U.S. Department of the Treasury Office of Foreign Assets Control

1. U.S. Department of the TreasuryOffice of Foreign Assets Control

2. Agenda • What is OFAC? • Relevance for Corporate Registration • Legal Authority for U.S. Sanctions • Jurisdiction • Sanctions Programs • Current List of Sanctions • Comprehensive Sanctions • Limited Sanctions • Recent OFAC Actions • Specially Designated Nationals (SDNs) and Blocked Persons • Penalties and Consequences • Effective Compliance Strategies

3. What is OFAC? Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury • OFAC administers andenforces economic sanctions against targeted: - Foreign governments (e.g. Iran, Sudan, Cuba) - Individuals (e.g. terrorists, int’l narcotics traffickers) - Entities (e.g. drug front companies, charities that send money to terrorist groups) - Practices (e.g. trade in non-certified rough diamonds, proliferation of weapons of mass destruction) • Importance of the “SDN List”

4. Relevance for Corporate Registration • OFAC regulations prohibit doing business with sanctions targets – you need to know who those targets are! • 9/11 emphasized the need to “know your customer” by screening applicants • Cooperation of corporate filing offices and businesses who facilitate this process contributes to the effectiveness and success of OFAC sanctions programs.

5. For example… • U.S. business filing company contracted with Yugoslavian entity to file incorporation papers* • Prohibited under the embargo of Yugoslavia (can’t do business with company in an embargoed country) • Adequate screening was not done by the filing company or the state registration office • Newly incorporated U.S. corporation used to avoid economic sanctions * This violation occurred prior to the lifting of the Yugoslavian sanctions on May 28, 2003.

6. Legal Authority for U.S. Sanctions

7. Legal Authority: TWEA • Trading with the Enemy Act (“TWEA”) (50 U.S.C. app. § § 1-44) • Primary legal authority for Cuba and North Korea programs

8. Legal Authority: IEEPA • International Emergency Economic Powers Act (“IEEPA”) (50 U.S.C. § § 1701-06) • Primary legal authority for most non-TWEA programs

9. Legal Authority: Other OTHER STATUTES: • Antiterrorism and Effective Death Penalty Act 8 U.S.C. 219, 18 U.S.C. 2332d and 18 U.S.C. 2339b • Foreign Narcotics Kingpin Designation Act Pub. L No. 106-120, tit. VIII Stat 1606, 1626-1636 IMPLEMENTATION AUTHORITIES: • Title 31 U.S. Code of Federal Regulations, Chapter V • Various Executive Orders

10. Jurisdiction: Individuals • American citizens and permanent resident aliens anywhere they are located • Any individual, regardless of citizenship, who is physically located in the United States

11. Jurisdiction: Businesses • Under the International Emergency Economic Powers Act (IEEPA) programs: • Corporations organized under U.S. law, including foreign branches of U.S. companies • Any corporation or company physically located in the United States, including U.S. branches, agencies and representative offices of foreign corporations

12. Jurisdiction: Businesses • Under Trading With the Enemy Act (TWEA) programs (Cuba, North Korea): • Corporations organized under U.S. law, including foreign branches and foreign-organized subsidiaries of U.S. companies • Any corporation or company physically located in the United States, including U.S. branches, agencies and representative offices of foreign corporations

13. Current List of Sanctions Programs • Zimbabwe • Syria • Terrorism • Narcotics Trafficking • The Balkans • Iraq • North Korea • Cuba • Iran • Sudan • Burma • Nonproliferation • Diamond Trading • Liberia

14. Comprehensive Sanctions Programs • In general the following are prohibited under comprehensive sanctions programs: • Exports of goods and services • Imports of goods and services • Trade brokering, financing, or facilitation

15. Comprehensive Sanctions Programs • Current comprehensive sanctions programs: Sudan Cuba Iran • See OFAC’s website for details on each of these programs: www.treas.gov/ofac

16. Comprehensive Sanctions Programs • Under comprehensive OFAC sanctions, persons subject to OFAC jurisdiction must “block” (“freeze”) assets/property of a sanctions target under their control. • For corporate registration industry, must refuse to do business with all sanctions targets.

17. Zimbabwe - Block property of persons undermining democratic processes/ institutions in Zimbabwe. (Robert Mugabe, etc.) Limited Sanctions Programs • Balkans • Block property of Milosevic supporters and persons who threaten international stabilization efforts in the Western Balkans

18. Limited Sanctions Programs • Burma/Myanmar • No import of goods or services from Burma. • All major banks blocked. • No new investment.

19. Limited Sanctions Programs • Iraq • General License • Most new transactions allowed • Cannot do business with designated members of the insurgency.

20. Recent OFAC Actions • Liberia • Block property of Charles Taylor and his supporters and persons who have undermined Liberia’s transition to democracy.

21. Recent OFAC Actions • Libya • Sanctions lifted • All blocked funds released • Doing business with Libya is now permitted

22. Specially Designated Nationals • Specially Designated Nationals (SDNs) • Individuals and entities all over the globe • Owned, controlled by or acting on behalf of targeted governments or groups • May be front companies, parastatals, high-ranking officials or specifically identified persons • Designated terrorists or narcotics traffickers

23. Specially Designated Nationals • Over 3,000 unique SDNs and blocked persons identified by OFAC • Published and accessible on: • Federal Register • http://www.treas.gov/offices/eotffc/ofac/sdn/index.html

24. Holy Land Foundation for Relief and Development (SDGT) Atlas Air Conditioning, U.K. (IRAQ) Treviso Trading Corporation, Panama (CUBA) Al-Hamati Sweets Bakeries (SDGT) Usama Bin Ladin (SDT/SDGT) Mamoun Darkazanli Import-Export, Germany (SDGT) Myanma Foreign Trade Bank (BURMA) Specially Designated Nationals

25. Penalties and Consequences • Criminal Penalties • Up to $10 million and 30 years in jail • Civil Penalties • Trading With the Enemy Act: $65,000 • International Emergency Economic Powers Act: $11,000 • Iraqi Sanctions Act: $325,000 • Foreign Narcotics Kingpin Designation Act: $1,075,000 • Anti-Terrorism and Effective Death Penalty Act: $55,000 • Violations may result in: • Blocked funds and seized goods • Negative publicity and loss of business good will

26. Effective Compliance Strategies • Screen corporate registrations for sanctions references • Screen against sanctioned countries, including cities and territories within such countries. • Screen all parties connected with registration

27. “Due Diligence” • Is the “hit” against the OFAC SDN list? • Organization vs. individual vs. vessel? • Is it a full name match? • Have you gathered enough information to compare?

28. Example 1 • Your potential customer: • Arnulfo Marquez; ABC Import-Export Limited; POB Chiapas, Mexico; US Citizenship; SSN: 222-22-222 • Similar to the OFAC SDN listing: • TREJOS MARQUEZ, Arnulfo, Carrera 4 No. 9-17 of. 308, AA 38028, Cali, Colombia; c/o CONSTRUCTORA TREMI LTDA., Cali, Colombia; Cedula No. 6090595 (Colombia) (individual) [SDNT]

29. Example 2 • Your potential customer: • CIMEX N.V., Antwerp, Belgium • Similar to the OFAC SDN listing: • CIMEX (a.k.a. CIMEX CUBA; a.k.a. COMERCIO INTERIOR, MERCADO EXTERIOR; a.k.a. CORPORACION CIMEX S.A.), Edificio Sierra Maestra, Avenida Primera entre 0 y 2, Miramar Playa, Ciudad de la Habana, Cuba; and all other locations worldwide [CUBA]

30. Example 3 • Your potential customer: • Abubaker Ahmed; DOB: August 1, 1970; Address: Dar es Salaam • Similar to the OFAC SDN listing: • AHMED, Abubakar K. (a.k.a. GHAILANI, Ahmed Khalfan; … a.k.a. KHALFAN, Ahmed; a.k.a. MOHAMMED, Shariff Omar); DOB 14 Mar 1974; alt. DOB 13 Apr 1974; alt. DOB 14 Apr 1974; alt. DOB 1 Aug 1970; POB Zanzibar, Tanzania; citizen Tanzania (individual) [SDGT]

31. Effective Compliance Strategies • Make sure your sanctions information is up-to-date! • Sanctions and SDN list can be updated or revised at any time • Updates not on a regular basis • Set your browser to automatically check the OFAC web site for updates • Subscribe to email notification service on OFAC home page

32. Effective Compliance Strategies • Make sanctions compliance an integral part of your business • Don’t treat OFAC compliance as an afterthought • Ensure that all employees are familiar with U.S. sanctions • Make compliance a part of training program for new hires

33. Effective Compliance Strategies • Take advantage of OFAC compliance resources • OFAC publishes an extensive library of on-line reference manuals, brochures etc. • These and other useful materials are available free of charge through: • OFAC’s web site: http://www.treas.gov/ofac • OFAC’s automated fax on demand service: 202- 622-0077

34. For compliance counseling… • 202-622-2490 or 1-800-540-6322 • Monday through Friday 8 a.m. to 7:00 p.m EST • www.treas.gov/ofac

35. Erin Ghelber Compliance Programs Division Tel: 202-622-2490 or 1-800-540-6322 Fax: 202-622-2426 Web: www.treas.gov/ofac