All Things Sanctions

Follow the Blackstone sanctions blog for your daily digest on the happenings of sanctions.

Actual steps to combat the Islamic State with your business

Posted by on Oct 26, 2015 in Sanctions Blog | Comments Off on Actual steps to combat the Islamic State with your business

Actual steps to combat the Islamic State with your business

This morning I was excited to wake up to a blog post on one of the preeminent foreign policy blogs, War on the Rocks, titled “How the U.S. Business Community Can Take on the Islamic State.” Anxious to read some potentially useful compliance angle towards maintaining a good CFT (“Countering the Financing of Terrorism”) program or a few pointed supply chain due diligence techniques, we are left with this hair-brained guidance by the author:   Today, U.S. businesses should similarly join the fight against the Islamic State. They can do so by suing banks that handle terrorists’ money under antiterrorism and racketeering statutes. Yes, you heard me correctly. This genius’ idea of combating the financing of terrorism is for your company to decide to waste its money on poorly thought out litigation against a series of mysteriously functioning branches in Iraq that serve as correspondent accounts for the Islamic State. I wish I could be kidding you, but frankly, I’m not. The author then goes on to cite the case against Arab Bank Plc, a case that took years of significant litigation relating to 18 U.S.C. § 2331, a section regarding the anti-terrorism act in which US persons can sue for treble damages against an institution that has provided material support as defined elsewhere in the statute (18 U.S.C. § 2339B). The author of this article goes to link ISIS attacks against oil fields in which, ostensibly, US persons have an interest in to be of the same level as litigation under Arab Bank Plc. How does he arrive there? The Islamic State seized at least 110 bank branches in the Levant that maintain correspondent relationships with global banks. Terrorist fundraisers publicly direct donations to other, identified banks in the Gulf and wider Middle East, and terrorists use such banks to launder hostage ransom payments. Some of these banks are subject to personal jurisdiction in the United States and hold substantial assets here. The author cites a FATF report that states that Iraq and Syria have correspondent branches under ISIS control, but a read of the FATF report (I’ve kept the link in the block-quote) shows that Iraq has moved to sever the necessary RMA keys with these branches and has further issued instructions to Iraqi banks on how to proceed. Likewise, in order to qualify under the ATA a plantiff would need two jurisdictional hooks: a) a US person harmed or killed in the attacks and b) a US person to sue. I am unaware of any Syrian banks maintain a presence in the United States and if the Iraqi banks are complying with instructions on how to handle their abdicated branches, it is unlikely that the prosecution could provide facts outlining to “extreme indifference” resulting in material support, similar to the facts of the Arab Bank case. Instead of wasting pixels responding to one of the dumbest articles regarding CFT compliance I’ve read in a while, let’s briefly outline some ways in which not just US companies, but all companies with exposure to this risk can help combat the Islamic State. Implement an effective AML/CFT program that includes a robust KYC framework. Customers’ risk should be assessed not just for AML and sanctions indicators, but also indicators specific to the financing of terrorism. The linked FATF report above does a great...

read more

SDN Moves: OFAC strikes back, Trouble in the Congo, More Kony Womp Womp

Posted by on Oct 29, 2013 in Sanctions Blog | Comments Off on SDN Moves: OFAC strikes back, Trouble in the Congo, More Kony Womp Womp

SDN Moves: OFAC strikes back, Trouble in the Congo, More Kony Womp Womp

A nice turn of pace for SDN activities. Sorry for the delay again.   Counter Narcotics Today OFAC designated a money-laundering cell operating between Peru and Spain (see, it was on purpose I delayed posting until today!…right). Of course, no designation can go without an Analyst Notebook chart for your viewing pleasure. Press release details are moderate, but given the SDNT context it is clear it is for transmission of proceeds from Colombia to Spain. Given the designated’s client list, he appears to be closely associated with the FARC and this goes straight to the point of FARC penetration of Europe via West Africa. I did a study a few years back on this and it seems to be the onward trend. That’s mainly notable because during my briefing I made someone cry… Manuel Aguirre Galindo, an SDN under the SDNTK program and a senior leader for the faltering AFO cartel was confirmed arrested Saturday. Good ole Manny was a senior level AFO member who allegedly oversaw a large financial aspect of their operations. Thus his arrest is a good notch on the belt for any OFAC and AML program. And is it just me, or has AFO been taking the biggest beating lately of all the cartels? Alternately, Stratfor tackles the question of whether the Zetas are really on their way out. They seems to think the Zetas will be around a little longer. I’m not going to object in the short term, but I don’t believe the Zetas will see long term existence. I did an article on why I think this earlier this year.   Counter-Terrorism This week seems to be a trade off between narco and terror. When one heats up, the other pipes down. However we did drone two senior members of al-Shabaab (not designated). ‘Murrica. The UN designated Muhammed Jamal al-Kashef, but he had previously been designated under OFAC and thus should already be in the filter.   Country Programs War crimes poster-boy and Facebook one-hit wonder Joseph Kony watch out, some 18 Bravos have bullets with your name on it. Kony is designated under SDGT. For those interested, State released a Q&A background on the P5+1 negotiations for Iran. I personally haven’t read it and probably won’t for a few days…or ever. But feel free to comment and pique my interest. DRC designated group M23 is starting more trouble in the Congo. Negotiations broke down and now they are getting smacked around by the military of the DRC. Reports are positive but I’m sure the group, or another equally bad one, will retreat into Rwanda and find itself fighting again a year from now. It’s unfortunate as that the talks broke down due to disagreements on amnesty. For these conflicts, Disarmament, Demobilization and Repatriation (DDR) ops are some of the most difficult issues. Having the rebels voluntarily disarm is the best way to guarantee future stability, yet the more brutal a group is the harder it is to forgive. Separating the bad apples from those that can be successfully repatriated is difficult, but when the bad apples are doing the talking its almost impossible to both seek peace and justice simultaneously....

read more

OFAC Enforcement Action: Another Grand Slam Penalty

Posted by on Oct 21, 2013 in Sanctions Blog | Comments Off on OFAC Enforcement Action: Another Grand Slam Penalty

OFAC Enforcement Action: Another Grand Slam Penalty

Today OFAC released an enforcement action against Alma Investment LLC, a quasi-investment and trading company in the UAE that decided it wanted to violate the ITSR. This case and the penalties seem very similar to another grand slam almost exactly a month ago. While N=2 does not make a pattern, this is the second time OFAC has leveled the full amount of the base penalty under IEEPA against a trading company facilitating transactions with Iran in less than a 30 day period. Both cases were most likely concluded 30 days after the PPN was issued. If OFAC is getting tough against these trading companies, I would suspect that we will start to see an uptick on these enforcement actions. Likewise, OFAC not so subtly couched their rationale for this focus as that “assessing a civil monetary penalty against Alma will have a compliance/deterrence effect by encouraging greater due diligence by foreign financial institutions that maintain accounts for third-country trading companies and/or money transmitters.” Enough said.    ...

read more

SDN Moves: Snowden leaks, peace talks and not so funny clowns

Posted by on Oct 21, 2013 in Sanctions Blog | Comments Off on SDN Moves: Snowden leaks, peace talks and not so funny clowns

SDN Moves: Snowden leaks, peace talks and not so funny clowns

With OFAC back in action this week, we’ll see how designations pick up in the next couple of weeks. I’m sure OGT is playing catch-up but a designation package isn’t something that’s produced overnight. So in all likelihood everyone is just going to pick up where they left off. As for the world, it’s been another awfully quiet week. A lot of excitement around Iran negotiations, some very weird pre-peace talks in Syria that are most likely fruitless.   Counter-Terrorism Hassan Ghul, a.k.a. Mustafa Hajji Muhammed Khan, an SDGT was confirmed killed by documents released to the Washington Post in the Snowden leaks. Yeah, this happened.   Counter-Narcotics Francisco Rafael Arellano Felix, one of the AFO brothers (but not an SDN…he may have been de-listed but I’m still searching the federal register for historicals) was killed by a sicario in a clown costume. Bonus points for style. The linked article also has a few names of close associates that it would be wise to screen for. Chances are most people at the party have some affiliation with AFO. Now the big question is who ordered the hit? A senior member of the Sinaloa cartel, Jose Fidel Nunez Meza, was arrested. He is not designated and neither are his brothers, also listed in the article. Nonetheless, they are probably good names to add to the filter.   Country-Programs With Iran talks up, there is a lot of questions about acceptable outcomes of the negotiations. Some want Iran to completely dismantle their nuclear program, which I don’t think is an acceptable outcome for Tehran. Ostensibly, U.S. priorities are to ensure that Iran does not have a nuclear weapons capability, so a good negotiating strategy would look to have Iran give up the requisite amount of tech to ensure they can’t have nukes while still being able to retain a peaceful energy capability. In probably the most interesting article I read last week, it seems that the strategy that gives the most marginal utility is to focus on them relinquishing their medical isotope projects. It’s a somewhat statistics heavy article but it reads well and gives a lot of perspective to what the talks will look like. Does anyone know what is up with these proposed peace talks in Syria? I have no clue how that would even work. The FSA, rebellion in general, the government of Syria and all of the members of the Arab League would have to get together to pow-wow, all while being baby-sat by a stability wanting mother (the U.S.) and the worlds equivalent of a drunk and deceiving father (Russia). Count me out....

read more

SDN Moves: SDGT nabbed in Libya, Al Shabaab firefights, Zetas operating in West Africa

Posted by on Oct 14, 2013 in Sanctions Blog | Comments Off on SDN Moves: SDGT nabbed in Libya, Al Shabaab firefights, Zetas operating in West Africa

SDN Moves: SDGT nabbed in Libya, Al Shabaab firefights, Zetas operating in West Africa

Sorry that I didn’t make the Friday deadline for SDN Moves. We were all very busy on this end and figured we could squeeze it in during the holiday.   Terrorism In sequential raids, U.S. operators nabbed Abu Anas-al Libi, an SDGT designated as a core al-Qaeda member who was responsible for the embassy bombings in 1998. Naturally, the Libyan government protested a bit about their sovereignty but eventually piped down. It’s probably better for them to sweep this under the rug rather than broadcast that they are having troubles maintain positive control over their own territory. Given the current situation in Libya, the fact that high level SDGTs are able to move about freely is disconcerting but will most likely be a trend as Libya rebuilds its policing capabilities. This also brings to light another issue I worried about before Ghadaffi’s ouster. Usually when a country like this experiences a revolution, its important to retain intelligence assets that acted professionally to stand up a new organization, but equally important to get rid of the brutal thugs (i.e. Eastern Europe intelligence reform). The problem with Libya is everyone was basically a thug so they are most likely starting their agencies from scratch. Speaking of lawlessness, SEALs also conducted a raid against al-Shabaab at the same time (while it was against al-Shabaab, the target does not appear to be an SDN but is certainly a name you want in your filter). They encountered resistance and human shields and decided that bounding back was the best course of action. A degree of restraint that many of our enemies don’t have… Likewise, 11 men affiliated with al-Shabaab were arrested in Tanzania on Thursday. Continuing with the lawlessness theme, Human Rights Watch issued a report on the atrocities of SDGTs and FTOs operating in Syria. The report details atrocities of al-Nusra and ISIS, the new offshoot of AQI. While GL 16 places the burden of due diligence on the originator of any funds to the opposition forces, its reports such as this one that drive home why I suggest that financial institutions should conduct extensive due diligence on the transaction in any event. This would include profiles of the intended end user, end user checks and if related to trade at the minimum a look at the invoice, bill of lading and voyage route.   Narcotics The Zeta’s have been reportedly using West Africa as a transit hub for drugs to Europe. This really shouldn’t catch anyone by surprise. The FARC started this last year. Apparently New Jalisco and the Knights Templar are at war now. We’ll see how long this will last. Neither of these groups are prime targets for OFAC, but they should still be monitored. Also not surprising is 13 members of CDG being arrested in Texas. And this, ladies and gentlemen, is why you screen domestic wires as well.   And that’s all folks. Have a great rest of the holiday...

read more

SDN Moves: Profile of the IRGC head, SDN Successors, Designation-less Week

Posted by on Oct 4, 2013 in Sanctions Blog | Comments Off on SDN Moves: Profile of the IRGC head, SDN Successors, Designation-less Week

SDN Moves: Profile of the IRGC head, SDN Successors, Designation-less Week

I’m sorry everyone, but this week’s SDN moves is kind of boring. A big reason is because just in case you’ve been under a rock, OFAC is on the Congressional Incompetence plan and nobody is lighting the fires of Gondor in the annex. Or designating anyone. But a silver lining is that I’m sure a lot of you have gotten to go home on time and not work after hours updating and testing the filter.   Terrorism Mullah Sangeen Zadran, who was expertly droned several weeks back has been succeeded by Bilal Zadran. Bilal is Sangeen’s nephew, continuing on the trend of familial leadership in the Haqqani network.   Narcotics A very quiet week on the Narco front. To my knowledge, no SDNs were killed, captured or embarrassed themselves too much. Not necessarily SDN related, but certainly post-worthy is the closure of the Silk Road. It looks like Bitcoin Bro wasn’t the smartest kid on the block, despite making $80 million in commissions.  However there are other illicit markets out there using cryptocurrencies. Albeit certainly humorous at times (” Do you sell organs/ No just regular pianos/ what are you looking for?”), this AMA of the leader of another illicit online trading forum provides some very interesting insight into the concerns of these businesses, how they operate and the motivations of starting them up. Nonetheless, I hope this is the last time I ever post a link to reddit.   Country Programs Trucking right along, it looks like a lot of the fervor of talks between Rouhani and Obama is starting to settle down to the normal pessimistic crawl. However the New Yorker did an exceptional expose on Qassem Sulameini, the head of the IRGC and an SDN. If there is one article I would suggest you read this week, this would be it. Also, hot off the presses from a friend. Reuters has a report on the Myanma jade industry. Remember, while most trade has been GL’d out, trade in goods under the JADE ACT (jadeite, etc.) are still prohibited as well as dealing with any SDNs. I haven’t read the report (as I said, I literally got it right before I hit the publish button) but I trust my friend’s (another OFAC alum) judgement. So, that about wraps it up. Have a great...

read more

How the government furloughs will actually affect U.S. sanctions and OFAC

Posted by on Oct 4, 2013 in Sanctions Blog | Comments Off on How the government furloughs will actually affect U.S. sanctions and OFAC

How the government furloughs will actually affect U.S. sanctions and OFAC

The Daily Beast ran an article on Wednesday citing how the government shutdown has vacated the Annex. I’m just going to tick this one off as yet another media piece on the shutdown designed to increase hit factors on the website. While the article is technically accurate (the building is pretty much empty), it offers no substance into how sanctions are actually affected. Overall, life with sanctions will indeed go on. Yes, certain services will be slowed and halted, but if anything OFAC is good at catching up. Instead, I’ve laid out a handy primer on the various services and how the shutdown effects them, all organized by division at OFAC. What is interesting is how much sanctions implementation is a self-contained system. Most sanctions compliance falls on financial institutions which are the front line fight against sanctions. OFAC does not personally oversee the blocking of all wires. It’s mission is to draw up the different sanctions programs, assist others in implementing them (through outreach and licensing specific activities) and level penalties against anyone who fails to comply with the applicable laws. Outside of the scope of providing advice and quickly issuing a license, there is very little that will be effected by a week of shutdown. Will it suck for OFAC members to go back to work with massive backlogs? Absolutely. Will it inihibit our ability to preventing bad people from doing bad things with bad money moved through the U.S. financial system? Doubtful. There are some longer term effects that I do worry about, mainly in the field of morale and retention. Also the fact that while Department of State has plenty of budget left from last year, the fact that OFAC had to furlough practically everyone means that we are looking at an agency that has been asked to do more and more by Congress with less and less. To put it in perspective, it costs about as much to deploy a rifle company to Afghanistan as it does to run OFAC for a year. Yet OFAC is on point for practically every single top national security item this administration is facing. Perhaps this is a signal that the next time Congress asks for more, they should also appropriate more. My other long term worry is about OFAC morale and retention. On the one hand, if you are at the GS-09 level or above but living in a way that loss of a week’s worth of pay is going to put you in debt, you should probably seek financial counseling. On the other hand, and particularly in the compliance branch at OFAC, your pay is already much less than you would make in the private sector and you already put in way more hours than your average federal employee. When your entire office of a little more than a dozen people is in charge of implementing, enforcing and informing about sanctions writ large, it means early days and late departures. To lose 2% of your yearly pay because the guys who hold your money want to act like children makes you start eyeing the private sector even more. Put that on top of issues of promotion and that a bank is offering a pay check three times larger than what you make now, this furlough becomes...

read more

What happens at the UN stays at the UN

Posted by on Sep 27, 2013 in Sanctions Blog | Comments Off on What happens at the UN stays at the UN

What happens at the UN stays at the UN

So, we were going to bore you with a third diatribe today, this time about our thoughts on U.S.-Iranian nuclear negotiations. But then one of our intrepid directors suggested we just post that on Monday and instead put up a link about the on-goings at the UN as explained by the Real Housewives. (Warning: there is some foul language.) Have a great weekend!

read more

When the assessed penalty = the base penalty

Posted by on Sep 27, 2013 in Sanctions Blog | Comments Off on When the assessed penalty = the base penalty

When the assessed penalty = the base penalty

There is a bit of mystery surrounding yesterday’s penalty against a Turkish trading company. First, there isn’t much information on the company to start with, which honestly could answer one of the bigger questions. But to be assessed the penalty, they must have a U.S. presence or tenuous connection to our jurisdiction. That is perhaps the most unclear part, but given its a trading company they could very well have a small office in New Jersey that handles a bunch of import/export. This is pure conjecture however. What is striking about the penalty is that the entity was “assessed” the statutory maximum. I say assessed because it appears from the enforcement notice that the company did not settle nor did they cooperate with OFAC, a mistake on their part. OFAC assesses penalties based on enforcement guidelines. If a violation has occured that OFAC wishes to pursue, they may issue a pre-penalty notice (“PPN”) to the alleged party, which most likely happened in this case. The party then has 30 days to respond in writing, state their case and attempt to settle with OFAC. Of course, OFAC can and will extend the time allotted for a settlement if you reach out to them in good faith. Generally, it is during the settlement process that companies are able to negotiate down the penalty amount. Likewise, if an institution settles with OFAC then OFAC will generally only issue a settlement and not a finding of violation that explicitly declares that the institution has violated sanctions. It’s always been my opinion that because OFAC posts settlement agreements, whether there was a direct FOV or simply a settlement then the cat is already out of the bag. But I think the objective of a settlement is a reduced fine and to show the public that you cooperated with OFAC, not squabbling over legal syntax. The entire process can be seen in 31 CFR part 501 Appendix A(iv)(c). If you haven’t gone over this part of the CFR, you are doing your compliance program a disservice. In this case, it seems that the violator either made no attempt to settle, respond to the PPN or their attempt to settle was in such bad faith that a settlement was not possible. This is why the penalty was an assessment and not a settlement. Another point found here is that the penalty was for the statutory maximum allowed under IEEPA. Yikes. I haven’t seen a case like that in a while. Penalties are done on a sliding scale matrix. I pulled the figure below straight from part 501’s appendix. Essentially, on the horizontal, OFAC is looking to see if the penalty was egregious or resulted from reckless actions. In the most basic context, was this a simple mistake that yielded no harm to sanctions or was the transaction conducted by a sophisticated institution that was either acting recklessly, had knowledge of the action and resulted in harm to the sanctions program?     Some of the factors are the expected ones, and OFAC will take into consideration whether the compliance program was sophisticated at the level of the entity(i.e. a large bank needs to have a very good program), whether there was knowledge of the violation by senior management, what corrective actions were taken, how cooperative the...

read more

SDN Moves: Designations, Delistings and Deals Oh My!!!

Posted by on Sep 27, 2013 in Sanctions Blog | Comments Off on SDN Moves: Designations, Delistings and Deals Oh My!!!

SDN Moves: Designations, Delistings and Deals Oh My!!!

Yes, it’s Friday and time for your weekly SDN moves. And it’s been quite a busy week.   Non-Proliferation In a very interesting turn of events this morning, it was reported that the Turkish government has selected an SDN from whom to procure surface to air missiles. Instead of acquiring U.S. made Patriot or Russian S-300 SAMS, they decided to bizarrely acquire HQ-9 systems from China Naitonal Precision Machinery Import/Export Corporation (CPMEIC). What is extremely interesting about this is that CPMEIC has been designated under [IFSR] and [NPWMD]. According to 31 CFR 561.201(a)(5)(ii), anyone who facilitates a transaction for CPMEIC could be subject to CISADA. As that a bank, even possibly the central bank of Turkey could be facilitating this significant transaction, this could result in a 561 designation that would prohibit opening of a correspondent bank in the U.S. If anything, it would be wise to monitor this deal closely and ensure your institution doesn’t inadvertently engage in this transaction.   Narcotics OFAC has targeted two relatively new targets, both the Cachiros in Honduras as well as Los Gueros in Mexico. Erich Ferrari already did a piece on the Gueros organization, whom frankly not much information exists. I honestly don’t know much about them other than their 2009 indictment. The Cachiros are an interesting case. They are Honduras’ largest organized crime and a transiter of cocaine from Colombia to Mexico. The Cachiros are well connected to Guatemalan gangs (which makes sense given their transportation routes). This is significant in as much as the Sinaloa and particularly the Zetas have extremely strong ties to Guatemala. Many of the Zetas original members were part of the Guatemalan Kabiles, a light infantry/special forces unit similar to the one that the Zetas defected from, and along with distribution of cocaine the Zetas have been known to run training camps and obtain heavy weaponry in Guatemala. I view the designation of the Cochires as a smart attempt to cut as deep in the supply chain of two of the worlds most terrible organizations. Los Cochires have been known to wield powerful influence, enough to be in a position to pressure the President to appoint one of their own as a minister. Apparently he refused so they offed a senator in revenge. This level of governmental penetration suggests high levels of dual sovereignty for the organization in Honduras and it wouldn’t be surprising if some of these designations have ownership or interests in a large area of commerce. Point and case. it has been alleged that the Cachiros not only have strong ties to the Honduran government but also own the Real Socieded Municipal soccer club and the clubs prime sponsor, Joya Grande, a Zoo in Honduras. (hint: add these to your filter…you’re welcome). Speaking of Central America, SDNTK Waldemar Lorenzana Lima was captured on the 20th.   Terrorism Unfortunately, we’ve seen the tragedy that an FTO can strike after al-Shabaab fighters struck a mall in Kenya, killing dozens. People are still reported missing and the attacks are alleged to have involved several Americans and a UK national. Analysts are stating that this attack both marks a shift in al-Shabaab strategy towards a much more dispersed terrorist group rather than the insurgent force that once controlled much of Somalia.  The organization has undergone leadership...

read more