Panama Papers expose threat to U.S. national security through violations of U.S. sanctions enforced by OFAC

Date: April 12, 2016

While most of the attention from the leak of 11 million electronic records from the Panama law firm, Mossack Fonseca, has focused on the undisclosed wealth of worldwide public officials that is hidden in the secrecy haven of Panama, it is now clear that the more sinister clients of this law firm are persons who are subject to economic sanctions imposed by the United States.

US economic sanctions are enforced by the Office of Foreign Assets Control (OFAC), a US Treasury Department agency. At any given time, OFAC enforces more than two dozen sanctions programs. In early April 2016, for example, OFAC was monitoring and enforcing 29 distinct sanctions programs covering the alphabet from “Balkans-Related Sanctions” to “Zimbabwe Sanctions.”

OFAC-enforced sanctions attack WMD proliferation, diamond trade, others

The programs also include functional or sectoral categories, such as weapons of mass destruction (WMD) “Non-Proliferation Sanctions,” “Rough Diamond Trade Controls” and “International Criminal Organizations” sanctions. In many respects, the sanctions deal with life-and-death issues that could affect the survival of portions of the world.

The Panama Papers expose a black hole through which subjects of United States sanctions slip into to avoid detection and continue doing business as usual. On this occasion, Panama, one of the world’s notorious secrecy havens, provided the crack in the wall that allows the world to see the full range of services that come with banking secrecy.

Sanctions programs of other jurisdictions may have been abused

There is no evidence the sanctions subjects of other nations, including the United Kingdom, Canada, France and others, and those of the United Nations, European Union and other international bodies, do not take advantage of the black holes found in the secrecy havens. In the aftermath of the Panama Papers leak, the BBC reported that 33 companies or individuals who were under economic sanctions enforced by the US Treasury Department’s OFAC were clients of the Mossack Fonseca firm. They included companies from Iran, North Korea and Zimbabwe. The BBC said one North Korean entity was linked to that nation’s nuclear weapons program.

Panama Papers also expose Syrian entities linked to Assad From what is now known, Mossack Fonseca follows the practice of incorporating and operating companies as offshore entities for its clients. In one instance, the BBC reported, the Mossack firm created and operated an offshore company for Rami Makhlouf, who was under US sanctions and is the cousin of Syria’s president Bashar Al-Assad. The Mossack firm is also alleged to have provided legal services to other Syrian entities that supplied aviation fuel to the Syrian government to fly military airplanes in the ongoing civil war there.

US could use potent money laundering law, which has ‘extraterritorial’ application

The continuing viability of United States sanctions may depend on the Treasury Department and Justice Department taking strong action against the secrecy havens and the facilitating law firms and corporate agents. This action could include the use of US criminal laws, including the powerful US money-laundering law which has “extraterritorial” applicability.

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