Feb 18 2014

Blacklists and controls on the movement of goods and money

We’ve focused mostly on the “no-fly” list and other government blacklists and “watchlists” restricting the movement of people. But the latest administrative injustice involving an innocent British philosopher reminds us that government blacklists also restrict the movement of information, goods, and money — sometimes with serious negative effects on innocent people’s lives.

How the US Treasury imposes sanctions on me and every other “Stephen Law” on the planet – my letter to OFAC

My name is “Stephen Law“. The name “Stephen Law” appear on OFAC’s “specially designated nationals” list….

I have discovered that, as a result of this listing, US Customs block shipments of goods to me here in the UK. Also when people try to wire me money from abroad (not just from the US, but from anywhere), for e.g. occasional travel expenses for academic conference attendance, the payment is interrupted and various checks are made before the funds are released. This became so bad during one period (a series of payments every single one of which triggered a block) that I had to switch to a different bank account. At no point was I told why this was happening (i.e. that you, OFAC, are responsible). The banks concerned believe they must keep this information from me (I was told this by my bank branch). Hence it took me many months to figure out what the source of the problem was: OFAC/US Treasury.

It appears any “Stephen Law” anywhere in the world will suffer this same treatment, as indeed will anyone who merely happens to have the same name or alias as one of your “specially designated nationals”. This has proved frustrating, time-consuming and also costly to me personally. E.g. I have  paid US$77 postage for goods it turns out I can never receive because they are returned by US customs to the US vendor because my name is listed. As a result of the OFAC listing, I cannot now order goods from – or receive gifts from friends and relatives in – the United States….

OFAC-caused delays to payments to me can run into weeks. On one occasion I ran up overdraft charges as a result of not receiving funds blocked by OFAC….

How could this happen?

U.S. law allows administrative agencies to place people, corporations, foreign governments, or categories of tangible and intangible goods and services (including intellectual property and non-commercial communications, i.e the content of speech protected by the First Amendment) on various blacklists, and restricts financial transactions and/or “exports” of goods, services, and information related to those blacklisted entities.

U.S. blacklists include the Commerce Control List (CCL) administered by the Bureau of Industry and Security (BIS) of the Department of Commerce pursuant to the Arms Control Export Act as implemented by the International Traffic in Arms Regulations (ITAR). Any export from the U.S. of any goods or services on the CCL or otherwise subject to U.S. Export Administration Regulations (EAR) requires government permission in the form of an “export license”.  The CCL, ITAR, and EAR include various categories of technology, information, and services.

Ideas and information developed entirely independently of the government can be classified as “munitions”, and those administrative determinations have been held to be political decisions exempt from judicial review. Once information is categorized by BIS as a munition, “transferring technical data to a foreign person”, even within U.S. territory, is considered an “export” of technology or “services” which requires a license.  Sharing of research work in progress by U.S. academics with foreign-citizen graduate students at U.S. universities has been held to constitute criminal “unlicensed export of munitions”.

In addition, multiple financial blacklists are maintained by the Office of Foreign Assets Control (OFAC) of the Department of the Treasury, pursuant to a variety of sanctions laws ostensibly related to drugs, terrorism, weapons, and countries on the U.S. enemies’ list (Cuba, Iran, Syria, etc.).

These financial blacklists are consolidated in OFAC’s list of Specially Designated Nationals (SDN).  Engaging in or “facilitating” any transaction involving an entity on the SDN list requires a license in advance from OFAC. The meaning of “facilitation” is broad but vague. It’s unclear, for example, whether allowing a Web server to respond to queries from IP addresses in a blacklisted country constitutes prohibited facilitation.

This broad brush approach has perverse but entirely foreseeable effects. For example, in 2004 the Peruvian airline Aero Continente was added to the SDN list on the basis of an allegation that one of its owners was a “drug kingpin”.  US citizens who held tickets on the airline were forbidden from using their tickets, canceling their reservations, or contacting the airline to seek refunds without OFAC licenses. (It remains unclear whether OFAC thought it would be illegal to consult the Aero Continente website without a license.) By the time OFAC got around to deciding which of these activities it might be willing to license, almost a year later, most ticket holders had forfeited their entitlement to any refund by no-showing their flights without canceling their reservations. As a result, the consequence of the OFAC sanctions was to expropriate the fares already paid by US citizens and residents to the airline, and forcibly transfer the value of their outstanding tickets to the “drug kingpin” — the ostensible target of the “sanctions” — as a windfall profit.

Draconian penalties for banks and other intermediaries accused of facilitating blocked transactions lead them to err on the side of blocking permitted but questionable activities, just as airlines in practice err on the side of denying boarding to suspicious or “watchlisted” passengers, even if they aren’t on no-fly lists.

Most interbank wire transfers are routed through the Society for Worldwide Interbank Financial Telecommunications (SWIFT), which is incorporated in Belgium but has offices and servers and member banks in the US which subject it to US law. As a result, electronic funds transfers — routinely used in many countries for bill payments,  paychecks, and expense reimbursements — are vetted by SWIFT against the SDN list (and blocked if one of the parties seems  a close match for an entry on the list) even when funds are being transferred within or between countries outside the US.

The SDN list is marginally better than the no-fly list, in that it is published in the Federal Register and publicly available online for download or search based on fuzzy logic scoring.

In theory, a person or entity on the SDN list can have OFAC’s blacklisting decision reviewed by a Federal court.  In practice, OFAC’s response to such a lawsuit is often to remove the plaintiff from the list so as to render the lawsuit moot. This suggests that OFAC, like the agencies that control the no-fly list and aviation watchlists, sees judicial review as a greater threat than whatever alleged evil prompted it to put someone on its list of “blocked” individuals in the first place.

Individuals on OFAC’s blacklist have included U.S. citizens and residents. Muhammad Salah, a U.S. citizen living in the Chicago area, was subjected for 17 years to a “designation” on the SDN list that made it illegal for anyone to sell or give him anything of value (including pro bono legal services) without a license from OFAC.  OFAC eventually issued a license for Mr. Salah to get paid paid for his work and to spend the income on food and other necessities of survival, but subject to restrictions that in practice were impossible to comply with.  Finally, in 2012, he found pro bono lawyers willing to risk representing him and organizations that wanted to support him but were prohibited from doing so.  Less than two months after the Center for Constitutional Rights filed a lawsuit to challenge Mr. Salah’s blacklisting, and before the court had a chance to review the merits of the case, OFAC took Mr. Salah off the SDN list.

More recently, OFAC unblocked a Croatian former general and alleged war criminal, Ante Gotovina, exactly a month after General (Retired) Gotovina asked a federal court to order OFAC to take him off its blacklist, and before the case could be heard by the court.

Professor Law, the philosopher in London, has no such recourse, even if he jumped through the hoops to hire a lawyer in the US. According to Clif Burns, a lawyer at Bryan Cave and an Adjunct Professor at the Georgetown University Law Center, who writes the excellent Export Law Blog:

Steven Law, the narcotics trafficker, has a right to seek removal from the SDN List but… according to OFAC, a non-designated individual, such as Professor Stephen Law, has no right to request any relief from OFAC.

The most common name on the SDN blacklist is “Daniel Garcia“.  OFAC’s listing for Mr. Garcia gives an address in Mexico City, but no date of birth, nationality, passport number, or any other identifying information that might distinguish OFAC’s target from any of the many other Daniel Garcias in the US and around the world.  These and other people with names the same as, or similar to, names on the SDN list experience problems including closed bank and PayPal accounts, denied  home mortgages, and withholding of payments and money transfers.

OFAC has sometimes noted in entries on the SDN list when an unlisted corporation has a name similar to that of a corporation on the list (for example as reported here and here). But OFAC takes no such action and has established no redress procedure at all for individuals whose names are similar to the names or alleged aliases of blacklisted/blocked persons.

As with the no-fly list and other travel “watchlists”, the solution should be to make the list of “specially designated nationals” a list of those whose financial activities have been blocked by judicial order (injunction or restraining order), rather than a blacklist created by secret, extrajudicial administrative fiat.

4 thoughts on “Blacklists and controls on the movement of goods and money

  1. If these allegations are correct, and I’m sorry to say they wouldn’t surprise me, Mr. Law needs a friend who can order and receive goods for him. (This is so obvious a bright 6 year old could figure it out, and I can’t even begin to understand why the feds wouldn’t see their efforts as futile.) Anyway, I wonder if the US computers are smart enough to differentiate “Stephen Law” from “S. Law”, “S. (middle name) Law”, or some other variant–“Stephanie Law”, for that matter. (The article says they can pick up “similar to”, but there must be a limit. “Daniel Garcia” could morph into “D. Garcia” and he’s out of it, unless the feds want to check every Diego and Daniella Garcia in the world.)

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