Wednesday, July 28, 2010

OFAC, Cuba, and the United Nations Federal Credit Union

In a development that did not get very much attention, the Treasury's Office of Foreign Assets Control ("OFAC") announced on July 15 that the United Nations Federal Credit Union ("UNFCU") had paid $500,000 to the U.S. government to settle charges that it had violated the Cuban Assets Control Regulations ("CACR").

OFAC's description of its allegations is quite cryptic: "OFAC alleged that UNFCU dealt in property in which Cuba or a Cuban national had an interest in violation of the CACR by engaging in certain unauthorized financial transactions on behalf of its members/accountholders who were blocked Cuban nationals pursuant to the CACR. The transactions involved financial services that were routinely provided by UNFCU to its members."

Clif Burns, a Washington, DC lawyer, criticizes OFAC in his ExportLaw blog for not providing more detail.  He says that the lack of details "makes OFAC look foolish by suggesting the possibility that OFAC is penalizing the UNFCU for providing banking services to Cuban diplomats posted to the U.N."  He claims that, if this were the case, it would violate the U.N. Headquarters Agreement.

Mr. Burns speculates that the allegations may refer to banking services the UNFCU may be providing to Cuban nationals at U.N. facilities outside the United States.  If that is what the OFAC allegations concern, though, Burns argues that "the UNFCU’s extra-territorial application of U.S. sanctions could create a new problem for itself because these sanctions could well violate local laws that prohibit discrimination based on national origin."

Because OFAC did not provide much in the way of explanation, what exactly going on here is a bit of a puzzle.  Even though the Obama administration is inclined to be more flexible about the Cuban sanction regime than the Bush Administration, OFAC seems to be doing what it thinks it must, enforce the existing sanctions until such time as they are changed.

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