (Part I): Inside the Visa RPPR finding and the importance of reporting

Today, OFAC issued a Finding of Violation (FOV) against Visa. But it wasn’t your typical notice that we have been accustomed to, of payments slipping through the cracks, wire stripping or general failure to stop bad money going into bad hands. Today’s FOV was focused on the failure to report that an entity had blocked funds. Essentially, the crux of the FOV is that after blocking funds in which Iranian proliferation-bank Melli had an interest in, they placed the money into a blocked account but never reported it to OFAC. Of all the things that have happened in the past couple of years, this is comparatively benign. However, given the size of the institution (your wallet probably has one of their products in quick reach), a failure to report both left OFAC in the dark and raises some concerns about their program’s ability to keep records. Hence why this was an FOV and not a cautionary letter. To be clear, there are varying degrees of actions OFAC can take to penalize an institution. An FOV exists to straddle the dimension where a party committed an error that is of sufficient concern to OFAC that warrants more than a private cautionary letter but not of sufficient concern to warrant a civil penalty. Oddly, FOVs alone are a very rare occurrence, more rare than settling and much more rare than a simple cautionary letter. FOVs do tend to proceed a civil penalty, but this was not the case here. If anything, this case does bring up a very important point. The ten day reporting requirement is not arbitrary. It exists to ensure that critical information gets to the right people in a timely fashion.Blocked and rejected assets reports serve two key purposes. To provide information for the Terrorist Assets Report through the use of the Annual Report of Blocked Property. The second and more immediate purpose is these reports of blocked and rejected assets help paint a picture and inform OFAC of activities. These are critical for allowing OFAC to identify trends in sanctions, understand the landscape and identify possible violations. In this case, Visa left critical information out of both their annual report as well as two blocking reports. The consequences of these actions could be anywhere from something as simple as partial accounting of all blocked assets all the way to not having the right information about a critical incident involving sanctions. For instance, if a bank was to block funds but not report it and a party was to come to OFAC with a license to release those funds, OFAC, the client and the bank would all be caught flat footed in adjudicating the request. An even more serious example would be failing to report blocked funds from a bank with known ties to nuclear proliferation, resulting in OFAC not knowing about a particular transaction and being able to execute steps to prevent further transfers. It essentially gives the bad guys a head start on their ability to adjust.   This is part one in a series of OFAC reporting requirements that will cover the importance of good reporting, what OFAC does with Blocking and Reject reports and a look at the Annual Report of Blocked...

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Awkward…

Apparently Sudan, a sanctioned country, is now a supplier of weapons to the Free Syrian Army. This is a little awkward…for all involved… Western analysts and officials said Sudan’s clandestine participation in arming rebels in Syria suggests inherent tensions in Mr. Bashir’s foreign policy, which broadly supports Sunni Islamist movements while maintaining a valued relationship with the Shiite theocracy in Iran. Remember, there is a general license (GL 16) authorizing the export of services to the National Coalition (basically a blanket for the FSA). However, part (d) of the license states that all other programs (including the Sudan program) are not overridden and must be enforced. While the GL also has the note at the end saying that you can take the originators word, you may want to still take these events in as part of your calculus.  ...

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On Lobbying and SDNs: The Technical Rebuttal

I realized that my post about two lobbyists being criminally indicted was a bit tongue in cheek (and maybe a little biased), but there have been some questions about the ability to lobby for an SDN. This question stems from the notion that lobbying for someone is in effect an extension of providing legal services and that it should be allowed. Because I do not believe that lobbying qualifies as a legal service, I do not believe that any of the authorizations would permit it. Chalk it up to my background at OFAC and being a sanctions zealot. Arguments can be made the other way. However, as Erich Ferrari points out, not including lobbying as an authorized service does present a moral dilemma that places OFAC on the defensive, something I’ll address in a separate post. My differences with the contention that lobbying should be allowed not only stem from the technical definition of the regulations, but also from the definition of lobbying and characterizing the services and requirements behind the act. This brings up two questions that need to be answered. First, what is lobbying? Second, does it fit into legal services? After that we can figure out if Israel and Turner have a credible legal defense for lobbying for Mugabe (spoiler alert: the answer is no regardless of how questions #1 and 2 come out). So, what is lobbying? If we take a look at Webster’s we find this definition: v. lob·bied, lob·by·ing, lob·bies v.intr. To try to influence the thinking of legislators or other public officials for or against a specific cause v.tr. 1. To try to influence public officials on behalf of or against (proposed legislation, for example): lobbied the bill through Congress; lobbied the bill to a negative vote. 2. To try to influence (an official) to take a desired action. Nowhere in the definition of lobbying is it alluded to that lobbying itself is a legal service. In fact, lobbying is an act of free speech denoting an action of when the member of the public or a constituent approaches a figure in authority to convince him or her of a specific course of action. In the United States, anyone may lobby congress, their community leaders and even the random guy giving away free newspapers on the corner (listed in degrading level of effects that is…). Thus, you do not need to have a law degree and be licensed to practice law in the state that you are lobbying in. Construing that it does is simply making a statement that lawyers are allowed special privileges that exceed general first amendment rights. However, because much of what we know as lobbying involves regulations and legislation, many of the lobbyist you see around D.C. are in fact lawyers. The second question then becomes: Does lobbying to have sanctions listed constitute as legal services as defined in 31 CFR 541.507? As I generally did when I was at OFAC, we’ll walk through this passage by passage to make sure we don’t miss anything and relate all the possible legal services to lobbying if applicable: The core paragraph of 541.507 states this: (a) The provision of the following legal services to or on behalf of persons whose property or interests in property are blocked pursuant to § 541.201(a) is authorized, provided that all receipts of payment of professional fees and reimbursement of incurred expenses must be specifically licensed: Hint, there is some foreshadowing for the Israel-Turner case in the above passage. But for the most part, it is clear that legal services for the passages we will look...

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SDN Moves: Al Qaeda in Iraq now called Al Qaeda Somewhere Between Syria and Iraq

Long War Journal reports that Al Qaeda in Iraq commander and OFAC SDN Abu Bakr Al-Baghdadi has moved his base of operations from Iraq to Syria. I’m guessing the move doesn’t have to do with cost of living… AQI has been operating in Syria for a while now and this should be as much of a surprise as the Heat winning another championship. However, depending on how your filter works and the depth of your analytics, if you haven’t merged any of the SDGT profiles that involve AQI with Syrian CTRPs, now is probably a good time to do...

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If you can’t beat us in sanctions…infiltrate our frats?

I would expect nothing less from Iran… I guess it’s a close call for us. Imagine if they had been there when I…umm…neverrrrmindddd….

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