In my role as the president of Fortress Trust, Ltd., a trust and financial services company based on the island of Nevis, in the British West Indies, I receive weekly mails from the Financial Services (Regulation and Supervision) Department.
The missives are sent to “regulated entities” and refer to weekly updates to lists of “Specially Designated Nationals” and “Blocked Persons” (collectively, the “SDN list”) maintained by the US Treasury’s Office of Foreign Assets Control (OFAC). The updates for 2021 can be found at this link. If you scroll to the end, you’ll discover last week’s entries comprised of more than two pages of mostly Arab-sounding names. Here’s a sample entry:
AL-SHAER, Saleh (a.k.a. ALSHAER, Saleh Mesfer; a.k.a. ALSHAER, Saleh Mesfer Saleh; a.k.a. AL-SHAER, Salih Misfer; a.k.a. “ABU YASSER”), Sana’a, Yemen; DOB 1965; alt. DOB 1966; alt. DOB 1967; POB Razih District, Saada Governorate, Yemen; nationality Yemen; Gender Male (individual) [YEMEN].
Since the beginning of 2021, nearly 160 pages of names have been placed on this list. The purpose of the list, OFAC reminds us, “is to assist the public in complying with the various sanctions programs administered by OFAC.” The entire list of Specially Designated Nationals and Blocked Persons is more than 1,600 pages long and contains about 6,300 names.
It would be fair to ask just what these “various sanctions programs” are. Fortunately, OFAC’s webpage informs us that it:
…administers and enforces economic and trade sanctions based on US foreign policy and national security goals against targeted foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy, or economy of the United States.
In other words, the SDN list is only the beginning of the sanctions OFAC is responsible for enforcing. There are lists imposing sanctions against the “non-SDN Palestinian Legislative Council” and “non-SDN Chinese Military-Industrial Complex Companies,” for instance. As well, you’ll find details of 36 separate sanctions programs against countries ranging from Belarus to Zimbabwe at this link. For instance, if you own a medical device manufacturing company and sell your devices internationally, you’ll want to be familiar with the list of medical devices requiring specific authorization for export to Iran.
And it’s important for Fortress and other “regulated entities” worldwide, as well as ordinary citizens, to avoid doing business with anyone on OFAC’s various watch lists. OFAC and the labyrinth of sanctions it enforces operates under the authority of the International Emergency Economic Powers Act (IEEPA). The civil penalty for violating this law is “not to exceed the greater maximum of $311,562 or an amount that is twice the amount of the transaction.” But if you willfully attempt to commit, conspire, or aid or abet in violating this law, you could be fined up to $1 million, imprisoned for up to 20 years, or both.
IEEPA also contains draconian civil forfeiture provisions. “Ordinary” civil forfeiture is bad enough. Based on the flimsiest imaginable evidence (perhaps provided by a “confidential informant”), police can seize your bank accounts, security accounts, your vehicle—even your home—if your property is allegedly purchased with, connected to, or “facilitates” any one of more than 400 federal crimes and tens of thousands of state and local laws and ordinances.
In an ordinary civil forfeiture, the government—eventually—is supposed to prove its case before a judge (although you’ll often lose your property automatically if you don’t contest a forfeiture quickly enough). But in an IEEPA civil forfeiture, the government seizes your assets administratively, without a court hearing. If you want it back, you must prove that your property isn’t subject to confiscation. And you don’t make your case before a court, but an OFAC tribunal.
OFAC’s decision is final. You have no right to appeal its decision in court. After all, it’s a “national emergency,” so the government’s determination must be correct.
Deal with any targeted person, entity, or country, and you face these sorts of penalties, although the vast majority of violations are settled more leniently. Still, there’s no threshold violation; in theory, selling a glass of lemonade to someone on the SDN list could land you in the slammer for 20 years. Similarly, you could conceivably face similar penalties for the nefarious act of willfully importing Cuban cigars.
Not wanting to subject themselves to draconian penalties, businesses worldwide, including Fortress, subscribe to OFAC compliance services to screen prospective clients. Since these services often flag partial name matches, people with names like “Hassan” or “Mohammed” are often denied the opportunity to open a bank account, obtain health insurance, buy a home, rent an apartment, or find a new job.
Like the other US government watchlists we’ve written about, the ones that OFAC administers are mostly useless. One analysis in 2014 concluded that between 50% and 70% of individuals tagged by OFAC compliance services are false positives. Another report from 2007 revealed that the screening of six million names in a health insurance company’s database against the OFAC list resulted in 6,000 false positive matches—and not one real match.
If OFAC’s watch lists aren’t effective at identifying suspected terrorists, what are they good for? We suspect one thing they’re effective at is discouraging individuals and companies from doing business with people named “Hassan.” And perhaps, at its root, that’s what the watchlists are really designed to do.