OFAC announces 2 fines for violations of Iran and Cuba sanctions

OFAC has announced two settlement agreements relating to violations of US sanctions on Iran and Cuba.

Aban Offshore Limited

Aban has agreed to pay $17,500 for violating US sanctions on Iran in 2008 when its Singapore subsidiary ordered oil rig supplies from the US, with the intention of re-exporting them from the UAE to a rig in Iranian territorial waters.  OFAC determined that Aban did not voluntarily self-disclose the violation, but that it constituted a non-egregious case.  In mitigation, OFAC also noted that Aban displayed substantial cooperation with OFAC’s investigation, including by conducting its own internal investigation into potential prior violations of sanctions.  OFAC’s enforcement notice is here.

An individual & Alliance for Responsible Cuba Policy Foundation

OFAC has issued a $10,000 fine to an individual acting in his personal capacity and Alliance, on whose behalf the individual also acted.  They are said to have violated US sanctions on Cuba by engaging in unauthorised travel-related transactions during business travel to Cuba in 2010 and 2011.  Although OFAC found the individual’s conduct to have been wilful, it noted that the violations appeared to cause minimal harm to US sanctions objectives. OFAC’s enforcement notice is here.

OFAC guidance on Cuba 180-day rule and Cuba de-listings

havana-cuba-1OFAC has updated its FAQ on US sanctions against Cuba to provide guidance on the “180-day rule” that applies to vessels visiting Cuba (FAQs 86-90, link here), and has also de-listed several people and entities from its Cuba sanctions.  The 180-day rule prohibits any vessel that enters a port or place in Cuba with the purpose of trading in goods or services from loading or unloading freight at a US port for 180 days after it leaves Cuba.

The new guidance sets out several exceptions to the 180-day rule, including when the trade was authorised under the Cuban Assets Control Regulations or where the vessel has entered a port for the purpose of licensed educational activities.  It stipulates that the exceptions to the 180-day rule do not in and of themselves authorise shipments to or from Cuba.

OFAC fines National Oilwell Varco for sanctions violations

OFAC has fined US firm National Oilwell Varco (NOV), and its subsidiaries Dreco and Elmar, $5,976,028 in settlement of their civil liability for allegedly violating US sanctions on Iran, Cuba, and Sudan.  The settlement is concurrent with a settlement agreement between NOV and the Department of Commerce, and a Non-Prosecution Agreement (NPA) with the US Attorney’s Office for the Southern District of Texas.  NOV’s settlement with OFAC will be deemed satisfied by its payment of $25,000,000 under the NPA.

OFAC determined that, between around 2002 and 2009, NOV repeatedly engaged in transactions involving the sale and export of goods to Iran, Cuba, and Sudan.  NOV is said to have wilfully blinded itself to Dreco’s deliberate non-identification of Iran in its communications with NOV.  It found NOV’s conduct to have been aggravated by, among other factors, the fact that it did not voluntarily disclose the violations, that senior management knew or had reason to know that several of the transactions were benefitting Iran, and that it is a large and sophisticated company involved in regions of high sanctions risk that had a wholly inadequate compliance programme in place.  OFAC found NOV’s conduct to have been mitigated by its cooperation with the investigation into its conduct, and its efforts to remediate its compliance programme.

OFAC’s penalty notice is here.

US eases Cuba sanctions

The USA has further eased its sanctions on Cuba (see previous blog).  The amendments (among other things) remove limits on the value of goods that authorised travellers to Cuba may bring back with them to the US for personal use, including a $100 cap on the value of alcohol and cigars, allow people subject to US jurisdiction to engage in joint medical research with Cuban nationals, and waive the prohibition on foreign vessels docking at US ports within 180 days of visiting Cuba. The US Treasury press release is here.

US renews trade sanctions on Cuba

The US has extended its trade sanctions on Cuba for another year, until 14 September 2017.  In December 2014, President Obama announced his goal of normalising relations with Cuba after decades of hostility, and the US has steadily eased its sanctions on the country since that time. However, he announced on Tuesday that continuing the sanctions was in the national interest of the US.

In June, White House Chief of Staff Denis McDonough set out the factors behind the Obama administration’s policy of rapprochement with Cuba (see previous blog).

OFAC publishes new FAQs on Cuba sanctions

OFAC has published 2 new FAQs, relating to information collection and recordkeeping requirements for providers of carrier or travel services to or from Cuba under US sanctions.  They confirm that, in the case of customers travelling under a specific licence, carriers and travel service providers subject to US jurisdiction may retain the licence number on file in place of a physical or electronic copy of the licence itself.  In addition, they caution that a certification from each customer, indicating the provision of the CACR authorising their travel, must be retained for at least 5 years from the date of the transaction, along with that customer’s name and address.

The updated list of FAQs is here.

New OFAC guidance on dollar transactions with Cuba

OFAC has added two new questions to its FAQ on US sanctions against Cuba, relating to the use of the US dollar in certain transactions (link here).  Question 43 sets out the circumstances in which the US dollar may be used to conduct transactions in Cuba or with Cuban nationals, which includes activities authorised by the Cuban Asset Control Regulations (CACR) and U-Turn transactions where neither the originator nor the beneficiary is subject to US jurisdiction.  Foreign branches or subsidiaries of US banks may act as the originator or beneficiary in such transactions.

Question 50 confirms that the correspondent accounts of depository institutions at Cuban banks may be established and maintained in US dollars, provided the accounts are used only for transactions that are authorised by or exempt from the CACR.  In addition, it says that transactions necessary to maintain those accounts are authorised, and that correspondent accounts used by US banks to process US dollar instruments presented indirectly by Cuban banks may also be denominated in US dollars.  However, the FAQ stipulates that Cuban banks are still prohibited from opening correspondent accounts at US banks.

White House chief of staff assesses Cuba sanctions policy

In a speech to the Truman Conference 2016, White House Chief of Staff Denis McDonough set out the factors behind the Obama administration’s policy of rapprochement with Cuba, and highlighted some of the limitations of sanctions as a foreign policy tool.

McDonough said that the policy of isolating Cuba through sanctions for more than 50 years, in the belief that doing so “would plant the seeds of democracy and empower the Cuban people”, had the opposite of the intended effect.  Echoing comments made earlier this year by Treasury Secretary Jack Lew on the risks of using sanctions without international backing (see previous blog), McDonough noted that it was the US that ultimately found itself isolated, from both its regional and international partners, and that it saw its influence in the world diminish as a result.  He contrasted this with the success of sanctions in changing Iran’s nuclear policy, where there was an international consensus behind the measures.

The full text of the speech is here.