Update on on U S.. Sanctions Sanctions David J. Brummond NASCUS State S ystem System S ummit Summit September 13, 2012

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1 Update on U.S. Sanctions David J. Brummond NASCUS State System Summit September 13, 2012

2 Presentation Outline OFAC Overview OFAC Enforcement Process OFAC and FinCEN Compared Somalia Remittance Case Study 2

3 OFAC Mission To administer and enforce economic and trade sanctions based on U.S. foreign policy and national security goals against selected targets 3 3

4 Sanctions History Embargo Act of Secretary Gallatin Trading with Enemy Act ( TWEA ) Civil War The Great War (WW I) Nazi Germany (WW II) North Korea/China (1950) Cuba Missile Crisis (1963) International Emergency Economic Powers Act ( IEEPA ) Peacetime Sanctions Economic Emergencies Presidential Implementation - Executive Orders Iranian Hostages (1979) Panama Noriega (1988) Yugoslavia (1998) Libya (2011) Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 ( CISADA 4 4

5 OFAC Overview ODNI THE PRESIDENT Defense National Security Council SANCTIONS Secretary of the Treasury Under Secretary Terrorism Finance Intelligence (TFI) PROGRAMS State Defense OFAC State Homeland Security USCG Banking Regulators (FRB, FDIC, OCC, State) Intelligence Community (ONI, CIA, etc.) Dept Transportation (MARAD) Justice (Washington Interpol) 5

6 OFAC Overview Active Sanctions Programs (22) Balkans Belarus Burma (Myanmar) Cote d Ivoire (Ivory Coast) Cuba Congo Diamond Trading Iran Iraq Lebanon Liberia Libya Kingpin Narcotics Narcotics Trafficking Non-Proliferation WMD North Korea Sudan Syria Somalia Transnational Crime Global Terrorism Zimbabwe 6

7 OFAC Overview Sanctions Program Categories Country-Based Programs Cuba, Iran, Sudan, Syria Regime-Based Programs Burma North Korea Zimbabwe List Based Programs Narcotics Trafficking Diamond Trading Anti-Terrorism WMD Proliferation Balkans, Lebanon Somalia 7

8 Presentation Outline OFAC Overview OFAC Enforcement Process OFAC and FinCEN Compared Somalia Remittance Case Study 8

9 OFAC Enforcement Process Economic Sanctions Enforcement Guidelines 74 FR (November 9, 2009) Scope All Sanctions Programs All U.S. Persons OFAC Enforcement Goals Flexibility to Achieve Appropriate Result Predictability/Equity in OFAC Response 9

10 OFAC Enforcement Process Sanctions Enforcement Options Criminal Referral Civil Penalty Finding of Violation Cautionary Letter No Action 10

11 OFAC Enforcement Process Enforcement Guidelines General Factors Willful or Reckless Violation Awareness of Conduct Harm to Sanctions Program Objectives Individual Characteristics of Subject Person Compliance Program / Remedial Response Cooperation with OFAC 11

12 OFAC Enforcement Process Base Penalty Calculation Yes Voluntary Self-Disclosure Egregious Case No Yes (1) (3) One-Half One-Half Transaction Value Statutory t t Maximum ($125k Cap) No (2) Applicable Schedule Amount ($250k Cap) (4) Statutory t t Maximum 12

13 Presentation Outline OFAC Overview OFAC Enforcement Process OFAC and FinCEN Compared Somalia Remittance Case Study 13

14 OFAC and FinCEN Compared Primary Differences: Statutory Authority Mission Compliance Paradigm Scope 14

15 FinCEN and OFAC Compared Statutory Authority OFAC Trading With the Enemy Act (TWEA), P.L , 40 Stat. 411 (Oct. 6, 1917) International Emergency Economic Powers Act (IEEPA), P. L , 91 Stat (Dec. 28, 1977) Various other statutes FinCEN Bank Secrecy Act, P. L , 84 Stat. 1114, 1118 (Oct. 26, 1970) USA PATRIOT Act, P.L , 115 Stat. 272 (Oct. 26, 2001) 15

16 OFAC and FinCEN Compared Mission OFAC Administer and enforce economic and trade sanctions based on U.S. foreign policy and national security goals. FinCEN Safeguard the financial system from the abuses of financial crime, including terrorist financing, money laundering, and other illicit activity. 16

17 OFAC and FinCEN Compared Compliance Paradigm Differences OFAC Sanctions Enforcement Strict Liability Block property Avoid transaction File reports FinCEN AML Compliance BSA Affirmative Obligation Policies, procedures, internal controls Compliance officer Training Independent d testingti File reports 17

18 OFAC and FinCEN Compared Scope OFAC All transactions by United States persons with SDN s or foreign governments/nationals as specified in various sanctions programs FinCEN Financial institutions as defined Transaction thresholds SAR > $5,000 Cash Receipt > $10,000 Covered products - insurance example 18

19 OFAC and FinCEN Compared Similarities Counterterrorism/Anti-Narcotics Purpose Risk Based Compliance Reports as Enforcement Tools Multipurpose Database Public Outreach / Hotline Treasury Department Function 19

20 Presentation Outline OFAC Overview OFAC Enforcement Process OFAC and FinCEN Compared Somalia Remittance Case Study 20

21 Somalia Sanctions Executive Order I hereby order: (April 12, 2010) Section 1. (a) All property and interests in property that are in the United States, that hereafter come within the United States, or that are or hereafter come within the possession or control of any United States person,... of fthe following persons are blocked and may not be transferred, paid, exported, withdrawn, or otherwise dealt in: (i) the persons listed in the Annex to this order; and (ii) any [future] person determined by the Secretary of the Treasury, in consultation with the Secretary of State: 21

22 Somalia Sanctions Persons Listed in the Annex (September 22, 2010) Individuals 1. Abshir Abdullahi "Boyah Chairman of piracy operations in Eyl area 2. Mohamed Abdi Garaad Pirate commander of M/V Maersk Alabama hijacking Entities 1. al-shabaab 22

23 Somalia Sanctions Minnesota Somali Hawala Timeline October 20, 2011 Minneapolis US District Court Conviction of Two Somali Women December 15, 2011 Franklin Bank Announces Closing of Hawala Accounts December 30, 2101 Sunrise Community Bank Closes Accounts of 14 Somali Money Transmitters January 13, 2012 Somali Protests in St. Paul Streets 23

24 Update on U.S. Sanctions David J. Brummond