In an interesting OFAC Enforcement Release issued this week, the agency announced that an individual formerly working for the U.S. Army was fined for engaging in transactions with a foreign person designated as a Specially Designated National (SDN).
Specifically, a U.S. Army official stationed at the U.S. Embassy in Colombia was penalized for engaging in at least 24 transactions with a narcotrafficker designated by OFAC. The U.S. person stationed in Bogota had evidently befriended an individual that has been designated by OFAC, and had over time “bought jewelry, meals, clothing, hotel rooms, and other gifts” for the individual over the course of a relationship. Ultimately the penalty was reduced from a maximum of over $33 million down to $5,000. While the penalty amount is not anything drastic and certainly far below the massive penalties we often see in OFAC enforcement cases against companies, this case is very interesting on a number of fronts – including the fact that:
(1) such releases seem to rarely be issued against natural persons;
(2) there was no identifying information of any of the parties (compared to corporate enforcement releases where the names of companies are generally provided); but also
(3) because of the nature of the transactions at issue – these were not commercial transactions per se but rather appear to have been the hallmarks of a personal relationship – gifts, meals, hotel stays. It begs the question – are personal relationships and generally friendships subject to sanctions?
For those who are familiar with sanctions laws, the answer is pretty clear. When parties are designated by OFAC, depending on the program under which they are sanctioned, most transactions with them by U.S. persons become prohibited for the U.S. person. Given the bar on dealings in the transfer of property to/from such parties, there is no line drawn for individual relationships. In other words, just like a U.S. person generally cannot export goods to a sanctioned company, it would naturally follow that they cannot give a gift to a sanctioned individual, or say, receive money or a small loan from that person. Again, the limitations vary based on the program under which the party is sanctioned, but these kind of limitations are not uncommon, regardless of the country the party is in.
There are a few key takeaways here, but it appears the biggest is the fact that sanctions laws like so-called “blocking programs,” whereby individuals and organizations are subject to blocking by U.S. persons (think of narcotraffickers, kingpins, certain terrorist entities, persons designated for corruption or human rights violations, etc.) are not just limited to corporate entities and are generally comprehensive enough to have an impact on personal relationships.
Further, the case very importantly highlights that compliance is critical for individuals too. This can translate into many different contexts – individual transactions in sanctioned countries like Iran or Cuba for example, or personal dealings (e.g., gift giving) with parties on the SDN list that may not fit many people’s definition of “commercial.” While all interaction with such a party might not be prohibited, they can still be under strict limitations, and the law often does not distinguish between “arms-length” commercial transactions or activities (like gift giving) that may transpire in the course of a personal relationship. As such, individuals should be alert to these risks and work to prevent them accordingly.