September 18, 2016
By Anna Sayre, Legal Content Writer, SanctionsAlert.com
The US has one of the most complex national systems of sanctions enforcement in the world. This system derives from the number of agencies that are empowered to initiate actions against violators of US sanctions. Because each US agency maintains a different “Do Not Touch” list, organizations and individuals on the various lists may differ. Furthermore, the regulations issued by these various agencies often have areas of overlap. It is not uncommon for three or four US agencies to take action jointly, thus exposing a business to multiple investigations and varying penalties.
This article is the fifth of a series on the role US agencies play in sanctions enforcement. The series focuses on the role departments and agencies have in the enforcement, administration and investigation of sanctions violations.
Article five describes the role of the Department of Homeland Security (DHS). Though a relatively new Department, founded in 2002, the DHS plays a vital role in the investigation and detection of potential sanctions violations.
The main investigative arm of DHS is Homeland Security Investigations (HSI), which is one of two bureaus contained within US Immigration and Customs Enforcement (ICE). HSI investigates and gathers intelligence on national and international criminal activities that threaten the security of the “homeland”, or in other words, the United States. HSI special agents have broad authority to investigate a range of cross-border issues and criminal activity including financial crimes such as trade-based money laundering, bulk cash smuggling, as well as export and sanctions violations.
In 2012, HSBC admitted to money laundering and sanctions violations as a result of an HSI investigation. The investigation by HSI revealed several violations of law, including illegally conducting transactions on behalf of customers in Cuba, Iran, Libya, Sudan and Burma – all countries that were subject to sanctions enforced by the Department of Treasury’s Office of Foreign Assets Control (OFAC) at the time of the transactions. As a result, the global banking giant forfeited $1.26 billion by way of deferred prosecution agreement.
HSI also employs a special Counter-Proliferation Investigations (CPI) program that prevents sensitive US technologies and weapons from reaching terrorists, criminal organizations, and foreign adversaries. This program combats the trafficking and illegal export of:
- Weapons of mass destruction, for example nuclear weapons, and associated delivery systems;
- Conventional military weaponry, equipment and technology;
- Some so called “dual use” commodity or defense articles, items which can have both commercial and military applications;
- Firearms and ammunition; and
- Financial and business transactions with sanctioned or embargoed countries and terrorist organizations.
Another DHS arm, Customs and Border Protection (CBP), ensures that goods entering and leaving the US comply with sanctions and export regulations. CBP has the power to seize, forfeit, and enforce these sanctions and export regulations on behalf of various agencies, including the Department of State’s Directorate of Defense Trade Controls (DDTC), the Department of Commerce’s Bureau of Industry and Security (BIS), and OFAC. If CBP officials suspect that a regulated item, a “dual use” commodity or defense article has been exported or imported without a license, the goods are subject to detention and seizure under the rules of ITAR and the BIS’s Export Administration Regulations (EAR).
In 2013, KMT Group AB, a Swedish company, agreed to pay $125,000 on behalf of its US and German subsidiaries, by way of a settlement agreement for apparent violations of the Iranian Transactions and Sanctions Regulations (ITSR). KMT AD is a US-based manufacturer of high pressure water jetting pump units used for industrial pipe cleaning, surface preparation, hydrostatic testing, and hydro demolition, whilst its German subsidiary acts as a sales agent for the pumps.
KMT subsidiaries violated ITSR when they attempted to export nine pumps from the US to Hamburg, Germany, with knowledge or reason to know that the goods were intended specifically for re-exportation to Iran, a country subject to economic sanctions. The pumps were seized by DHS/CBP upon redelivery from Europe to the US.
Connection to other US agencies
Often times, mostly in relation to cases involving breaches of national security, DHS will collaborate with other US investigators and regulators. DHS works with its colleagues at the Department of Justice (DOJ)’s FBI to investigate international criminal activities, including breaches of international sanctions, and may also bring a sanctions violation to the attention of OFAC, as it did in the aforementioned HSBC case.
CBP uses its Cargo Systems Messaging Service (CSMS) to communicate news and updates on information gathered at the border or otherwise to other US agencies, as well as those who sign up for email alerts. From time to time, these messages contain useful information for importers and exporters about sanctions or export controls, published on other agencies’ websites. For example, on January 7, 2015, following US Treasury’s authorization of certain transactions with respect to the Crimea region of the Ukraine, CBP posted a notice to importers of any goods, services or technology into the US from Crimea. Due to sanctions imposed in 2014, people and entities involved in Russia’s annexation of Crimea are generally subject to asset freezes and other restrictive measures.
The Department of Commerce’s BIS and the Department of State’s DDTC, also work regularly with DHS/CBP to improve border detection and, in 1995, launched the Automated Export System (AES). AES is a joint venture between CBP, the Census, BIS, DDTC, and the export trade community. It is the central point through which export shipment data required by multiple agencies is filed electronically to Customs. AES is a nationwide system operational at all ports and for all methods of transportation and was designed to assure compliance with and enforcement of export laws.