“OFAC Issues New Guidance Regarding Entities Owned by one or More Designated Parties”

August 19, 2014

The National Law Review on August 18, 2014 released the following:

“On August 13, 2014, the Treasury Department’s Office of Foreign Assets Control (“OFAC”) issued new guidance advising that it has changed its policy governing whether entities that are owned by individuals or entities designated under Executive Orders and regulations administered by OFAC, but are not themselves designated, are also subject to U.S. sanctions.

Pursuant to this new guidance, any entity that is owned 50 percent or more in the aggregate, directly or indirectly, by one or more parties on OFAC’s Specially Designated Nationals and Blocked Persons List (“SDN List”) is subject to blocking.1 This is a significant departure from prior OFAC guidance that it was not necessary to aggregate the ownership interests of separate SDN-Listed parties to determine whether a non-listed entity was considered to be blocked.

The new “50 Percent Rule” provides that, effective immediately, the property and interests in property of any entity owned 50 percent or more in the aggregate, directly or indirectly, by persons designated on the SDN List that are, or come into, the United States or the possession of control of a U.S. person are blocked and cannot be dealt in absent licensing or other authorization from OFAC. This means that U.S. persons are effectively prohibited from engaging in any dealings with any entity directly or indirectly owned 50 percent or more in the aggregate by one or more blocked parties regardless of whether such entity is itself designated on the SDN List.

In Frequently Asked Questions (“FAQs”) that OFAC issued on August 14 clarifying the scope of the new 50 Percent Rule, OFAC has provided that this new aggregation test also applies in determining whether entities that are not on the Russian Sectoral Sanctions Identifications (“SSI”) List are subject to the sanctions that apply to the SSI-Listed Russian banks and oil companies. Entities on the SSI List, and entities owned 50 percent or more in the aggregate by such SSI-Listed entities, are not subject to comprehensive blocking measures. Rather, they are subject to a more limited set of restrictions related to new debt with a maturity of longer than 90 days and, in the case of the SSI- Listed banks, new equity, in either case issued by, on behalf of, or for such an entity. For more information on the full scope of SSI List restrictions, please see our prior E-Alert dated July 30, 2014.

THE SCOPE OF THE 50 PERCENT RULE

OFAC’s FAQs offer the following additional guidance concerning the application of the new 50Percent Rule:

1 Certain OFAC sanctions programs are broader and also target entities that are controlled by sanctioned parties. For example, the Iranian Transactions and Sanctions Regulations apply to entities that are owned or controlled by the government of Iran. See 31 C.F.R. §§ 560.304 and 560.313. The 50 Percent Rule’s focus on ownership does not limit the broader scope of these sanctions programs.

The 50 Percent Rule applies only to ownership interests, not control. According to OFAC, “[a]n entity that is controlled (but not owned 50 percent or more) by one or more blocked persons is not considered automatically blocked” pursuant to the 50 Percent Rule. Nonetheless, companies should proceed with caution when considering a transaction with an entity that one or more blocked parties may control because OFAC could add that entity to the SDN List at some point in the future.

Consistent with prior guidance that OFAC has issued, companies should be careful not to negotiate, enter into contracts, or process transactions that involve a blocked person when the blocked person is acting on behalf of a non-blocked entity. OFAC sanctions “prohibit transactions involving, directly or indirectly, a blocked person…even if the blocked person is acting on behalf of a non-blocked entity.” This includes, for example, situations in which a blocked person signs a contract on behalf of a non-blocked entity.

Indirect ownership refers to “ownership of shares of an entity through another entity or entities that are 50 percent or more owned in the aggregate by the blocked person(s).” This means that if Blocked Person X owns 50 percent of Entity A, and Entity A owns 50 percent of Entity B, then both Entity A and B are blocked — Entity A because it is directly owned 50 percent by Blocked Person X and Entity B because it is owned 50 percent by blocked Entity A. Similarly, if Blocked Person X owns 50 percent of Entity A and 10 percent of Entity B, and Entity A also owns 40 percent of Entity B, then Entity B is considered as blocked based on the aggregate 50 percent ownership of Entity B by two blocked parties.

By contrast, indirect ownership does not apply at all where a blocked party owns less than a 50 percent interest in the intermediate entity. Thus, if Blocked Person X owns only 25 percent of Entity A and 25 percent of Entity B, no matter how large an interest Entities A and B hold in Entity C, Entity C will not be considered blocked. This is because Blocked Person X’s 25 percent ownership of each of Entity A and Entity B falls short of 50 percent. Accordingly, neither Entity A nor Entity B is blocked and, for purposes of the 50 Percent Rule, Blocked Person X is not considered to indirectly own any of Entity C as a result of its minority ownership of Entities A or B.

While all of the OFAC examples in the FAQs address circumstances involving a single Blocked Person, the guidance would apply more broadly. For example, if Blocked Person X owns 50 percent of Entity A, and Entity A owns 25 percent of Entity B, and Blocked Person Y owns 50 percent of Entity C, which also owns 25 percent of Entity B, then the combination of the indirect ownership and 50 Percent Rule requirements may make Entity B a blocked person. While the FAQs do not address this situation, we believe OFAC would consider Entity B to be a blocked person since Entities A and C would each be considered blocked entities because of their 50 percent ownership by blocked persons, and in the aggregate they own 50 percent of Entity B.

Companies likely will need to undertake significant additional due diligence in order to collect the information about direct and indirect ownership interests that is necessary to make these complex calculations and to aggregate ownership information across multiple levels of a corporate structure. Indeed, OFAC urges companies considering a transaction to conduct “appropriate due diligence” on the involved entities in order to determine relevant ownership stakes.

Under certain limited circumstances, it may be possible for one or more blocked persons to divest their ownership stake in an entity in order to ensure that the combined ownership by blocked persons in the entity is less than 50 percent. However, these actions must be undertaken entirely outside of U.S. jurisdiction and without the involvement of any U.S. persons. Companies also should be careful to avoid “sham transactions” by conducting sufficient due diligence to be confident that any purported divestment actually occurred before they enter into any dealings with entities that were previously owned 50 percent or more by one or more designated parties.

If the aggregate ownership of blocked parties in an entity falls below 50 percent due to the actions of one or more of the blocked parties, including the entity itself, any property or interests in property that were previously in the United States or the possession or control of a U.S. person remain blocked and cannot be dealt in absent licensing or other authorization from OFAC. This is because OFAC does not recognize the unlicensed transfer of blocked property in the United States or in the possession or control of a U.S. person. This position imposes an additional layer of due diligence as it suggests that U.S. persons may need to conduct a retrospective analysis of the property of entities that they learn are minority owned by a blocked party in order to ensure that the entity was not previously owned 50 percent or more in the aggregate by blocked parties.”

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Douglas McNabb – McNabb Associates, P.C.’s
OFAC SDN Removal Videos:

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To find additional global criminal news, please read The Global Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.

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“US Slaps Sanctions on Haqqani Network Suicide Operations Chief”

November 6, 2012

The Wall Street Journal on November 5, 2012 released the following:

“By Samuel Rubenfeld

The U.S. State Department said Monday it placed sanctions on Qari Zakir, the Haqqani Network’s chief of suicide operations.

In addition to the U.S. designation, the United Nations placed Zakir and the Haqqani Network itself on its blacklist, requiring member states to implement an asset freeze, travel ban and arms embargo on both him and the group.

“Today’s U.N. actions demonstrate international resolve in eliminating the Haqqani Network’s ability to execute violent attacks in Afghanistan,” the State Department said in a statement.

The U.S. State Department placed the Haqqani Network on its list of foreign terror organizations in September after years of deliberation. Until then, the U.S. had focused its efforts targeting individual members of the group.

The Haqqani Network, dubbed “the Sopranos of the Afghanistan war” by the New York Times, built an empire out of kidnapping, extortion, smuggling and trucking.

Zakir, along with his role as chief of suicide operations for the network, is the operational commander in Kabul, Takhar, Kunduz and Baghlan provinces in Afghanistan, the State Department said.

He’s responsible for the training program, which includes instruction in small arms, heavy weapons and basic improvised explosive device construction, the State Department said. Since approaching leader Sirajuddin Haqqani in 2008 for financial assistance to expand the group’s influence in northern Afghanistan, Zakir has become a trusted associate and confidant of the group’s leadership.

Separately, the U.S. Treasury Department’s Office of Foreign Assets Control removed Mohammad Abd El-Hamid Khalil Salah from its blacklist. Salah, an Illinois man who filed a lawsuit in September against Treasury in Chicago federal court, said in court papers he was the only U.S. citizen residing in the U.S. to be placed under sanctions.

In the complaint, Salah said the designation made him was unable to purchase virtually anything from food to a bank account.

OFAC would grant him licenses that, in theory, allowed him to do things like get a job or housing, but because OFAC is the sole determinant of such abilities, he “survives, in other words, only at the sufferance of OFAC,” the complaint said.

A Treasury spokesman said Monday that while evaluating its response to Salah’s legal complaint, OFAC determined it was appropriate to remove him from the blacklist”

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Douglas McNabb – McNabb Associates, P.C.’s
OFAC SDN Removal Videos:

OFAC Litigation – SDN List Removal

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OFAC SDN Removal Attorneys

————————————————————–

To find additional global criminal news, please read The Global Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.

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Specially Designated Narcotics Trafficking Kingpin [SDNTK] Entries Added to OFAC’s SDN List on September 13, 2012

September 14, 2012

On September 13, 2012, OFAC has added [SDNTK] Entries to the Specially Designated Nationals List (SDN List):

The following [SDNTK] entries have been added to OFAC’s SDN List list:

CONSTRUCTORA F.R. DE VENEZUELA, C.A. (a.k.a. CONSTRUCTORA FR DE VENEZUELA, C.A.), Calle Paez, Edf. Gisage PB, Ofic 1, Chacao, Caracas, Venezuela; Sector los Montones, Galpon 2, Puerto La Cruz, Venezuela; RIF # J-31327555-7 (Venezuela) [SDNTK].

CONSTRUCTORA FR DE VENEZUELA, C.A. (a.k.a. CONSTRUCTORA F.R. DE VENEZUELA, C.A.), Calle Paez, Edf. Gisage PB, Ofic 1, Chacao, Caracas, Venezuela; Sector los Montones, Galpon 2, Puerto La Cruz, Venezuela; RIF # J-31327555-7 (Venezuela) [SDNTK].

LOPEZ PERDIGON, Roberto Manuel; DOB 09 Sep 1971; POB Caracas, Venezuela; nationality Venezuela; citizen Venezuela; Passport C1771508 (Venezuela); alt. Passport 037325626 (Venezuela); National ID No. 10337667 (Venezuela) (individual) [SDNTK] Linked To: CONSTRUCTORA FR DE VENEZUELA, C.A..

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Douglas McNabb – McNabb Associates, P.C.’s
OFAC SDN Removal Videos:

OFAC Litigation – SDN List Removal

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OFAC SDN Removal Attorneys

————————————————————–

To find additional global criminal news, please read The Global Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.

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U.S. Imposes New Sanctions On Iran Proliferators, Companies Linked To Regime

July 17, 2012

RTT News on July 12, 2012 released the following:

“(RTTNews) – The U.S. Treasury Department announced Thursday it is sanctioning a number of companies and individuals tied to weapons proliferation in Iran or circumvention of existing sanctions on the Iranian regime.

“Iran today is under intense, multilateral sanctions pressure, and we will continue to ratchet up the pressure so long as Iran refuses to address the international community’s well-founded concerns about its nuclear program,” Treasury Under Secretary for Terrorism and Financial Intelligence David S. Cohen said in a press release.

He added, “Today’s actions are our next step on that path, taking direct aim at disrupting Iran’s nuclear and ballistic missile programs as well as its deceptive efforts to use front companies to sell and move its oil.”

Today’s new sanctions came in two parts: 1) placing sanctions on 15 entities or individuals involved in supporting Iran’s nuclear and ballistic missile programs and 2) publicly sanctioning over 25 companies and individuals as Specially Designated Nationals (SDN) who have repeatedly acted to circumvent current sanctions on the Iranian regime.

Both sets of sanctions block all U.S. persons and companies from engaging in any transactions with the designated entities and individuals.

Most of the entities designated under the first set of sanctions (E.O. 13382) are tied to Iran’s Ministry of Defense for Armed Forces Logistics (MODAFL) and its subsidiary Aerospace Industries Organization (AIO).

Under executive order 13382, which is “aimed at freezing the assets of proliferators of weapons of mass destruction and their supporters and isolating them financially,” Treasury can prohibit all transactions between the designees and any U.S. person and freeze any assets the designees may have under U.S. jurisdiction, according to the State Department.

Electronic Components Industries Co. (ECI) and Information Systems Iran (ISIRAN), one of the largest and most experienced information technology companies in Iran, and Daniel Frosch, an Austrian exporter currently living in Dubai, were both designated under E.O. 13382. Frosch had previously been under investigation by Austria for exporting components that could be used in nuclear weapons to Iran.

The second set of sanctions, pursuant under E.O. 13599 or the SDN List, targets “individuals and companies owned or controlled by, or acting for or on behalf of, targeted countries. It also lists individuals, groups, and entities, such as terrorists and narcotics traffickers designated under programs that are not country-specific,” according to Treasury.

Petro Suisse Intertrade Company SA (Switzerland), Hong Kong Intertrade Company, Noor Energy Ltd, (Malaysia) and Petro Energy Intertrade Company (Dubai) were all added to the SDN List today “because they are owned or controlled by, or acting for or on behalf of, the Government of Iran,” Treasury said.

Twenty Iranian financial institutions were also designated as SDN as well as 58 National Iranian Tanker Company (NITC) vessels, the NITC itself and 27 of its affiliated entities.

Pundits have argued over the efficiency of the U.S. government’s two-track approach to Iran – on the one hand, pressuring the regime with sanctions and on the other, urging them to discuss their nuclear program during meetings with the international community.

However, recent leaks from Iran showing state-owned news agencies being discouraged from reporting the effects of sanctions could show the steps are having an impact.

“Our country is not in a position to allow the media to publish news or analysis which is not compatible with the regime’s and national interests,” Ministry of Culture and Islamic Guidance chief Mohammad Hosseini recently told local media site dolat.ir in uncharacteristically candid terms.

He added, “The situation regarding sanctions and other pressures, especially in economy … requires more cooperation by the media so the country is not hurt.”

The next round of working-level meetings between Iran and the P5+1, the international group charged with discussing the Iranian nuclear program, will take place in Istanbul on July 24th.

by RTT Staff Writer”

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Douglas McNabb – McNabb Associates, P.C.’s
OFAC SDN Removal Videos:

OFAC Litigation – SDN List Removal

OFAC SDN List Removal

OFAC SDN Removal Attorneys

————————————————————–

To find additional global criminal news, please read The Global Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.

————————————————————–

International criminal defense questions, but want to be anonymous?

Free Skype Tel: +1.202.470.3427, OR

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