On April 22, 2012, the President signed a new Executive Order Blocking the Property and Suspending Entry into the United States of Certain Persons with Respect to Grave Human Rights Abuses by the Governments of Iran and Syria Via Information Technology (Executive Order 13606, dubbed the “GHRAVITY EO”). This measure targets persons who abuse Internet and telecommunications technology to monitor and disrupt free communication, enabling serious abuses of human rights. In so doing, it presents new compliance challenges to both US and non-US providers of Internet and telecommunications goods, services, and technology.
What does EO GHRAVITY prohibit?
The GHRAVITY EO blocks (freezes) the property and interests in property that are in the United States or come within the possession or control of any US person (including legal entities) of a short list of Syrian and Iranian persons determined to have been involved in the use of information and communications technology that facilitates computer or network disruption, monitoring, or tracking (“disruptive communications technology” for the purposes of this summary). The following persons were designated in the initial wave:
- Ali Mamluk (an individual, director of Syrian General Intelligence Directorate)
- Syrian General Intelligence Directorate
- Syriatel (Syrian telecommunications company that controls approximately 55 percent of the cell phone market)
- Islamic Revolutionary Guard Corps (Iranian military and intelligence entity)
- Iranian Ministry of Intelligence and Security
- Law Enforcement Forces of the Islamic Republic of Iran
- Datak Telecom (Iranian Internet service provider company)
With the exception of Datak Telecom, all persons designated for blocking by the GHRAVITY EO had already been designated by the Office of Foreign Assets Control (OFAC) as Specially Designated Nationals (SDNs). Thus, these designations should be viewed as an initial, largely symbolic, step in the Obama Administration’s new strategy of targeting the users and providers of disruptive communications technology.
More significant for industry, the GHRAVITY EO establishes a regulatory framework to impose sanctions against those who assist the Governments of Iran or Syria in their use of disruptive communications technology. Section 2(a) of the GHRAVITY EO provides OFAC with authority to block the assets of the persons determined, in consultation with the Department of State:
- to have operated, or to have directed the operation of, information and communications technology that facilitates computer or network disruption, monitoring, or tracking that could assist in or enable serious human rights abuses by or on behalf of the Government of Iran or the Government of Syria; or
- to have sold, leased, or otherwise provided, directly or indirectly, goods, services, or technology to Iran or Syria likely to be used to facilitate computer or network disruption, monitoring, or tracking that could assist in or enable serious human rights abuses by or on behalf of the Government of Iran or the Government of Syria. (emphasis added)
Significantly, the term “information and communications technology” used in sub-paragraph (A) is defined as:
any hardware, software, or other product or service primarily intended to fulfill or enable the function of information processing and communication by electronic means, including transmission and display, including via the Internet. (emphasis added)
Thus, the range of information and communications technology implicated is quite broad.
The term “information and communications technology” is not used in paragraph (B) at all, effectively creating an end-use prohibition and authorizing OFAC to block the assets of an offending supplier of anything “likely to be used” to facilitate disruptive communications technology. For example, OFAC could designate a supplier of computer screens if it were to determine those screens were likely to be used for such repressive purposes. Because the Executive Order contains no requirement that the goods be subject to the US Export Administration Regulations, using even 100 percent foreign-origin items in furtherance of disruptive communications technology could trigger SDN designation and blocking.
Also subject to blocking are the assets of persons who have materially assisted or provided support – financial, material, or technological – to the activities described in subparagraphs (A) and (B), as well as the assets of persons owned, controlled, or acting on behalf of the persons blocked under this Executive Order.
EO GHRAVITY presents compliance challenges to US and non-US telecommunications technology companies alike
Companies providing Internet and telecommunications technology solutions (in the broadest sense) should be particularly alert to the provisions of EO GHRAVITY and its implementation through future OFAC regulations.
On its face, EO GHRAVITY does not impose any additional restrictions on the export and re-export to Iran or Syria of US goods, services, or technology, or US persons’ participation in such exports and re-exports, because such transactions are already prohibited under existing law. However, the Executive Order creates an end-use test for purposes of designating entities and individuals for blocking: if a good, service, or technology is “likely to be used” for disrupting, monitoring or tracking electronic and telecommunications, its supplier may be designated for blocking.
This could create risks to US persons providing goods and technology for incorporation into foreign-made products in third countries, even if such foreign-made products would contain de minimis US content that would otherwise place them outside of US jurisdiction. In this sense, the prohibitions within EO GHRAVITY could supersede and limit certain exceptions within the Iranian Transactions Regulations. We will not know OFAC’s interpretation of this point until OFAC promulgates regulations or issues other guidance, which can be a slow process.
Further, non-US providers of “goods, services or technology” that are “likely to be used to facilitate computer or network disruption, monitoring, or tracking that could assist or enable serious human rights abuses” may now be designated and blocked. This is true even if the non-US providers are supplying wholly non-US-origin goods, services, or technology. Once blocked and added to the SDN list, US persons would be prohibited from engaging in any transaction involving such persons or companies unless authorized by OFAC.
An information or telecommunications solutions company blocked under EO GHRAVITY could see its entire US market base eliminated virtually overnight, and many non-US companies with significant operations involving the United States (particularly banks) would be likely to follow suit whether or not directly subject to US law.
This creates a need for multinational non-US Internet communications and telecommunications companies conducting business involving Syria and Iran to ensure their products, technology, or services are not “likely to be used” to facilitate disruptive communication technology. US companies with foreign subsidiaries which may sell goods, technology, or services not subject to US jurisdiction to Iran or Syria also need to ensure that their foreign subsidiaries do not supply disruptive communications technology to Iran or Syria. US banks, insurers, freight forwarders, and other intermediaries in global trade also need to be vigilant that their foreign affiliates do not involve any US persons in transactions related to Iran or Syria, and do not provide support or services for the direct or indirect provision of disruptive communications technology to the governments of Iran or Syria.
To avoid being blocked or penalized under the GHRAVITY sanctions, US and non-US companies alike should conduct due diligence and be alert to red flags indicating a transaction might assist the governments of Syria or Iran in obtaining disruptive communications technology. In its “Frequently Asked Questions” on the new sanctions, OFAC warns:
Those providing communications technology to Iran or Syria that has the potential to facilitate computer or network disruption, monitoring, or tracking should exercise great caution given Iran and Syria’s use of this technology to assist in the commission of serious human rights abuses” (emphasis added).
If there is any reason for concern about such a transaction, further investigation by experienced export controls and sanctions compliance professionals is recommended. If an Internet or telecommunications solutions company does not have sufficient visibility into its sales to ensure they would not violate the GHRAVITY sanctions, it should consider obtaining statements of assurances or end-user certificates from its customer, or other compliance safeguards to mitigate the risks.
- OFAC can and likely will designate additional Syrian and Iranian persons determined to have operated or directed the operation of disruptive communications technology.
- OFAC may also designate third-country persons who have assisted Syria and Iran in these activities. Such designations might even be predicated on conduct pre-dating the GHRAVITY EO. Whether OFAC exercises these powers will depend on the facts of the case as well as political realities. Even so, the specter of designation is a powerful lever over companies that depend on access to the US market.
- According to a report in the Washington Post, administration officials have indicated that the Executive Order could be expanded to include other countries using technology to repress dissent. The elephant in the room in this category is China, although political and economic realities surely would temper such action. North Korea seems a safer bet.
- OFAC eventually will promulgate regulations implementing the Executive Order. The ultimate significance of these sanctions will depend on how broadly OFAC interprets and enforces its mandate. As many of you know, OFAC’s regulations tend to be expansive but vague, giving OFAC wide berth to enforce US foreign policy directives.
EO GHRAVITY is an innovative sanctions measure capable of extending OFAC jurisdiction to new lengths to combat modern-day repression
EO GHRAVITY is potentially a powerful tool in the US Government’s strategy of confronting regimes that repress the human rights of their citizens. It is significant for its direct link between the use of disruptive communications technology and human rights abuses, and the assertion that such abusive use of technology threatens US national security and foreign policy interests.
EO GHRAVITY is also notable because the US Government targeted technology likely to be used for repressive disruption and surveillance of the Internet and telecommunications. Much of this technology might not be listed on the Commerce Control List – that is, it could fall under EAR99. Thus, EO GHRAVITY has effectively expanded crime controls beyond the listed Crime Control entries on the Commerce Control List in a manner similar to the Enhanced Proliferation Control Initiative (EPCI) controls. Specifically, it creates an end-use control for computer or network disruption, monitoring, or tracking end-uses in two countries – Iran and Syria (for now).
On the other hand, OFAC specifically stated that “these measures are not designed to prevent the provision of information and communications technology necessary to enable the Iranian and Syrian people to freely communicate with each other and the outside world.” This is consistent with OFAC’s issuance of general licenses for exportation of free publicly available software and services in March 2010 based on a policy of promotion of the freedom of Internet-and-telecommunications-network-based communications. Making these distinctions in practice, however, may be more difficult and requires a robust compliance system.
Further, the Executive Order continues the US Government’s trend toward targeted or smart sanctions. As in the Iran Sanctions Act and its progeny, however, EO GHRAVITY relies on the threat of downstream sanctions (secondary and tertiary boycotts) as the teeth behind the law. Thus, the scope of the sanctions is narrow but quite deep. This strategy has proven surprisingly effective in pressuring non-US financial institutions and petroleum concerns to reduce or sever their ties to Iran with relatively little backlash from US trading partners.
EO GHRAVITY and future OFAC actions under its authority may become an effective weapon in confronting a 21st century mode of repression – the surveillance and disruption of Internet and telecommunications based communications. In addition to sanctioning the specific persons and entities designated under it, this Executive Order should send a warning signal to other governments and entities that use or contemplate repression through such means.
At the same time, EO GHRAVITY creates significant additional compliance challenges for both US and non-US companies involved in the legitimate global trade in Internet and telecommunications products and technology. Fortunately, these challenges can be managed through knowledge of these new requirements and compliance program enhancements.