BREAKING NEWS: North Pole spokeself Mr. Elf E. McElfface contacted Export Law Blog with unsettling information. Apparently Donner and Blitzen are under the weather meaning that Santa will have to make his annual Christmas Eve run with six reindeer instead of his normal complement of eight. As readers will recall from the Press Release posted below back in 2016, OFAC’s rules were amended to permit Santa to visit both the United States and Cuba, provided that he went to Cuba first and only gave Cuban children EAR99 gifts. Otherwise, he would be landing in the United States with a sleigh containing toys in which Cuban children had an interest in violation of section 515.207(b) which was not waived by section 515.550(b).
Santa is concerned that requiring the reindeer to fly over the United States from the North Pole to Cuba and then back to the United States will unduly strain the six reindeer that will be making the run. Mr. McElfface pointed out that none of us, including the reindeer who are somewhere around three hundred years old (except for Rudolph who is 262 years old), are getting any younger. So, although Santa and the six healthy reindeer will do their best under these constraints, children in the United States should be prepared that this year there may be nothing (not even a lump of coal) under the tree for them. A GoFundMe campaign is in the works to purchase several tons of coal to be delivered to OFAC should any U.S. children be impacted by OFAC’s Cuba First rules for Santa.
FOR IMMEDIATE RELEASE
MEDIA CONTACT: Elf E. McElfface, firstname.lastname@example.org or (951) 262-3062
Santa’s Village, North Pole – Santa Claus today, on behalf of himself, Mrs. Claus and the 40,000 elfployees of the Santa Foundation, expressed his gratitude to the Office of Foreign Assets Control for its timely revision of its rules to grant Santa clear authority this year to visit children both in the United States and Cuba. For years, Santa’s efforts to bring holiday cheer to children of both countries has been thwarted by section 515.207 of the Cuba regulations which would prohibit Santa’s sleigh from landing in the United States while toys for Cuban children remained in the sleigh or in landing in the United States if those toys had been delivered to Cuban children first.
Today’s action waives these restrictions if Santa’s sleigh only carries items that would, if they were subject to the EAR, be EAR99 or controlled only for AT reasons. This ends the long struggle over whether teddy bears and other toys — which are not food, medicine, or personal communications devices — could only be delivered to Cuban children in wrapped parcels with the child’s name and address written on the outside and with the statement “GIFT—Export License Not Required” also marked on the parcel package. Notwithstanding the diligence and timely efforts of Santa’s elfployees, compliance with these requirements for each non-naughty child in Cuba has heretofore been impossible.
News of the OFAC announcement led to loud cheers and applause throughout Santa’s Village. Elf E. McElfface, Santa’s spokeself, wiped a tear of joy from his eye as he said to the elves in one of Santa’s workshops that he never believed that this would occur in his lifetime, which was saying a lot given that the average life expectancy of an elf on the North Pole is currently just over 500 years.
As Christmas approaches, Santa said that he was looking forward to this year’s delivery of toys and goodies to the nice children throughout the world more than ever before and reminded children everywhere, both in Cuba and the United States, that they could call his hotline at +1 (951) 262-3062 to leave their Christmas wishes and toy requests.
This press release may include predictions, estimates or other information that might be considered forward-looking. While these forward-looking statements represent the Santa Foundation’s current judgment on what the future holds, they are subject to risks and uncertainties that could cause actual results to differ materially. You are cautioned not to place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this press release. Please keep in mind that we are not obligating ourselves to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events.
So, if you and I went to the Haskell Free Library and Opera House, half of which is in Derby Line, Vermont, and the other half of which is in Stanstead, Québec, we would think of it as a clever gimmick designed to attract tourists to boring little towns with little else to offer. But, were you and I genius criminals, we would see it as a venue for the perfect crime.
Here’s why. If you’re from Canada, you park in Canada, and you can walk to the only entrance on the U.S. side without clearing Canadian or U.S customs. And it’s the same thing on the way out if you go straight back to your car in the parking lot in Canada. So, this brilliant criminal gang cooked up the plan to buy guns in the United States and then leave them in a backpack in the library’s bathroom. Then the Canadian gang member would later retrieve the guns and take them back to Canada without ever having to worry about U.S. or Canadian Customs. Brilliant! Foolproof! Genius!
Of course, never underestimate cops in funny hats and red coats who ride around on horses. They’re much smarter than they appear. A joint operation nabbed the Canadian charged with retrieving the gun-filled backpack from the library’s men’s room. That Canadian, Alex Vlachos, was just sentenced to 51 months in U.S. prison for his role in the transnational library smuggling scheme. He will be given credit for the 43 months he spent in U.S. prison after being extradited to the United States. Do you think he spent much time in the prison library?
BIS recently announced a settlement with Mohawk Global Logistics Corporation for $155,000 ($20,000 of which was suspended if Mohawk behaved itself during a probationary period). The penalty arose out of Mohawk’s export of items to institutions on the Entity List without the required license. In both instances, Mohawk screened against the list, but things went wrong.
One of the exports went to the University of Electronic Science and Technology of China (“UESTC”). Rather than screen against the full name of the university, Mohawk just screened the university’s commonly-used acronym — UESTC. As a result, it failed to flag the transaction. BIS, in the charging documents, noted that the address it had for UESTC was a “near-match” (whatever that means) to the address shown for UESTC on the Entity List. The take-away here, of course, is that exporters should screen entire names and addresses.
One of the other exports was to the All-Russian Scientific Research Institute of Experimental Physics otherwise known as VNIIEF (because the name in Russian — Всероссийский Научно-Исследовательский Институт Експериментальной Физики [Vserossiyskiy Nauchno-Issledovatelckiy Eksperimentalnoy Fiziki] — is abbreviated as ВНИИЕФ or VNIIEF when transliterated to the Roman alphabet — got that?). Now for this export the transliterated Roman abbreviation resulted in a hit, which, for some unexplained reason, the Mohawk export supervisor simply ignored.
A footnote dropped by BIS on VNIIEF reveals the perils of foreign language names and the Entity List. The initial listing was for the “All-Union” Scientific Research Institute of Experimental Physics. When this was updated to the correct “All-Russian” Scientific Research Institute of Experimental Physics in 2011, the common acronym VNIIEF (but not ARSIEP, which is, clearly, a better acronym) was added. But searches of VNIIEF, the common name of that entity, prior to 2011 would not have turned up anything. The moral of this story: don’t search abbreviations or acronyms.
The fine here seems high. The goods involved were EAR99 items and worth, in total, about $200,000. A license probably would have been granted if requested so there’s no palpable harm to national security here. And Mohawk tried to screen but just did not do a very good job of it. However, it’s not like they, like many exporters, did not even try to screen the recipients. Granted the inexplicable activity of the Mohawk supervisor in overriding the hit for VNIIEF would permit some aggravation of the penalty. And perhaps the failure to screen addresses when they had a “near match” of the correct address further annoyed BIS. But it seems to me here that BIS is fining incompetence rather than malice.
I wrote earlier this month on a State Department press release finding that Russia had used chemical weapons in the attacks on Sergei and Yulia Skirpal in the United Kingdom and that, accordingly, sanctions would be imposed on Russia pursuant to the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991 (the “CBW Act”). That act requires the imposition of five sanctions, although the President has the authority to waive any or all of the sanctions based on national security considerations. On Monday, the State Department published a notice in the Federal Register imposing those sanctions, effective immediately. As expected, the application of certain of the sanctions was waived completely or partially, and the ones given full effect are unlikely to be of much concern to Russia. As a result, it seems unlikely that Russia will find any reason to curtail its use of nerve agents around the world.
The first sanction required by the CBW Act is the termination of all foreign assistance to Russia under the Foreign Assistance Act of 1961. This sanctions was waived on national security grounds. It’s not clear why State bothered to use the national security waiver here, since Russia last received foreign assistance under the act in 2014 and none was scheduled to be provided in 2019 (or likely any time after that.)
The second required sanction is the termination of arms sales to Russia. State waived this sanction except “with respect to the issuance of licenses in support of government space cooperation and commercial space launches.” You’ve got to get supplies to the International Space Station somehow or other. And, of course, DDTC stopped granting license to export most items on the USML back in 2014.
The notice imposes the third required sanction completely and without waiver. It terminates all “foreign military financing for Russia under the Arms Export Control Act.” This can hardly be an earth-shaking development. When was the last time the US financed arms sales to Russia? World War II?
The fourth sanction — denial to Russia of “any credit, credit guarantees, or other financial assistance by any department, agency, or instrumentality of the United States Government, including the Export-Import Bank of the United States” — is also imposed without any waiver. Again, this is a sanction without any forseeable impact given the likelihood that little, if any, such federal financial assistance is being provided to Russia. The last transactions involving Russia financed by the EXIM Bank were in 2014.
The fifth required sanction under the CBW Act is the prohibition of “the export to Russia of any goods or technology” controlled on the Commerce Control List for NS reasons. The State Department notice here has a number of waivers that arguably are not very different from waiving the prohibition in its entirety.
Not surprisingly, the waiver includes any exports under license exception ENC. Remember that all encryption items, other than mass market items, are controlled for NS reasons, so this prohibition would have prohibited, say, exporting network equipment to Russia. How could we spy on them if we don’t sell them routers? Which is why, of course, Russia limits imports from the United States of items, such as routers, with encryption functionality. Other exceptions that survive the prohibition are GOV, RPL, BAG, TMP, TSU, APR, CIV, and AVS.
Beyond the waivers for exports under the aforementioned license exports, there are waivers for exports to wholly-owned U.S. subsidiaries, to commercial (i.e. non-governmental) enterprises, and to Russian nationals in the United States. Because Russia has always been subject to NS controls, these waived exports will still require, as they always have, licenses.
One final observation should be made on the meaning of “to Russia” in these sanctions. As noted the sanctions prohibit the provision of federal financial assistance “to Russia.” The reference in the fifth sanction to waivers for deemed exports to Russian nationals in the United States means that “to Russia” means to anyone in Russia and to any Russian outside Russia. So, if that a Russian granted asylum in the United States is one of the victims of a natural disaster, FEMA could not provide any financial relief to that Russian. That’ll teach Russia!
Last week the State Department changed its travel advisory on Cuba from “reconsider travel” to “exercise increased caution.” The “reconsider travel” warning was apparently based on the sonic attacks on diplomats in Cuba. The decision to change to “exercise increased caution” came after the State Department concluded that sonic attacks on private U.S. citizens was unlikely.
Still this business of travel warnings appear to have little, if any, relation to the actual safety of the destination. There are no warnings about the safety of travel to Belize even though between 2009 and 2016, 16 Americans were murdered in Belize. That put Belize as the seventh most dangerous country for Americans as measured by its death rate of 1.02 per 100,000 American tourists. During that same period, only two people were killed in Cuba giving it a death rate of 0.08 per 100,000 American tourists, approximately 12 times lower than that of Belize. Of course, given the U.S. homicide rate of 5.3 per 100,000, it’s probably safer to travel to Cuba, or even Belize, than to stay home in the United States.
A number of news sites commented on this change. But one of them, namely Newsweek, caught my eye when it decided to add this statement about travel to Cuba:
The only legal way for U.S. citizens to travel there is by applying to the Treasury Department’s Office of Foreign Assets Control for a license under one of 12 categories of travel.
Good grief. Is Google not working at Newsweek these days? Those twelve categories mentioned in the quote are for general licenses, you know, the ones that do not require a specific OFAC license application. In case the Newsweek reporter wanders by and reads this post, here is the link to the OFAC regulation noting that general licenses are available for each of those categories.
So, as you’ve heard before, don’t believe everything you read on the Internet unless, of course, you read it here.
The John McCain National Defense Authorization Act of 2018, in addition to passing the Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”), which reforms the CFIUS process, also enacted the Export Control Reform Act of 2018 (“ECRA”). That name is, I think, something of a misnomer given what the ECRA actually does. Perhaps a better name would have been the Export Administration Act Reenactment Act. After Congress in 1994 was unable to renew the Export Administration Act (“EAA”), which was the statutory authority for the parts of the U.S. export control regime covering dual use items and administered by the Commerce Department’s Bureau of Industry and Security (“BIS”), every U.S. President has resurrected the dead statute each year with an executive order under the International Emergency Economic Powers Act. With the passage of ECRA, that is one less executive order that the White House will need to issue each year.
Most of what ECRA does is provide the statutory authority for BIS that it previously had under the EAA and the yearly executive orders, although now with higher penalties for violations, which have been upped to $300,000 per violation. Why, after all, pass a law if you can’t raise the penalties? The only thing in ECRA which might be called a reform in a traditional sense of making life easier for regulated parties is section 1757 which says the President may authorize BIS to provide export counseling to exporters. This provision has generated so much excitement among exporters that U.S. exporters were popping bottles of Dom Perignon in celebration. Sorry, just kidding.
Rather than making life easier for exporters, the ECRA contains new controls certain to make exporters’ lives more difficult. (In addition to the higher penalties. Did I already mention those?) License applications will now have to explain why the export of an item will not have a negative impact on the U.S. defense industrial base. The law also mandates that BIS consider stopping exports of items on the Commerce Control List to countries that are subject to State Department arms embargoes. (Ahem, does anybody think that’s a dog whistle for restricting more exports to China?)
But the biggest change, and potential headache for exporters aside from higher penalties, is section 1758, which requires BIS, in cooperation with the Departments of State, Energy and Defense to identify and control “emerging and foundational technologies.” What on earth, you rightly wonder, is an emerging and foundational technology? The act only says that they are technologies that are “essential to the national security of the United States” but not already subject to export controls. Basically, since all export controls are based on national security, the only real definition of an emerging and foundational technology is something that is not already export controlled but should be. Your guess is as good as mine (and Congress’s) as to what these four agencies will decide to control under this new rubric.
Once the list of these new export controlled items is in force, then the ECRA requires as a minimum level of control that export of this technology to a “country subject to an embargo, including an arms embargo, imposed by the United States” would require a license. (Hello, China!) Embargo is not defined, so it’s not clear if a license would be required for these technologies with respect to a country to which the United States prohibited only a few types of goods or arms. A more significant issue is how this requirement, which applies to any “country” subject to an embargo would affect exports of emerging technologies to the Crimean territory, which is subject to a comprehensive embargo. This provision would impose the license requirement on either Russia or Ukraine depending on which country is considered to own Crimea and whether an embargo of a territory of a country means that the country is subject to an embargo.
The last thing to note about section 1758 is that the license requirement would not apply to what the Senate version referred to as “ordinary business transactions.” In the legislation as passed, these ordinary business transactions are described, for example, as
The sale or license of a finished item and the provision of associated technology if the United States person that is a party to the transaction generally makes the finished item and associated technology available to its customers, distributors, or resellers.
For those used to the EAR’s treatment of technology this provision seems odd and unnecessary. “Associated technology” generally made available to customers would be “published,” as defined in section 734.7 of the EAR, and thus not subject to the EAR or any license requirement, making this exception completely unnecessary. I suspect that the ECRA, which never defines “technology,” is using the term in a loose sense that would cover physical goods in addition to information. In any event, count on these exceptions to cause much confusion when the list of emerging and foundational technologies finally appears.
The Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”), just signed into law as part of the John McCain National Defense Authorization Act of 2018 (“NDAA”), will change significantly the way in which the Committee on Foreign Investment in the United States (“CFIUS”) reviews foreign investments. It expands the definition of transactions covered by the process, makes the review process mandatory for certain of these transactions, and imposes a filing fee equal to the lesser of $300,000 or one percent of the value of the transaction.
Prior to FIRRMA, the definition of a “covered transaction” set forth in section 721(a)(3) of the Defense Production Act was “any merger, acquisition, or takeover … by or with any foreign person which could result in foreign control of any person engaged in interstate commerce in the United States.” The new law expands this definition to cover certain real estate transactions. In addition, a covered transaction now includes certain investments, even if they do not result in foreign control, in U.S. businesses that are involved with “critical infrastructure,” that have “critical technologies,” or that maintain or collect sensitive personal data on U.S. citizens.
The real estate transactions that are covered are those that are part of an air or maritime port or are in close proximity to a military installation and that could result in an opportunity for foreign surveillance of that military installation. Exempted from these covered real estate transactions are purchases of single housing units or transactions in urbanized areas as defined by the Census Bureau.
The investments in critical infrastructure, critical technology companies, or companies with sensitive personal data that are covered are those that will give the foreign entity access to “material non-public technical information.” Additionally, these investments will be covered transactions if they will give the foreign entity membership on the board of directors, observer rights or nomination rights. Finally, a non-controlling investment transaction will be a covered transaction if it gives the foreign entity any involvement, other than through voting of shares, in “substantive decisionmaking” involving sensitive personal data, critical technologies or critical infrastructure.
Of particular interest to readers of this blog is the definition of critical technologies which includes most, but not all, items that are subject to export controls. All items on the United States Munitions List are critical technologies. Most items on the Commerce Control List are critical technologies with the exception of items that are only controlled for anti-terrorism (AT), Firearms Convention (FC), crime control (CC) or encryption (EI). So, companies that make handcuffs (ECCN 0A982) are fair targets for foreign acquisition without CFIUS review but those that make triethanolamine (ECCN 1C350.c.10) for shampoo and cosmetics are not. Critical technologies will also include “emerging and foundational technologies,” which is a new and yet unpopulated category of export-controlled items described in the Export Control Reform Act of 2018, which was also enacted as part of the NDAA.
FIRRMA creates a new filing called a “declaration” (as opposed to a “notice,” the term both before and after the new legislation for the voluntary filing that commences CFIUS review). The declaration, which is not subject to the $300,000 or 1% fee, is meant to be a short document and no more than 5 pages. And although declarations can be voluntarily filed, they will be mandatory where “a foreign government has, directly or indirectly, a substantial interest” in a covered transaction. Any party required to file the mandatory declaration may, at its own option, file a regular, and longer, notice of the transaction instead. Prior to FIRRMA, involvement by a foreign government would force a 45-day CFIUS investigation after the initial 30-day review period but would not require any mandatory filings.
In response to the declaration, CFIUS may require the filing of the regular written notice (which will require the payment of the new $300,000 or 1% fee), may initiate a unilateral investigation, or may inform the parties that no further review is required. It may also state that it cannot make any decision based on the declaration and merely advise the parties of their right to file the standard written notice. Rather perplexingly, the new law states that CFIUS “may not require a declaration to be submitted … with respect to a covered transaction more than 45 days before the completion of the transaction.” Given that one response to the declaration is the initiation of the normal CFIUS process, which can given the statutory time frame take more than 45 days, it is not clear what this time limit means or how it is enforced.
The time frame for the review process has also been changed by the new legislation. Prior to the new law, the CFIUS process would consist of a 30-day review process, an optional 45 day investigation after the review, and then 15 days for the President to act after the investigation process was completed. The new law extends the initial review period to 45 days.
During the consideration of the bill in the House and the Senate, the two chambers took different approaches to the issue of “countries of concern,” largely in response to concerns about Chinese investment resulting in China pilfering U.S. technology. The House took a naughty list approach, calling out China, Russia and Venezuela by name while the Senate took the nice list approach, putting NATO countries and major non-NATO allies, among others, on the nice list. The new law takes the Senate nice list approach, but give CFIUS the authority to decide, based on national security considerations, which countries are on the nice list. The effect of this determination is that non-controlling investments in real estate or involving critical infrastructure, critical technologies or sensitive personal data by companies from countries on the nice list would not be covered transactions.
According to a State Department press release released today, the United States has made a determination that Russia used novichok, a chemical warfare agent, in an attack on British soil and, as a result, the US will impose sanctions on Russia under the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991 (the “CBWC Act”), 22 U.S.C. § 5601 et seq. The text of these sanctions was not released. Instead, the text will be in a Federal Register notice expected to be published on or around August 22. The sanctions will be effective as of the date of the publication of that notice.
Because these sanctions are being imposed under the CBWC Act, we can already get a good idea of what these sanctions will be. The Act contemplates sanctions being imposed in two stages. The first stage, described in section 5605(a), sets forth the following sanctions, all of which are required to be imposed upon the offending country:
Termination of all foreign assistance
Termination of all arms sales
Termination of all foreign military financing
Denial of U.S. government credit or assistance
Termination of all exports of items controlled on the Commerce Control List for NS reasons
To be honest, none of these sanctions will have any significant impact on Russia. Arms sales to Russia have been prohibited for some time now. The country chart already has Russia controlled for both columns of NS controls. Of course, you could say that the new sanctions will mean that NS items will not be considered for licenses under any circumstances. But I don’t think licenses to export NS items to Russia are being readily granted now.
The second stage, if it happens, would take place on November 8 of this year unless the President determines that Russia is no longer using chemical or biological weapons. If that determination is not made, the President is required to impose three sanctions from a set of six possible sanctions. Those six possible sanctions are:
Opposing multilateral bank financial assistance to Russia
Prohibition of U.S. bank loans to the government of Russia
Prohibition of all exports of all U.S. goods and technology to Russia
Downgrading or suspending diplomatic relations with Russia
Termination of all service to and from the United States by Russian airlines
Whether the President will make the findings necessary to impose this second stage and which three of the six will be imposed is anyone’s guess, although I suspect that most people likely have a pretty good guess. The upcoming Federal Register notice will probably not even address the second stage sanctions. If the United States does in fact impose the three second stage sanctions, the best guess is probably that he will impose the least restrictive of those, i.e., opposing multilateral bank loans, prohibiting U.S. bank loans, and expelling a few more diplomats.
Just hours before Defense Distributed, pursuant to a Settlement Agreement with the Department of State’s Directorate of Defense Trade Controls, planned to upload plans to allow anyone who can afford a 3-D printer to make their own plastic guns, a federal district court in Seattle entered a preliminary injunction prohibiting the uploading of those plans. The preliminary injunction was entered at the request of attorneys general from eight states and the District of Columbia. In entering the preliminary injunction, the court stated that the plaintiffs were likely to prevail on the merits for two reasons — both, frankly, fairly questionable.
The first reason the court thought that plaintiffs would likely prevail is that, in the court’s view, the Settlement Agreement effectively removed items from the United States Munitions List (“USML”) without the prior thirty-day notice to Congress as required by section 38(f) of the Arms Export Control Act, 22 U.S.C. § 2278(f). As you probably recall, DDTC and BIS so far have only issued proposed rules. As noted early on in the export control process, State and Commerce indicated that they would provide the section 38(f) notices to Congress 30 days prior to publishing the final rule. At this point, only the proposed rules have been issued and the comment period ended on July 9, so it is likely that no section 38(f) notices have been sent to Congress as the court states. Certainly they would not have been sent thirty days prior to the execution of the Settlement Agreement on June 29 as the Court said should have been done.
The problem with this argument is that the Settlement Agreement did not remove Category I (or any other) items from the USML. The Settlement Agreement is quite clear that DDTC was not removing anything from the list but, rather, was granting an exemption under ITAR section 125.4(b)(13). Under that section, an export of technical data does not require a license if that data has been “approved for public release” by DDTC. All that DDTC did in the Settlement Agreement was approve public release of specified Defense Distributed plans making their export eligible for the exemption in section 125.4(b)(13). Nothing has been removed from the USML by the Settlement Agreement, and, thus, no section 38(f) notice was required as a result of the Settlement Agreement.
The other reason relied on by the district court in temporarily blocking the Settlement Agreement was the requirement in Executive Order 11958 that any removal of any item from the USML by DDTC would need the concurrence of the Department of Defense. The court stated:
When the President delegated his authority under the AECA to the Secretary of State, he also imposed a requirement that any changes in designations of defense articles and defense services subject to export control had to have the concurrence of the Secretary of Defense. There is no indication that the federal government followed the prescribed procedures
Apparently, the district court had not bothered to read the initial notice from the Department of Commerce on the proposed removal of Category I firearms from the United States Munitions List to the Commerce Control List. That notice clearly states:
The changes described in this proposed rule and in the State Department’s companion proposed rule on Categories I, II, and III of the USML are based on a review of those categories by the Department of Defense, which worked with the Departments of State and Commerce in preparing the amendments.
Oops. So even if the Settlement Agreement effectively removed certain Article I items from the USML, which it did not, the DOD had already agreed to that prior to the publication of the initial notices proposing removal of those items.
Prosecutions for violations of the Foreign Agents Registration Act (“FARA”) might kindly be thought of as press ops for prosecutors and catnip for reporters. And the recent indictment of Maria Butina certainly fits that description: Spies! Sex! Twitter exchanges! Red Sparrow! A duped “boyfriend”!!! Sell me the movie rights now.
On the other hand, economic sanctions prosecutions are boring. Specially Designated Nationals . . . yawn. The International Emergency Economic Powers Act . . . big yawn.
But the, ahem, sex appeal of a FARA case as opposed to an IEEPA case may well be a possible explanation for why Butina was indicted under FARA rather than under IEEPA for having performed services in the United States on behalf of a Russian SDN. It seems to me that the FARA case has some significant difficulties whereas the IEEPA case approaches being a slam dunk.
To simplify matters somewhat, to prosecute Butina for failing to register as a foreign agent, the government needs to prove that she engaged in political activities on behalf of a foreign person in the United States. The Act defines “political activities” as
any activity that the person engaging in believes will, or that the person intends to, in any way influence any agency or official of the Government of the United States or any section of the public within the United States with reference to formulating, adopting, or changing the domestic or foreign policies of the United States or with reference to the political or public interests, policies, or relations of a government of a foreign country or a foreign political party.
But the affidavit in support of the criminal complaint against Butina, which provides the most detailed statement of the government’s case, summarizes Butina’s activities in the United States as follows:
BUTINA’s efforts in the United States to promote the political interests of the Russian Federation were diverse and multifaceted, including BUTINA’s efforts to organize a series of”friendship and dialogue” dinners, some of which are believed to have taken place in the District of Columbia, as well as BUTINA’s attendance at two National Prayer Breakfasts in the District of Columbia.
It certainly seems to me that going to two prayer breakfasts and arranging dinners probably don’t constitute “political activities.” But perhaps the government thinks that if it can put a Russian in the dock and yell “Spy!” enough times, the jury won’t be bothered with such legal niceties as the proper outlines of “political activities” under the law.
On the other hand, the criminal complaint provides detailed information on Butina’s interactions with her handler in Moscow, who was not named, but is almost certainly Alexander Torshin. Torshin was placed on OFAC’s SDN List on April 6, 2018. To prove a violation of the Ukraine sanctions, it would only be necessary to show that Butina provided “funds, goods, or services by, to, or for the benefit of” Torshin. The definition of providing services is, of course, significantly broader than the definition of “political activities” in FARA.
Now although the actions in the criminal complaint pre-date Torshin’s designation in April 2018, there is no reason to believe that Butina was not continuing to act on Torshin’s behalf after his designation. The complaint details actions by Butina in cooperation with Torshin as late February 8, 2017. Of course, there is a chance that government has no evidence after the designation or has reasons not to reveal such evidence, but I still think that a sanctions case, if there were services performed after April 6, 2018, would be a much easier case to win.