Foreign Assets Control Facilitation: g Preparing for Expanded - PowerPoint PPT Presentation

Presenting a live 90 ‐ minute webinar with interactive Q&A Foreign Assets Control Facilitation: g Preparing for Expanded Enforcement in 2013 Identifying and Mitigating Risks for U.S. Persons and Companies Absent Clear Guidance TUES DAY, JULY 23, 2013 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific T d Today’s faculty features: ’ f l f Ronald I. Meltzer, Partner, WilmerHale , Washington, D.C. Greta Lichtenbaum, Partner, O'Melveny & Myers , Washington, D.C. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .

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Prohibited Facilitation Under OFAC Regulations OFAC Regulations Ronald I. Meltzer Wil Wilmer Cutler Pickering Hale and Dorr, LLP C tl Pi k i H l d D LLP July 23, 2013

OVERVIEW 1. What is facilitation? 2. Exceptions 3. Recent legislation and Executive Orders related to facilitation WilmerHale 6

Part One: What is facilitation? Part One: What is facilitation?  Circumvention of OFAC requirements by routing or supporting otherwise prohibited routing or supporting otherwise prohibited transactions through foreign persons  Aiding or permitting non-US persons to  Aiding or permitting non US persons to perform activity that would be prohibited if undertaken by US persons  Explicit and imputed prohibition across all OFAC sanctions programs  Broad and elastic: even minor or indirect actions that support or approve another person’s transaction with OFAC targets can constitute transaction with OFAC targets can constitute prohibited facilitation WilmerHale 7

Definitions of facilitation: Iran, Sudan and Burma regulations g  Iran: approving, financing, facilitating, or guaranteeing any transaction by a foreign guaranteeing any transaction by a foreign person, where the transaction would be prohibited if performed by US person or within the United States (31 CFR § 560.208)  Sudan: action by a US person that assists or supports transactions with Sudan by any other S person (31 CFR § 538.407) WilmerHale 8

Definitions of facilitation: Iran, Sudan and Burma regulations g (continued)  Burma: approving, financing, facilitating, or guaranteeing a transaction by a foreign person, if such transaction would be prohibited when performed such transaction would be prohibited when performed by US person or within the United States (31 CFR § 537.205(a))  Exception for certain types of new investment in Burma (31 CFR § 537.205(b)), such as certain contracts to sell/purchase goods contracts to sell/purchase goods WilmerHale 9

Cuba: evasion/avoidance  CACR prohibits “[a]ny transaction for the purpose or which has the effect of evading or avoiding any part of the [CACR] prohibitions” (31 avoiding any part of the [CACR] prohibitions (31 CFR § 515.201(c))  Interpreted to prohibit facilitation p p WilmerHale 10

Other examples of facilitation from OFAC regulations g  Altering policies or operating procedures to enable a foreign affiliate/subsidiary to perform enable a foreign affiliate/subsidiary to perform OFAC-prohibited transactions  Altering a foreign affiliate’s/subsidiary’s  Altering a foreign affiliate s/subsidiary s operating policies and procedures to facilitate OFAC-prohibited transactions  Referring purchase orders, requests for bids, or other business opportunities involving OFAC t targets to a foreign person t t f i WilmerHale 11

Penalties For Iran, Sudan and Burma (under IEEPA):  Civil: $250,000 per violation or twice transactional value  Criminal: $1 million per violation and 20 years For Cuba (under TWEA):  Civil: $65,000 per violation Civil: $65 000 per violation  Criminal: $1 million per violation and 10 years WilmerHale 12

Part Two: Exceptions 1. Authorized transactions 2. General inventory rule WilmerHale 13

Authorized transactions u o ed s c o s Prohibited facilitation requires that the underlying transaction be unauthorized transaction be unauthorized If the transaction is permitted (either by general authorization or a specific license) then taking authorization or a specific license), then taking action to approve, facilitate or support that transaction is not prohibited Examples:  Information and informational materials  Transactions covered by OFAC licenses WilmerHale 14

General Inventory Rule  What if a US person sells goods to a foreign  What if a US person sells goods to a foreign person in a third country that does business in Iran? Does that activity constitute prohibited facilitation?  General inventory rule : US persons may sell/transfer goods to a third-country party, even ll/t f d t thi d t t if a small/unidentifiable portion of such goods is destined for or ends up in OFAC targets p g  Not in the OFAC regulations—established by longstanding agency practice g g g y p WilmerHale 15

General Inventory Rule (continued) Two key limitations:  Items when shipped from the United States or b by a US person to the third-country party must US t th thi d t t t not be specifically intended for eventual sale to or use in OFAC targets g  Third-country party’s inventory must not be predominantly used for selling/sourcing such g g p y items to OFAC targets WilmerHale 16

Part Three: Recent legislation and Executive Orders related to facilitation Key developments:  Executive Order 13606 (Foreign Sanctions Executive Order 13606 (Foreign Sanctions Evaders)  Executive Order 13608 (Grave Human Rights Abuses)  Executive Order 13622   Iran Threat Reduction and Syria Human Iran Threat Reduction and Syria Human Rights Act of 2012  Iran Freedom & Counter-proliferation Act of 2012  Executive Order 13645 WilmerHale 17

EO 13608 (Foreign Sanctions Evaders) ( g )  Targets foreign individuals/entities who:  Violate/attempt to violate/cause a violation of sanctions on Iran/Syria; or  Facilitate “deceptive transactions” on or behalf of Facilitate “decepti e transactions” on or behalf of persons subject to Iranian/Syrian sanctions. – Deceptive transactions : identity of an Iranian or Syrian “Deceptive transactions”: identity of an Iranian or Syrian sanctions target is withheld or obscured from other parties or relevant regulatory authorities (e.g., non-U.S. export licensing officials)

EO 13608 (FSEs) (continued) Allows OFAC to impose sanctions on non-U.S. persons for facilitation C Consequences of being listed under EO 13608: f b i li t d d EO 13608  U.S. persons may not provide goods, services, or technology to listed FSEs, or i t h l t li t d FSE entities owned/controlled by, or acting on behalf of, such FSEs  Effectively, listed FSEs are cut off from access to the U.S. market and financial system  However, no blocking requirements under this EO