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Sanctions Additions Skyrocket, De-listings Nosedive Under Trump Administration

By Valentina Pasquali

Data compiled by a law firm in Washington, D.C. and reviewed by ACAMS moneylaundering.com shows that the total volume of parties removed from U.S. blacklists is set to decline for the third year running under President Donald Trump.

The data shows that the Treasury Department removed only 70 individuals and firms from the U.S. list of specially designated nationals, or SDNs, and list of sectoral sanctions identifications, or SSIs, in the first nine months of 2019, and is on track to complete fewer than 100 removals for the entire year—down from 320 in 2018 and 390 in 2017.

In 2016, the last full year of former President Barack Obama’s second term in office, the department’s Office of Foreign Assets Control, or OFAC, removed a record 1,000 SDNs and SSIs from the lists, more than doubling the volumes of the prior two years.

The decline in removals from the SDN list and the SSI list reflects the current administration’s tendency to use sanctions as a form of punishment rather than as an incentive to change behavior, said Erich Ferrari, an attorney who represents blacklisted parties and whose law firm, Ferrari & Associates, compiled the figures.

“They are not removing people anymore, except in very limited circumstances,” Ferrari told moneylaundering.com.

But de-listings are only half the story. After averaging 600 total SDN and SDI additions each year from 2014 to 2016, OFAC blacklisted approximately 850 parties in 2017, a record 1,500 in 2018 and 590 in the first nine months of 2019.

Those sanctions impose various financial restrictions on foreign individuals, entities, vessels, and even entire governments that allegedly pursue or facilitate activities banned by U.S. statutes or executive orders, including drug trafficking, weapons proliferation, terrorist financing and public corruption.

Parties can challenge their designations in federal court or through an administrative process governed by OFAC, but the agency is not required to make all of the evidence behind its decisions available to designees and can take months, if not years, to consider their appeals.

OFAC also deletes designations that are subsequently determined to have been made in error, or have become outdated as a result of a targeted individual dying or a firm ceasing operations, among other reasons.

Finally, the U.S. government can relax or end a sanctions program altogether as part of broader foreign-policy considerations.

Those factors together, rather than foreign policy alone, probably fueled the drop in removals and surge in designations, according to Sean Kane, a former deputy assistance director for OFAC.

“The raw numbers can be misleading in this context,” said Kane, now an attorney with Dechert in Washington, D.C. “Just one [successful petition to be de-listed] can result in hundreds of derivative removals.”

In June 2014, OFAC withdrew at once the designations of more than 300 parties affiliated with Colombia’s Cali cartel after the group crumbled “under the weight of economic sanctions.”

The lifting of nuclear-related sanctions against Iran in 2016 and of the near-total U.S. embargo of Sudan two years ago led to the removal of hundreds of entities from U.S. blacklists.

Those and other batches of de-listings may complicate year-on-year comparisons, but the surge in designations confirmed by the research is a clearer indicator of the Treasury Department’s current strategy, said Brian O’Toole, a former senior official with OFAC.

“[This] is consistent with the general view that, at least at the very top, sanctions are the strategy and not necessarily only a part of one,” said O’Toole, now a scholar with the Atlantic Council in Washington, D.C. “This administration clearly uses sanctions more as punishment than others have, which feeds that disparity.”

Annual de-listing volumes do not have a significant impact on banks, O’Toole added, since processes to comply with list-based sanctions programs are largely automated.

The delisting of parties with common names or lacking identifiers, however, may relieve compliance officers from the burden of ensuring they are blocking the right individual or entity from accessing financial services.

In January 2017, OFAC lifted sanctions against Daniel Garcia, a Cuban national identified only as the manager of a talent agency, Promociones Artisticas, 23 years after imposing them.

Garcia’s designation is considered a case study in how OFAC can inadvertently blacklist those who share a name with an SDN, blocking them from financial services for several years, if not decades.

Contact Valentina Pasquali at vpasquali@acams.org

Topics : Sanctions
Source: U.S.: OFAC , U.S.: Department of Treasury
Document Date: October 29, 2019