HM Treasury has today established the Office of Financial Sanctions Implementation (OFSI), which was first announced in the Summer Budget 2015. OFSI is tasked with supporting the UK’s foreign policy and maintaining the integrity of and confidence in the UK financial services sector. The Treasury has said that OFSI will continue and build on the work of its Financial Sanctions team, and its stated aims are to:
- increase awareness of and compliance with financial sanctions;
- ensure that sanctions breaches are rapidly detected and effectively addressed; and
- provide a professional service to the public and industry on financial sanctions issues.
In conjunction with the launch of OFSI, the Treasury has changed its email address for correspondence relating to financial sanctions to firstname.lastname@example.org, and its address for sending out notifications to email@example.com (see previous blog).
Following a Russian court’s decision last week to sentence Ukrainian military pilot Nadiya Savchenko to 22 years in prison (see previous blog), Ukraine has added new people and institutions it believes to be involved in her detention and that of other Ukrainian citizens to its sanctions against Russia. In its statement, Ukraine’s Security and Defence Council said that among those sanctioned are executives and personnel of the FSB, the Investigative Committee of the Russia Federation, the Prosecutors Office, the judicial corps, and the military. It accused the listed institutions of involvement in “abduction, unlawful detention, torture, falsification of cases, and organisation of made-to-order legally void sentences”.
US Secretary of the Treasury Jack Lew gave a speech on US sanctions policy on Wednesday. The full text of the speech is here. Key points:
- Sanctions are “forward-looking” and “not meant to dole out punishment for past actions”
- The “ultimate and extreme steps” taken to sanction Iran should not become the starting point for responses to future crises.
- There is a danger of sanctions overreach that would “ultimately drive business activity from the US financial system”, with implications for the US economy and the potency of its sanctions.
- Secondary sanctions “are viewed, even by some of our closest allies, as extra-territorial attempts to apply US foreign policy to the rest of the world”. They “should only be used in the most exceptional circumstances…where we have international consensus, and when ordinary sanctions have fallen short of their mark”.
- “The more international support there is for sanctions, and for their underlying objective, the more effective they will be”.
- UN Security Council resolutions are “the best way to reach consensus”, for example recent UN resolutions sanctioning ISIL and North Korea.
- The “ineffective” unilateral trade embargo imposed on Cuba by the US is an example of the problems that arise when there isn’t broad international support for a sanctions regime. Some foreign subsidiaries of US companies had been “subjected to an untenable conflict of laws” as a result of legislation in places such as the EU and Canada prohibiting compliance with the embargo.
- The US must be prepared to provide relief from sanctions when they succeed in effecting the desired change in policy, lest they “undermine our own credibility and damage our ability to use sanctions to drive policy change”.
- Sanctions will continue to be imposed on Russia until it meets its commitments under the Minsk process.
- “Powerful sanctions require investigators and analysts to track how key actors move and store their money and to build detailed cases drawing on intelligence analysis” as well as enforcement officers to investigate and penalise violations.
- The US government “sought out asymmetries” when devising its sanctions programme against Russia – areas of significant Russian reliance on the West where imposing sanctions would cause minimal spillover on the US, its allies, and the Russian people.
The UN Security Council has extended the mandate of the panel of experts assisting its Sanctions Committee on North Korea until 24 April 2017 and included in its mandate the new UN sanctions in Resolution 2270 (see previous blog). The Security Council requested that the panel provide them with a mid-term report by 7 September 2016 and a final report by 15 March 2017. The resolution is here.
The panel is tasked with gathering information from States and other parties on the implementation of N Korea sanctions and recommending improvements. Its mandate was originally due to be extended on 17 March, but the decision is said to have been delayed by China while it sought US support for the de-listing of 4 vessels under Resolution 2270 (see previous blog).
A Turkish businessman, Reza Zarrab, has been arrested in the USA on charges of conspiring to evade US sanctions on Iran, money laundering, and bank fraud. The arrest was made shortly before an indictment setting out the charges against Mr Zarrab and 2 co-conspirators, Camelia Jamshidy and Hossein Najafzadeh, was unsealed on Monday last week.
According to the indictment, between at least 2010 and 2015 the 3 conspirators engaged in transactions on behalf of the government of Iran and several other blocked Iranian entities, laundered the proceeds of those transactions, and defrauded a number of financial institutions by concealing the nature of the transactions. Among the alleged beneficiaries of the conspiracy were Bank Mellat, National Iranian Oil Company, Naftiran Intertrade Company Ltd, and Hong Kong Intertrade Company, all of which are still subject to primary US sanctions. The Department of Justice’s press release is here.
Earlier this year, the House of Commons EU Scrutiny Committee asked Europe Minister David Lidington to comment on the EU’s decision to lift its Belarus sanctions against 170 people and 3 entities on 15 February 2016 (see previous blog). The Minister did so in March, informing the committee that EU member states had noted improvements in the human rights situation in Belarus, and that his view was that “in order for sanctions to remain a credible and effective foreign policy tool, it is important that we remain willing to lift measures in response to positive changes in behaviour”. The Committee has now cleared the EU measures implementing that decision from scrutiny, although expressing its surprise that the Minister did not submit the related measures and Explanatory Memorandum for scrutiny until 9 March. The Committee said that “the ensuing year will tell if the policy of ‘carefully calibrated engagement’ that the Minister says he is seeking is any more effective than hitherto in securing fundamental change”.
OFAC has issued a new general licence, General Licence I (link here), which authorises transactions ordinarily incident to the negotiation of and entry into contracts for the export or re-export to Iran of commercial passenger aircraft or related parts and services covered by the Statement of Licensing Policy (pursuant to the JCPOA), provided that the performance of the contract is made contingent on receipt of an OFAC licence. The general licence doesn’t not authorise transactions with blocked property.
Prior to the issuance of the general licence, US persons were required to apply to OFAC for a licence to enter into negotiations relating to contracts covered by the Licensing Policy, and then apply for a second licence to actually export the goods if a contract was formed. The general licence is intended to ease the burden of applications received by OFAC, and so reduce processing delays, by eliminating the need to apply for a licence to negotiate authorised contracts.
The US has arrested a consultant to Iran’s UN mission, Ahmad Sheikhzadeh, and charged him with circumventing US sanctions on Iran. The indictment alleges that Mr Sheikhzadeh assisted 2 people in the US to invest in Iran, by directing an Iran-based co-conspirator to channel money to Iran. He is also charged with money laundering and helping to arrange false tax returns.