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Posted May 22, 2009 by publisher in OFAC

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Rob Sequin | Havana Journal

On May 15th, OFAC hosted the first annual OFAC International Trade Symposium in Washington DC.

I attended as an internet entrepreneur, not as a journalist since the event was not open to the press. OFAC did a fine job of presenting their US governmental responsibilities to the attendees and the event was very well attended. Below is a summary of OFAC presentations as they related to Cuba. There is a link at the end of this article that will take readers to all of the slide presentations from this event.

Compliance Programs

How Do I Develop an Effective OFAC Compliance Program?

- Do a documented risk profile/analysis of your company

- Have written company compliance policies and procedures in place to address risks highlighted in your risk profile

- Have a designated “compliance group” or person

- Provide routine compliance training to staff AND be sure to properly train all new staff

- Have effective screening measures in place to check against the SDN and Sanctioned Countries list

- Ensure sanctions information is up-to-date!

- Screening against outdated information could increase the risk of a violation

- Sanctions and the SDN list can be updated or revised at any time

- Subscribe to email notification service on OFAC home page

Why Develop Compliance Program?

– A sound Compliance Program will help ensure that you do not violate OFAC regulations, thereby mitigating the risk of reputational damage that having a violation will cause

– Having an effective, risk-based compliance program in place is a factor in determining the appropriate enforcement response to a violation. Refer to the “General Factors for Administrative Action”

Compliance Audits The Basics:

• Audits are done primarily based on the risk profile of the company

• Audits are simply a tool to help ensure compliance by the international trade community

• Purpose of the audits is to ensure that appropriate controls are in place to reasonably ensure that a transaction is not processed in violation of OFAC regulations, not necessarily to look for violations.

Jessica Brinkmann - Compliance Programs Division
Tel: 202-622-1556 or 1-800-540-6322
OFAC Website

OFAC Licensing Division

• Makes determinations on requests for specific licenses.

• Provides interpretive guidance on applicability of prohibitions, general licenses, and exemptions.

• Prepares interpretive rulings for publication on OFAC’s website.

• Participates in development of policies and regulations.

Role of OFAC Licensing Division

• 62,000 specific license applications and requests for interpretive rulings per year.

• 30,000 calls are received on the license inquiry line (D.C. and Miami offices) per year.

• Highest volume: Cuba, TSRA, blocked wire transfers, Iranian transactions.

Types of OFAC Licenses and Exemptions

• General License – authorization for broad categories of transactions. Already published in regulations or on website. No application is required. Example: debiting of blocked accounts by financial institutions for reasonable service charges.

• Specific License – requires a written application and is issued on a case-by-case basis. Authorizes a particular transaction or set of transactions. Example: commercial exportation of agricultural products to Sudan and Iran.

Types of Licenses and Exemptions

• Exemptions – certain transactions are completely exempt from OFAC regulations. No authorization from OFAC is required.

• Examples:
• transactions related to information and informational materials;
• certain travel-related transactions in most IEEPA programs.

• Receipt of payment from non-blocked sources for provision of certain legal services to SDNs.

• Exports of food, medicine, and medical devices to sanctioned countries.

• Humanitarian transactions (e.g., NGOs providing relief supplies or services to Sudan).

• Cuba travel.

• See Interpretive Guidance and Statements of Licensing Policy.

Licensable Activities

• Requests to unblock wire transfers require the use of mandatory OFAC form

• Other requests may be submitted in letter form.

• Fax and email applications are generally not accepted – must be followed up with original hard copy.

• Policy is to NOT answer hypotheticals.

• Incorrect or incomplete applications may be returned without action.

Jodi Kouts - Assistant Director for Licensing
Aydin Akgun - TSRA Program Manager

The OFAC License Application Process

• Licensing procedures are set for in the Reporting, Procedures and Penalties Regulations, 31 C.F.R. Part 501.

• Because of national security and foreign policy ramifications of licensing determinations, OFAC does not have a deadline to process applications. Processing times for TSRA can be found in the OFAC quarterly reports (current time is approximately 114 days average)

• It is an OFAC priority to review and take action on applications in an expeditious and timely manner.

• 31 C.F.R. § 501.801(b)(3) describes the information to be provided in a license application.

• Anything required by relevant instructions and/or forms.

• Names of all parties concerned with or interested in the proposed transaction.

• Relevant documentation must be attached or incorporated by reference if previously submitted.

• Applicant must supply his/her taxpayer I.D. number.

• Additional information may be required by OFAC or presented before or after a decision has been made.

Required Information for OFAC License

• 31 C.F.R. § 501.801(c)(2) describes the information to be provided by nongovernmental organizations.

Guidelines for submitting TSRA applications

OFAC Licensing Determinations

• Some decisions are based on internal guidelines and policies.

• Other decisions are made after conferring with the U.S. State Department for foreign policy guidance.

• In some cases we act based on we information we became aware of.

Role of State Department

• Close working relationship with the State Department.

• State advises whether otherwise prohibited transactions should be authorized when they are determined to be consistent with or in furtherance of U.S. foreign policy or national security objectives.

• Official point of contact: Office of Terrorism Finance and Economic Sanctions Policy.

Recent OFAC Actions or Policies of Interest

• Cuba Family Travel

• President’s April 13th announcement for unlimited travel to visit close relatives in Cuba.

• Specific licenses will be issued for 2nd trip until regulations are published.

TSRA Licensing Process

• On October 2000, the U.S. Congress passed the Trade Sanctions Reform and Export Enhancement Act (“TSRA”) into law, which lifted unilateral sanctions on agricultural commodities, medicines, and medical devices to most destinations.

• On July 12, 2001, OFAC issued interim regulations implementing the TSRA, which went into effect on July 26, 2001.

• The intent was two-fold:

• The U.S. should not use food, medicine, and medical devices as an instrument of foreign policy; and

• Exporting to appropriate end-users in these countries should be easier than previously allowed.

• Licensing jurisdiction remained the same:

• BIS: Cuba

• OFAC: Iran, Sudan and formerly Libya

How can I apply for a TSRA license?

• The guidelines for submitting TSRA applications

• To apply for a license to export agricultural commodities, medicine, or medical devices to Iran or Sudan under the TSRA Program, applicants must submit a license request, in writing, to the Office of Foreign Assets Control (OFAC).

The following items must be included in clear and legible form:

• Identification of the country and program for which the applicant is requesting a license on the top of the first page of the application and on the front of the envelope.

• Applicant’s full legal name (If the applicant is a business entity, include the state or jurisdiction of incorporation and principal place of business);

• Applicant’s mailing and street address;

• Name(s) of the individual(s) responsible for the application and related commercial transactions, including their telephone numbers, fax numbers, and if available, email addresses so that we may reach a responsible point of contact should there be any questions about the application;

• Applicant’s signature;

• Names and addresses of all parties involved in the transactions and their roles, including financial institutions, and any Iranian or Sudanese broker, purchasing agent, end user, or other participant in the purchase of the agricultural commodities, medicine, or medical devices;

• A description of all products to be exported, including a statement that each product is an agricultural commodity, medicine, or medical device and that it is classified as EAR99, and documentation and information sufficient to verify that each product to be exported is classified as EAR99 and eligible for exportation under the TSRA program;

• To be eligible for export in the TSRA program, each product must be classified as EAR99. We encourage exporters to consult the website of the Department of Commerce’s Bureau of Industry and Security (“BIS”) for guidelines on how to submit a commodity classification request.

• Exporters of all fertilizers, live horses, and western red cedar must provide to OFAC a copy of an Official BIS Commodity Classification of EAR99 as part of the license application (because certain of these items are controlled on the Commerce Control List and thus are not eligible for export under the TSRA program).

• Exporters of medicine must provide to OFAC a copy of an Official BIS Commodity Classification of EAR99 as part of the license application (because certain medicines are not eligible for export under the TSRA program).

• Exporters of medical devices must provide to OFAC a copy of an Official BIS Commodity Classification of EAR99 as part of the license application, unless the proposed export is for medical supply and that medical supply is specifically listed under the TSRA program on BIS’s website.

Please note that if an application for the export of a medical device does not include an Official BIS Commodity Classification of EAR99 and OFAC is unable to determine the export eligibility of the proposed export product, OFAC will request an Official BIS Commodity Classification of EAR99 from the applicant. 

• Exporters of agricultural commodities may wish to consult the following U.S. Department of Agriculture website for a list of agricultural commodities that qualify for export under the TSRA program.

• The maximum number of export products and/or number of end-users should not exceed 50 per application.

• The application should be mailed to the address below.

Attn: Licensing Division
Office of Foreign Assets Control
U.S. Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220

• Applicants may also send a complete copy of their application in Adobe Acrobat PDF format to the following email address: agmed @ do.treas.gov

• Applicants who choose to send a copy of their application via the Internet must also send a hard copy of their application in order for OFAC to process their application.

Applicants should note that the official date of receipt for their application will be the date the hard copy of the application is received by OFAC via mail.

THINGS TO NOTE:

• Payment by cash in advance, open account financing, or third-country bank letter of credit is authorized by general license. A special request will have to be made to use a letter of credit issued by an Iranian or Sudanese bank. Upon such a request, payment by letter of credit issued by an Iranian or Sudanese bank may be authorized by specific license on a case-by-case basis, provided that such letter of credit may not be advised, confirmed or otherwise dealt in by any financial institution that is a United States person (see 31 C.F.R. §§ 560.314, 560.532; 31 C.F.R. §§ 538.315, 538.525).

• Financing arrangements cannot involve any entities that are designated pursuant to Executive Order 13224 of September 23, 2001, “Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism”; Executive Order 13382 of June 28, 2005, “Blocking Property of Weapons of Mass Destruction Proliferators and Their Supporters”; or any other Executive order or Chapter V of Title 31 of the C.F.R.

• U.S. persons are prohibited from engaging in any transactions involving directly or indirectly Bank Saderat, Bank Sepah, Bank Mellat, Bank Melli, Future Bank, and Export Development Bank of Iran, which have been designated pursuant to Executive Order 13224 or Executive Order 13382.

• U.S. persons are prohibited from engaging in any transactions or dealing with the Islamic Republic of Iran Shipping Lines (IRISL) and the 18 affiliated entities that were designated pursuant to Executive Order 13382.

• Applications not containing all of the required information will be considered incomplete and returned without action and without prejudice. A new application will be accepted upon resubmission of a complete application.

• The hard copy of all licenses will be mailed to applicants. Upon request, applicants may receive via email a copy of their license in Adobe Acrobat PDF format.

Administration of Civil Penalty Cases
Elton Ellison
Assistant Director
Civil Penalties

Application of Enforcement Guidelines

• ADMINISTRATION OF CIVIL PENALTY CASES UNDER the ECONOMIC SANCTIONS ENFORCEMENT GUIDELINES

• TRANSACTION VALUE – the dollar value of the subject transaction

• Egregious Cases – determination made by the Director or Deputy Director based upon an analysis of the applicable General Factors

• Transparency

FORMAL OFAC PENALTY PROCESS

• Pre-penalty Notice (PPN) –issued when OFAC has reason to believe that a violation of U.S. sanctions has occurred and a civil monetary penalty is warranted

• Provides notice of the alleged violation(s) and an opportunity to respond within the prescribed time

• In general, the PPN will set forth the following with respect to the specific violations alleged and the proposed penalties

Prepenalty Notice (PPN) - Format

• Description of the alleged violations, including the number of violations and their value

• Identification of the regulatory or other provision alleged to be violated

• Maximum Potential Penalty (old style PPN)

• Base Penalty Calculation

– Egregious/non-egregious
– Voluntary self-disclosure or not

• Proposed Penalty Amount

– Identification of most relevant General Factors
– Can raise or lower the Base Penalty Amount

Penalty Notice (PN)

• PPN provides for an opportunity to respond within the specified time
– Response not required
– Must be timely

• Penalty Notice
– Finding of a violation
– Assessment of a penalty amount
– Final agency action

• Other possible outcomes: No Action, Request Additional Information, Cautionary Letter, Finding of Violation

Settlement Agreement

• Can settle at any stage

• Not required to send a PPN

• Currently the majority of cases settle

• No finding of violation – settlement of allegations

• Settlement agreement contains web language

Civil Penalty notices posted to OFAC website

• Required under 31 CFR 501.805

• Minimum elements include:
– Name and address (except for individuals)
– Sanctions program involved
– Brief description
– Informal settlement or imposition of penalty
– Voluntary self-disclosure or not
– Amount

Civil Penalty Examples

• 2008 Penalties & Settlements: $3.5M
• 2009 year-to-date total Penalties & Settlements: $634,851
• Stena Bulk LLC $424,486 Sudan (Jan 09)
• Casa de Cambio Delgado, Inc. $40,160 Foreign Narcotics Kingpin Sanctions (Mar 09)
• Varel Holdings, Inc. $110,000 Cuba (Apr 09)
• Key Bank National Association $200,000 Iran (Feb 08)
• York International Corporation $669,507 Iran, Sudan, Iraq (May 08)
• Engineering Dynamics Inc. $132,791 Iran (May 08)
• Spirit Airlines, Inc. $100,000 Cuba (Jun 08)
• Minxia Non-Ferrous Metals, Inc. $1,2M Cuba (Jul 08)
• A.G. Edwards $122,358 Narcotics Trafficking (Jul 08)
• Chevron Corporation $2M Iraq (Dec 07)
• ZeroMax $481,983 Iran (Oct 07)
• National Australia Bank Ltd. $100,000 Burma, Sudan, Cuba (Sep 07)

OFAC Symposium Presentations

Slide presentations regarding all of the below are available at the OFAC Symposium summary website

The Intersection of Export Controls and Economic Sanctions :
    Rochelle Stern, Office of Foreign Assets Control (OFAC)
    Anthony Christino Bureau of Industry and Security (BIS)

Licensing Issues and Perspectives:
    Jodi Kouts and Aydin Akgun (OFAC)
    Sheila Quarterman (BIS)

Partners in Enforcement:
    Clark Settles, U.S. Immigration and Customs Enforcement
    Glenn Smith, State Department
    Michael Geffroy, OFAC

Anatomy of a Site Visit:
    Deborah Carroll, State Department
    Jessica Brinkmann, OFAC
    Dale Kelly, U.S.Census Bureau

OFAC Enforcement Guidelines:
    Elton Ellison, OFAC
    Ori Lev, OFAC

  1. Follow up post #1 added on May 27, 2009 by John McAuliff

    Did anyone ask whether it is true that OFAC never went after individual Cuban Americans who traveled without a license during the harsh Bush years (even when they had the list of persons who made use of fraudulent religious licenses)?  Is it true as lawyers report that no violation letters have been sent to any Americans for the past year or two?

    Did they say anything about what was happening to alleged Cuba travel violators who ask for a hearing?  Lawyers report that the process has ground to a halt and that at least two of the three seconded administrative court judges resigned or were transferred back to their real jobs.


  2. Follow up post #2 added on May 27, 2009 by publisher with 3905 total posts

    Interesting questions.

    I doubt OFAC enforcement on Cuba issues is at the top of their “to do” list anymore.

    Sure, everything is still on the pile and can be addressed at any time but Obama probably gave OFAC back door orders to lay off on Cuba issues and focus more on Iran and Sudan like they should be doing.



    Cuba consulting services

  3. Follow up post #3 added on February 05, 2011 by publisher with 3905 total posts

    We updated the OFAC Cuba sanctions page with more information about US Cuba trade and travel restrictions at CubaLegalServices.com



    Cuba consulting services

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