U.S. Department of the Treasury Office of Foreign Assets Control

Agenda  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? 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 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…  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. Sanctions

Legal 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: IEEPA  International Emergency Economic Powers Act (“IEEPA”) (50 U.S.C. § § ) –Primary legal authority for most non-TWEA programs

Legal Authority: Other OTHER 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 , tit. VIII Stat 1606, IMPLEMENTATION AUTHORITIES:  Title 31 U.S. Code of Federal Regulations, Chapter V  Various Executive Orders

Jurisdiction: 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: 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: 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 Programs  Cuba  Iran  Sudan  Burma  Nonproliferation  Diamond Trading  Liberia  Zimbabwe  Syria  Terrorism  Narcotics Trafficking  The Balkans  Iraq  North Korea

Comprehensive 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: Comprehensive 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 Programs

 Zimbabwe - Block property of persons undermining democratic processes/ institutions in Zimbabwe. (Robert Mugabe, etc.) Limited 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 Programs

 Iraq –General License –Most new transactions allowed –Cannot do business with designated members of the insurgency. Limited Sanctions Programs

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

Recent OFAC Actions  Libya –Sanctions lifted –All blocked funds released –Doing business with Libya is now permitted

Specially 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 Nationals  Over 3,000 unique SDNs and blocked persons identified by OFAC  Published and accessible on: –Federal Register –

Specially 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 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 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”  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 1  Your potential customer: –Arnulfo Marquez; ABC Import-Export Limited; POB Chiapas, Mexico; US Citizenship; SSN:  Similar to the OFAC SDN listing: –TREJOS MARQUEZ, Arnulfo, Carrera 4 No of. 308, AA 38028, Cali, Colombia; c/o CONSTRUCTORA TREMI LTDA., Cali, Colombia; Cedula No (Colombia) (individual) [SDNT]

Example 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 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 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 notification service on OFAC home page

Effective 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 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: OFAC’s automated fax on demand service:

For compliance counseling…  or  Monday through Friday 8 a.m. to 7:00 p.m EST 

Erin Ghelber Compliance Programs Division Tel: or Fax: Web: