The following examples are scenarios presented in OFAC materials.
- A U.S. company wishes to build a new factory in Burma where its products will be produced. This is likely to involve an agreement for the development of industrial, commercial, and human resources located in Burma and is prohibited.
- A U.S. contractor has been asked by a foreign oil company to be the general contractor for its oil exploration project in Burma. The U.S. company would not only supervise the sub-contractors, but also guarantee their performance. This activity is considered new investment and is prohibited.
- A U.S. sub-contractor has been asked to perform a service for the general contractor in the previous example, but will have no supervisory functions. The sub-contractor is merely providing a service and its activities in Burma are not prohibited.
- A U.S. company has been asked by a European company to provide ongoing technical support for its factory in Burma. The contract calls for the U.S. company to be paid a percentage of the profits generated by the Burmese factory. This is a prohibited new investment in Burma.
- The foreign subsidiary of a U.S. company wishes to bid on a project to develop a coal mine in Burma. The U.S. parent cannot approve, supervise, or otherwise be involved in the foreign subsidiary’s negotiations with regard to this project.
- A U.S. oil company holds a pre-effective date contract to develop a Burmese oil field. It wishes to sell its rights under the contract to a foreign company. It is authorized to sell an interest without prior authorization from OFAC, but if the agreement is valued at more than $10,000, the seller must file a report with OFAC within ten days of the signing of the agreement.
Exporters & Importers
- A Texas importer sends $50,000 to the account of a French exporter at Banque Intercontinentale Arabe (“BIA”) in Paris as advance payment for a shipment of wine. The company never gets its wine because the French seller claims non-receipt of the funds which were blocked at a U.S. bank because BIA is a Specially Designated National of Libya. In addition, the importer is fined $11,000 for violating the International Emergency Economic Powers Act.
- A Milwaukee exporter makes 6 separate shipments of TV sets to Trover S.A. of Cristobal, Panama. It is fined $300,000 for trading with a Specially Designated National of Cuba in violation of the Trading with the Enemy Act.
- A New York manufacturer ships a container of air purifiers to a customer in Dubai and presents documents for payment under a letter of credit issued by the Arab Bank for Investment and Foreign Trade in Abu Dhabi. Not only is the company not paid; it pays an $11,000 fine for dealing with a Libyan bank.
- A California company, working through a broker, charters a vessel to ship fishmeal from Chile to Japan. The nominated vessel turns out to be the M/V Emerald Islands owned by Bettina Shipping Co. Ltd. Both the vessel and the vessel owner are listed as Specially Designated Nationals of Cuba. The company pays $50,000 in fines.
- A New Jersey company attempts to import $2 million worth of Mexican iron ore pellets. It remits payment from a U.S. bank to a Mexican bank. Not only do the goods not arrive, the payment is rejected and the New Jersey company faces investigation and possible civil penalties of $11,000 per count because the pellets were shipped on the vessel Iran Banohar, a vessel owed and controlled by the Government of Iran.
The following are examples of insurance transactions which would be prohibited or blocked because of the interest of a blocked person:
- A health insurance policy issued to a citizen of Cuba;
- A life insurance policy naming a resident of Havana, Cuba as beneficiary;
- An aviation policy, issued to a non-blocked foreign airline, which names the Arab Bank for Investment and Foreign Trade, Abu Dhabi, a Specially Designated National of Libya, as an additional insured because the bank holds a mortgage on the aircraft;
- A marine hull policy covering potential damage to the Pinecone, a Cypriot-flag merchant vessel which has been named as a Specially Designated National of Cuba;
- A cargo policy in which Valleta Shipping Corp. of Panama, a Specially Designated National of Cuba, is a named insured;
- A liability policy covering the pharmaceutical operations of Laboratorios Blanco Pharma S.A. of Bogota, Colombia, which has been named as a Specially Designated Narcotics Trafficker;
- A reinsurance contract for policies underwritten in whole or in part by the Arab Commercial Insurance Company of the Channel Islands, a Specially Designated National of Libya;
- Return of a premium overpayment to a Cuban resident in France.
The following are examples of insurance transactions that, while not necessarily blocked, would violate U.S. sanctions law because they would involve the provision of prohibited services:
- A property insurance policy written for an international hotel chain which covers hotels in Tehran, Iran;
- A marine cargo or “goods in transit” policy insuring a shipment of Iranian crude oil shipped from Egyptian ports to a Spanish buyer;
- An aviation liability policy known to cover scheduled stops in Havana, Cuba by a foreign air carrier;
- A liability policy covering a private oil exploration company’s operations in Libya.
Recently, a five-figure claim payment due from a U.S. underwriter was stopped en route to a U.S. broker’s account. The payment was interdicted electronically when it reached the wire room of a U.S. bank because the payment referenced “Tripoli Loss.” Both the broker and the U.S. underwriter involved in the underlying reinsurance contract are at risk for having issued a policy and processed a claim without an OFAC license covering a foreign insured’s worldwide operations, which include commercial activity in Libya.