Sanctions Top-5 for the week ending 1 May 2020

Here are five things that happened this week in the world of economic sanctions that I think you should know about.

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  1. The US Office of Foreign Assets Control (OFAC) announced a finding of violation against American Express Travel Related Services Company (Amex) for violations of the Weapons of Mass Destruction Proliferators Sanctions Regulations. According to the OFAC enforcement release, Amex issued a prepaid card to an individual on the List of Specially Designated Nationals and Blocked Persons (the SDN List) after a name-screening system failure and subsequent human error.
  2. OFAC added an Iranian-Iraqi national and his Oman-based company to the SDN List pursuant to Executive Order 13224 for providing support to Iran’s Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF). The US Department of Justice (DOJ) simultaneously announced criminal money laundering and sanctions charges against the individual and another Iranian national for making payments through the US financial system as part of a scheme to procure a petroleum tanker.
  3. The US State Department is making the argument that the United States has the ability to force a “snap back” of United Nations sanctions against Iran under the Joint Comprehensive Plan of Action (JCPOA), despite having withdrawn from the JCPOA in May 2018. The argument turns on the meaning of the term “participant” as used in UN Security Council Resolution 2231 (2015). (Here is a transcript of a press briefing with Brian Hook, US Special Representative for Iran, discussing the issue.)
  4. The Commerce Department’s Bureau of Industry and Security (BIS) amended the Export Administration Regulations (EAR) to further restrict exports of “items subject to the EAR” to China, Russia, and Venezuela involving military end uses or end users. (For more details, read my team’s post on the Steptoe International Compliance Blog.)
  5. Reuters reported that Amazon bought temperature cameras from a Chinese manufacturer that was added to the BIS Entity List in October 2019 for activities in the Xinjiang Uyghur Autonomous Region (XUAR). (A tempest in a teapot, if you ask me, since the Entity List applies to transfers of items to a listed entity, not from one.)

Comments

The Amex case brought me back to the days of working as a sanctions compliance officer for a bank. Going over name screening schematics with IT colleagues was one of the trickier parts of the job. According to OFAC’s enforcement notice, Amex’s centralized name screening system timed out after receiving multiple requests from an external issuing bank, allowing the SDN’s card application to be processed. (A back-up procedure involving a manual review also apparently failed.) It’s important that “automated sanctions compliance controls . . . cannot be overridden without appropriate review,” OFAC reminds us. A large part of sanctions compliance is about technology, as I’ve said before, and compliance officers should endeavor to understand how their screening systems work from end to end.

I neglected in last week’s email to include a link to the report by Castellum.AI that was cited in a Wall Street Journal story about changes to Pakistan’s terrorists watch list. You can find the report here.

Don’t miss this week’s sanctions webinar hosted by Fintelekt and the Asian Bankers Association on Wednesday, 6 May 2020, at 1:30 p.m. Hong Kong time featuring myself and co-panelists Hala Bou Alwan, Suren Thapa, and Vincent Gaudel, with moderator Shirish Pathak, Looking forward to it!

Did I miss something? Send me a message or comment on LinkedIn.

(The views expressed are my own and do not constitute legal advice. Photo from Vladislav Reshetnyak.)

US attorney in Hong Kong specializing in economic sanctions, financial crimes. Sign up for emails: http://eepurl.com/cVhTXf LinkedIn at: http://goo.gl/KX1jER