Today, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) added a Hizballah financier and a Lebanon-based telecommunications company  to the Specially Designated Nations (SDN) List, pursuant to its counterterrorism designation authority. According to the OFAC press release announcing these designations,  Ali Youssef Charara has invested millions of dollars on behalf of Hizballah.

Charara’s telecommunications company, Spectrum Investment Group Holding SAL, purports to provide services in the Middle East, Africa and Europe. OFAC designated 23 individuals and entities last year based on their ties to Hizballah. In addition to the expected connections with Lebanon, Syria, and Iran, these 2015 designees are linked to Nigeria, Sierra Leone, Iraq, and most interestingly, China.

U.S. companies are prohibited from dealing with Charara,  his listed company,  and any other entities that he may own. Although entities that Charara may control are not designated as a matter of law, it would be highly advisable for U.S. companies to cease all dealings with any such entities. Foreign businesses, including financial institutions, that continue to deal with Charara are now exposed to designation. Inclusion on the SDN list results in complete exclusion from the U.S. financial system.

Hizballah International Financing Prevention Act of 2015

The United States recently imposed  so-called secondary-sanctions on Hizballah through Section 102 of the Hizballah International Financing Prevention Act of 2015. This section states:

The President shall prohibit or impose strict conditions on the opening or maintaining in the United States of a correspondent account or a payable-through account by a foreign financial institution that knowingly:

  • facilitates a transaction or transactions for Hizballah;
  • facilitates a significant transaction or transactions of a person on specified lists of specially designated nationals and blocked persons, property, and property interests for acting on behalf of or at the direction of, or being owned or controlled by, Hizballah;
  • engages in money laundering to carry out such an activity; or
  • facilitates a significant transaction or provides significant financial services to carry out such an activity.

To sever a foreign financial institution’s correspondent accounts in the United States based on services provided to a designated Hizballah financier, OFAC must demonstrate that the bank knowingly facilitated a significant financial transaction for that person.  The knowledge and significance requirements create an evidentiary burden that makes this law unlikely to be used extensively, similarly to the secondary-sanctions under the Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISADA).  Alternatively, OFAC could simply designate a foreign bank based on its provision of services, pursuant to its long established counterterrorism authority.