The Office of Foreign Asset Control (OFAC) is an agency few Americans know. Part of the U.S. Treasury, OFAC administers and enforces economic and trade sanctions based on US foreign policy and national security goals. The agency helps protect us from targeted foreign countries such as North Korea and Iran as well terrorists, international narcotics traffickers, and those engaged in the proliferation of weapons of mass destruction.
When Congress, the President or a multinational treaty institutes sanctions against a country or group, it falls to OFAC to help enforce those sanctions.
Trading with enemies of the United States is a felony that can involve huge penalties. Sometimes sanctions are imposed against specific countries and sometimes against terrorist groups or rebels. Frequently these same sanction targets have horrific histories of human rights abuse.
Depending on the sanction, companies and individuals that trade with the enemy can be criminally prosecuted or pay huge monetary penalties. The fines and penalties are designed to make it non-economical to do business with terrorists.
Unfortunately, many people put profits before domestic safety and human rights. In the hopes of earning easy profits, they smuggle in “blood” diamonds into the U.S. from Zimbabwe or use shell companies to trade with Iran.
The list of sanctioned countries and entities changes frequently. OFAC most recently updated their active sanctions list on December 19, 2018. The countries that currently subject to sanctions are: Syria, Iran, North Korea, Belarus, Burundi, Central African Republic, Cuba, Congo, Iraq, Lebanon, Libya, Nicaragua, Somalia, Susan, South Sudan, Venezuela, Yemen and Zimbabwe. There are even limited sanctions involving Russia, particularly as to operations in the disputed Crimea area of Ukraine.
Violations of these sanctions is aggressively pursued by OFAC and the Department of Justice. Catching someone in the act, however, is difficult.
Companies seeking to violate sanctions frequently employ third party intermediaries or engage in transshipping. Let’s say that I can purchase blood diamonds from Zimbabwe for 50 cents on the dollar. They are cheaper there because much of the world prohibits the importation of diamonds from rebel controlled territories. The mines in these areas are also operated under horrific conditions.
If I am an honest jeweler, I will purchase my diamonds legally from a reputable source. If I am dishonest, however, I may ship the diamonds from Zimbabwe to Dubai and then to India. Somewhere along the way, new certificates of origin are drawn up. The customs agent in the U.S. sees diamonds from India and has no clue of where those diamonds actually were mined.
OFAC Whistleblower Awards (OFAC Sanction Violations)
The OFAC laws, international treaties and Presidential executive orders do not contain whistleblower reward provisions. And the biggest whistleblower statute, the False Claims Act, isn’t a good fit either. While there is no direct OFAC whistleblower award, depending on who is involved there may be SEC or banking whistleblower rewards available.
SEC Whistleblower Awards and OFAC Sanctions
Often a violation of an OFAC economic sanction also violates a disclosure obligation under the federal securities laws.
Do you remember Al Capone? He was first prosecuted not for being a mobster but instead for not paying the income tax on his ill-gotten gains. The securities laws act much the same way. If you violate OFAC you may have an obligation to self-disclose.
Failing to make required disclosure is an SEC violation. The SEC maintains a very robust whistleblower reward program that pays up to 30% of whatever the government collects from the wrongdoers.
Better yet, the SEC program allows whistleblowers to remain anonymous.
Iran and Syria Sanctions Implicate SEC Reporting
The Iran Threat Reduction and Syria Human Rights Act of 2012 requires SEC registered issuers to disclose activities covered by sanction restrictions. That means if a public or other company subject to SEC jurisdiction fails to disclose, rewards may be available.
The SEC filing requirements won’t help when it is a small mom and pop company violating sanctions but normally those companies aren’t the ones in violation.
In 2017, Zhongxing Telecommunications Equipment Corporation (ZTE) paid over $100 million in sanctions for violating Iran sanctions. Prosecutors say the Chines telecommunications giant sold goods made in the U.S. to Iran.
How did they get away with it? By using third party intermediaries.
Banks and OFAC Sanctions
Banks are one of the worst offenders of U.S. and international sanctions. We have seen repeated instances of banks turning a blind eye to narco-terrorists using American banks to launder funds. Some of the world’s largest banks such as HSBC have paid fines for allowing their bank to be used by international money launders and narcotics traffickers.
Unlike many traditional businesses, banks have robust “know your customer” rules that require them to know exactly with whom they are doing business. Banks also have an obligation under the Bank Secrecy Act to report suspicious transactions.
Banks that fail to honor OFAC sanctions may be liable BOTH under the SEC Whistleblower Program and under a separate law called FIRREA. The latter law, the Financial Institutions Reform Recovery and Enforcement Act, prohibits banks from engaging in a wide variety of illegal conduct.
We like FIRREA because it provides for whistleblower rewards of up to $1.6 million.
Call for OFAC Whistleblowers
Companies that violate U.S. and multinational sanctions endanger American lives, they hurt our economy and they contribute to massive human rights violations. They also hurt legitimate businesses who can’t compete when a dishonest business decides to circumvent the law and purchase cheap oil from ISIS or diamonds from mines operated with slave labor.
We can’t promise a reward to every whistleblower but we can help you determine if you are entitled to an award and help you collect that award if so entitled.
Ready to see if you qualify for an OFAC whistleblower award? Contact us online, by email or by phone at (direct). All inquiries kept strictly confidential and protected by the attorney – client privilege.