Preface
This information was prepared in response to many requests from members of the American Friends of the Episcopal Church of Sudan (AFRECS) for an overview of the U.S. sanctions rules governing the transfer of U.S. funds, property, and personnel to the Episcopal Church of the Sudan (ECS). AFRECS is indebted to a practicing attorney and member who provided invaluable guidance and assistance in identifying and interpreting the laws and regulations that pertain to the transfer to money, equipment and personnel to the Episcopal Church and its affiliates in Sudan.
This is an overview. No one should undertake specific transactions to transfer money, equipment, or personnel to church organizations in Sudan without checking the detailed facts of the proposed transaction against these rules or consulting with a lawyer. Small changes in the facts can make a big difference in the legal result.
Violations of these rules can result in forfeiture of money or property sought to be transferred. Perhaps of greater concern, individuals and organizations making improper transfers may face substantial civil penalties, and in extreme cases, may be sent to prison.
Compliance with these rules is thus extremely important, both to make sure that efforts to support the church in Sudan are carried out effectively, and to assure that those involved do not place themselves in legal jeopardy. We have also discussed visa requirements, affecting entry into Sudan.
Background on Rules and Situation in Sudan.
Sudan remains subject to comprehensive United States economic sanctions, 31 C.F.R. Part 538 (2005), known as the Sudanese Sanctions Regulations (SSR). Unlike Iraq before the 2003 Gulf War, Sudan is not subject to comprehensive United Nations economic sanctions. Thus, other nations allow their nationals and businesses to engage in commerce in and with Sudan.
Even though a peace agreement was signed between the Sudanese People’s Liberation Army/Movement (SPLA/SPLM) and the Government of the Sudan (GOS) in January 2005, the SSR remain in place because of continuing U.S. concerns about reported Sudanese support for international terrorism, and the more recent human rights abuses and claimed genocide in western Sudan (Darfur). Thus, economic sanctions are likely to remain a factor in church work in Sudan for the foreseeable future.
Unfortunately, the rules impact church work by making it harder to transfer funds, equipment, and personnel into the Sudan, and by forbidding commercial development in the Sudan by Americans, wherever located.
The rules do allow those traveling into Sudan for church work and residing there for humanitarian or religious work to carry out transactions related to their travel and maintenance and ordinary living expenses. These efforts are still difficult because of the restrictions on fund transfers through banks indirectly owned or controlled by the Government of Sudan.
The rules apply throughout the territory of the Sudan, even those parts of southern Sudan under the military control of the SPLA. In any event, the nearly complete absence of financial infrastructure in southern Sudan probably means that even if the U.S. government exempted all or part of the area under SPLA control, there would be little practical difference.
SUMMARY OF SANCTIONS RULES
The Sudan Sanctions Regulations (SSR) are administered by the Office of Foreign Assets Control (OFAC) at the U.S. Department of the Treasury. OFAC’s website, which includes updates to these rules, is found at www.treas.gov/offices/enforcement/ofac/sanctions. The SSRs are also set forth at 31 C.F.R. Part 538, as that section is amended from time to time in the Federal Register. The most recent amendment occurred on June 13, 2005. 70 Fed. Reg. 34060.
In order to transfer money legally into Sudan for a church ministry in Sudan, the church entity making the transfer must either register with OFAC and obtain a registration number, or the receiving church entity must have done so. Without the registration number, banks are not supposed to make the transfer. Instead, they are supposed to freeze the money and report the transaction to OFAC, which may begin an enforcement investigation. As explained below, there are circumstances where a U.S. church entity with a registration number may partner with an individual or other NGO donor without a registration number, so that legitimate transfers can be made under the rules. Each such proposed transfer needs to be carefully reviewed in advance of the transfer to assure compliance with the rules. (See I. A. below)
The registration form for Non-Governmental Organizations (NGOs) doing humanitarian and religious work in Sudan is on OFAC’s website: http://www.treas.gov/offices/enforcement/ofac/sanctions/sanctguide-sudan.shtml. The registration process can take several months. (See I. A. below)
American entities and individuals (including churches) with registration numbers may only use a few banks in Sudan for financial transactions. This restriction arises because the SSRs forbid Americans to use any bank directly or indirectly owned or controlled by the Government of Sudan. Most banks in Sudan are subject to such government ownership or control, albeit indirect. (See I. B. below)
Sending American checks to Sudan will probably not work to transfer funds, but may trigger an enforcement investigation. Likewise, credit cards and American travelers checks will probably not work in Sudan outside Khartoum, and even there may not work.
There are “U.S. registered money transmitters,” legitimate businesses registered with the Treasury Department, which make such fund transfers in compliance with the law. they are also supposed to insist on the registration number for transfers to NGOs in Sudan. (See I. C. below)
Hand-carried cash transfers to Sudanese ministries or individuals are subject to U.S. currency reporting requirements if they are $10,000 or more. Those reports must be filed before the cash leaves the United States. In addition, regardless of the sum transferred such hand-carried donations must still comply with the SSR registration requirements if they are for non-governmental organizations (NGOs), regardless of the sum transferred. (See I. D. below)
Personal Remittances May Be Made Into Sudan, But Cannot Be Used for Charitable Transfers to Organizations. The revised rules strongly emphasize that a personal remittance must be for non-commercial purposes. (See I. E. below)
Commercial Imports and Exports and Related Transactions are Banned. Some churches have successfully fostered small businesses in other African countries, including some businesses where agricultural or other cooperatives make textile and other handicraft items for export to the United States to earn the workers a better living. The SSR in their current form make it impossible for any such business in Sudan to export to the United States. (See II. below)
Visa applications to enter Sudan often take months for Khartoum to process and they are not always granted. In recent times, entry into southern Sudanese areas controlled by the SPLM/SPLA has also required a “permit” issued by the SPLM, at their offices in either Kenya or Uganda. The practical as well as legal requirements for travel into Southern Sudan may change as implementation of the Peace Agreement moves forward. Those planning to travel to Sudan would be wise to check the travel advisory portion of the State Department website: http://travel.state.gov/travel/cis_pa_tw/tw/tw_934.htmlhttp://travel.state.gov/travel/cis_pa_tw/tw/tw_934.html. (See III.A. below)
The rules make clear that Americans doing religious or humanitarian work in Sudan may pay for the ordinary costs of traveling and living there, including lodging, food, transportation, and similar items. 31 C.F.R. § 538.211(d)(travel expenses), § 538.522 (ordinary living expenses for U.S. citizens who are permanent residents of Sudan). The rules allow Americans moving into Sudan to bring in their actual household goods and personal effects. Id. § 538.511 (accompanied baggage), § 538.518(a) (transfer of household and personal effects to Sudan). Certain restrictions apply to exports of computers and computer software.(See III.B. below)
Americans may donate tangible articles of food, clothing and medicine intended to relieve human suffering in the Sudan, and arrange for their shipment to Sudan. 31 C.F.R. § 538.211(b). Sudanese customs duties and other import clearance problems often make this approach unworkable, however, resulting in the effective loss of the tangible items. These losses can occur because of spoilage of the medicine during unrefrigerated delays, theft, seizures for lack of import permits, or prohibitive customs duties. (See III.C. below)
I. Fund Transfer Requirements.
A. All Fund Transfers from the United States to the Church in Sudan Must Be Made Using an OFAC Registration Number.
Put simply, no money may lawfully be transferred from an American church entity (or individual acting on its behalf) for humanitarian or religious purposes into Sudan unless either the transmitting U.S. church entity or receiving ECS entity has first obtained a non-governmental organization (NGO) registration number from OFAC. Several Episcopal Church of the United States America (ECUSA) entities have so registered and have obtained such registration numbers; in addition, at least one diocese in Sudan and the Sudan Council of Churches reportedly have such numbers.
This registration rule applies to hand-carried donations as well. Thus, donations of cash to the church in Sudan are supposed to be made either on behalf of an organization with a registration number, such as a U.S. parish, diocese, or specific ministry which has registered with OFAC, or to be made to an organization in Sudan with an OFAC registration number. OFAC has indicated that parishes with registration numbers may help sponsor church workers traveling to Sudan who wish to make such donations, even if the individuals in question are not regular members of that parish. In that case, however, the individual traveling should first obtain written authorization from the clergy of that parish or bishop of that diocese before undertaking to make such hand-carried donations. The church worker making the donations should also report to the sponsoring parish or diocese, in writing (which may include e-mail) about the donations actually made and the purposes to be served by these donations.
The OFAC registration number must accompany the paperwork making the transfer of money into Sudan. Otherwise, the transmitting U.S. bank may block the transaction and freeze the account.
The registration rules are set forth in sections 31 C.F.R. § 538.521 and § 501.801(c); the form can be found at http://www.treas.gov/offices/enforcement/ofac/sanctions/sanctguide-sudan.shtml.
The information sought by these registration requirements consists of:
· Organization name and contact information
· information about key staff, including citizenship and date of birth;
· identification of field offices and personnel at these offices,
· identification of subcontractors;
· explanation of sources of income;
· identification of financial institutions holding deposits for or extending credit to the organizations;
· the identity of accountants (if any) producing the organization’s financial statements;
· recent annual reports and annual filing with the local government (if applicable);
· names and addresses of organizations to which the applicant proposes to provide funding services, and material support;
· detailed description of the applicant organization’s humanitarian or religious activities and projects in the Sudan.
This information is reasonably geared to an American non-profit corporation, making regular reports to its donors and sponsors and making the appropriate corporate and tax filings. These requirements should also be relatively easy for an ECUSA church or diocese to meet.
B. U.S. Rules Limit the Choice of Banks Open to Americans for Sudanese Transactions and Restrict Parties to the Transaction.
Even with an OFAC registration number, American churches cannot use a corresponding bank in Sudan if the Government of Sudan owns that corresponding bank, directly or indirectly. The Sudanese government owns most Sudanese banks, often indirectly, even if their names suggest otherwise. Only a handful of legitimate banks operating in Sudan are viewed by OFAC as permissible channels for Americans to transfer money into Sudan for the church.
All transactions also need to be screened against the list of specially designated nationals (SDNs), as well as related lists, such as the list of specially designated global terrorists (SDGT). These lists are maintained online by OFAC and are supposed to be checked by the bank. The permissible banks for transfers into Sudan reportedly include the Sudanese-French bank, and some banks based in the Persian Gulf emirates.
If the bank determines that there is a forbidden party anywhere in the transaction, the transaction must be blocked. Because the lists in question often have very common names with little information to distinguish among them, there is a considerable potential for blocking such transactions, even though no denied party is in fact a participant in any capacity. The list is maintained on-line by OFAC and can be checked by anyone with web access.
Review of these complicated requirements shows why there are few U.S. banks willing to undertake such work. Such transfers to Sudan are a costly compliance headache with very little profit for the bank. The absence of corresponding banking relationships sometimes means that intermediate banks in England or other countries are required, sometimes requiring costly currency conversions to euros and increased transfer fees.
C. U.S. Registered Money Transmitting Businesses (non-banks) May Lawfully Make Fund Transfers to Sudan.
As explained below, it is lawful to make personal, non-commercial remittances to Sudan, such as remittances to family members. These remittances are often made on behalf of Sudanese nationals in the United States, such as refugees, who may be trying to help support families at home.
There are “U.S. registered money transmitters,” legitimate businesses registered with the Treasury Department, which make such fund transfers in compliance with the law. 31 C.F.R. § 538.528. Western Union is reportedly an example. These non-bank institutions generally impose significant charges on such transfers; they are also supposed to insist on the registration number for transfers to NGOs in Sudan. Some churches have successfully used these services for fund transfers to ECS church entities.
D. Hand-Carried Donations.
Donors often suggest hand-carrying donations of U.S. currency to avoid the compliance headaches of these rules. With respect to hand-carried donations to an ECS entity, however, a registration number is still needed, as explained above. Changes in the rules in June 2005 and recent consultations with OFAC have made it clear that the registration requirement applies to hand-carried donations. As explained above, OFAC has also made clear that sponsorship of a church worker traveling to Sudan by a parish or diocese with an OFAC registration number can satisfy the registration requirement. Both the sponsoring diocese or parish and the church worker should document such authorization and donations.
Those making hand-carried donations with funds hand-carried from the United States must comply with U.S. currency rules requiring the report of exports of currency (including negotiable instruments like travelers checks) of $10,000 or more. This requirement was imposed by Congress to fight money laundering and terrorism; in the present context, however, they make it even more burdensome to transfer funds for vital church work in Sudan.
The reporting requirements for currency exports arise from the Bank Secrecy Act, BSA, 31 U.S.C. § 5316 (2002), which provides that
a person . . . shall file a report . . . when the person . . . knowingly (1) transports, is about to transport, or has transported, monetary instruments of more than $10,000 at one time – (A) from a place in the United States to or through a place outside the United States . . .”
Failure to file this report is a felony; the currency involved may also be subject to forfeiture, and failure to report it may also subject the person failing to do so to substantial civil penalties.
The relevant form, FinCen105, is found on the Customs and Border Protection website, www.cpb.gov, at the questions and answers for travelers. If a church worker or anyone else plans to hand-carry more than $10,000 in currency or negotiable instruments (e.g. travelers checks) out of the United States, that form must be completed and submitted to Customs before leaving the United States. Even if the traveler has already filed the form with Customs before arriving at the airport,
the traveler should also carry copies of the completed form to file with Customs upon departure, particularly if one is uncertain as to whether the mailed form has actually been received by Customs prior to departure. (The form states that one need not file twice, but it would be wise to be prepared to do so, so as not to delay departure if Customs has questions.)
Travelers should not be splitting up the money among themselves in order to avoid the $10,000 reporting threshold. The case law makes clear that this step does NOT comply with the rules, and may leave the person making the export subject to criminal prosecution. Rather, travelers should err on the side of reporting, since there are serious criminal penalties for a violation.
Carrying a large sum of currency obviously risks loss of the cash by inadvertence, theft, or robbery. Given the widespread banditry noted in the State Department’s travel advisory, travelers carrying large amounts of cash should be especially vigilant. Put differently, an American church worker does the Sudanese church no good if he becomes a robbery victim.
Traveler’s checks from an American bank may be difficult to negotiate in Sudan, especially outside Khartoum, because of the sanctions rules and related restrictions. Similarly, based on current information, travelers should not expect that regular U.S. bank checks or U.S. credit cards will necessarily work in the Sudan, both because of these rules, and because of the limited financial infrastructure, especially outside Khartoum. That situation may be changing, but it would be unwise to rely on such funding sources without much more information suggesting that they will work reliably.
E. Personal Remittances May Be Made Into Sudan, But Cannot Be Used for Charitable Transfers to Organizations.
Until June 2005, OFAC allowed personal remittances to be sent into Sudan pursuant to two obscure portions of the rules. These allowed U.S. financial institutions to maintain accounts for Sudanese nationals and to make certain transfers to Sudan for such individuals without violating the SSR. The June 13, 2005 amendments clarified and revised these rules.
The revised rule makes clear that while personal remittances are authorized, that mechanism may not be used to make charitable donations to organizations or for commercial purposes. 31 C.F.R. § 538.528(a), 70 Fed. Reg. 34062 (June 13, 2005). Personal remittances can be made legitimately to people ordinarily resident in the Sudan or by them, as long as the individuals are not on the various published lists of specially designated nationals (SDNs), specially designated global terrorists (SDGTs), etc., maintained by OFAC.
Such remittances are ordinarily to support family members or for similar non-commercial purposes. The revised rules strongly emphasize that the personal remittance must be for non-commercial purposes.
II. Ban on Commercial Imports and Exports and Related Transactions.
Some churches have successfully fostered small businesses in other African countries, including some businesses where agricultural or other cooperatives make textile and other handicraft items for export to the United States to earn the workers a better living. The SSR in their current form make it impossible for any such business in Sudan to export to the United States.
The sanctions regulations contain a blanket prohibition on imports and exports of goods and services to and from Sudan, as well as related transportation and credit transactions. 31 C.F.R. §§ 538.201-211. Absent a specific license from OFAC, most imports from the Sudan into the United States are unlawful and subject to forfeiture. The rules also forbid transactions to arrange transportation and credit for such exports into the United States. Thus, until the rules change, any church plans for development must assume that no Sudanese exports will be allowed into the United States.
In addition, while there are U.S. investors who might invest in the development of southern Sudan, such commercial investment remains barred by the SSR without a specific license from OFAC. At present, the only significant commercial transactions allowed between the United States and Sudan are the purchase of gum Arabic from Sudan, pursuant to licenses from OFAC, and the sale of American agricultural commodities on a “cash and carry” basis, with very limited extensions of credit allowed. These U.S. exports are made pursuant to a specific statutory authorization.
U.S. citizens and permanent resident aliens must remember that the regulations also forbid them to participate in unlicensed commercial transactions, even while the individual is outside the United States. Thus, no matter how helpful an investment into southern Sudan may be, neither a U.S. citizen nor a permanent resident alien may broker such an investment from a third country without first obtaining an OFAC license.
III. Church Workers Traveling to and Locating in Sudan.
Church workers traveling to Sudan face a number of legal issues, both under the sanctions rules and other legal requirements. These include issues about visas, living and travel expenses, and gifts.
A. Visas and Travel Permits.
Visa applications to enter Sudan often take months for Khartoum to process and they are not always granted. In recent times, entry into southern Sudanese areas controlled by the SPLM/SPLA has also required a “permit” issued by the SPLM, at their offices in either Kenya or Uganda. The practical as well as legal requirements for travel into Southern Sudan may change as implementation of the Peace Agreement moves forward. Those planning to travel to Sudan would be wise to check the travel advisory portion of the State Department website: http://travel.state.gov/travel/cis_pa_tw/tw/tw_934.html.
If the Government of Sudan finds that a church worker has entered the country without a visa, that worker may be deported, expeled, fined, and/or imprisoned, since the individual will have entered the country without government authorization. Any property brought into the country or acquired there by such unauthorized entrants may be subject to forfeiture or confiscation. Additionally, the government may bar the worker from future entry into the country, and may bar others coming from the same church organization or entity.
If an American encounters difficulties and has entered the Sudan unlawfully, there may be very little the State Department can do to assist him. In addition, the travel warning notes that the U.S. Embassy is already quite limited in the consular assistance it can provide to any U.S. national in Sudan, regardless of the legality of that person’s entry into the country. It would nonetheless be wise to advise the U.S. embassy in Kenya or Uganda if one is entering southern Sudan, and wise to advise the U.S. embassy in Khartoum if one is entering Sudan through Khartoum or other territory controlled by the government of Sudan.
When the Government of Sudan reestablishes control over its southern borders any Americans who have entered without a visa risk encountering serious problems in leaving the country. These problems may include a bar on re-entry, a bar on entry for others from that organization, and possible prosecution of their Sudanese colleagues.
The Government of Sudan levies an exit tax on departing foreigners. At last report it was $20 at Khartoum airport.
B. Living and Travel Expenses While In Sudan.
For Americans locating in the Sudan for humanitarian work, the regulations allow the expenditure of funds to defray routine and necessary living expenses. The current regulations state:
U.S. persons are authorized to engage in transactions in Sudan ordinarily incident to the routine and necessary maintenance and other personal living expenses of U.S. citizens who reside on a permanent basis in Sudan.
31 C.F.R. § 538.522. Household effects may be transferred into the Sudan as part of relocation. Id. § 538.518(a). Thus, for example, rental of a home appears permissible under these rules, as well as purchase of food, utilities, transportation, and similar expenses.
The rules also make clear that transactions incidental to travel are permissible:
The prohibitions contained in this part do not apply to transactions ordinarily incident to travel to or from any country, including exportation or importation of accompanied baggage for personal use, maintenance within any country including payment of living expenses and acquisition of goods or services for personal use, and arrangement or facilitation of such travel including non-scheduled air, sea, or land voyages.
Id. § 538.211(d).
There is specific authorization for the purchase of informational materials or information, id. § 538.211(c), and to pay for communications, including telecommunications, § 538.211 (a). The traveler may bring back the informational materials into the United States. The exemption for informational materials is actually written into the authorizing statute; it does NOT include software that cannot be purchased at a retail store or freely downloaded on the Internet.
Exports of computers and computer software from the United States to Sudan, even laptops for personal use, need to be checked carefully before export to assure compliance with both the SSR and the Export Administration Regulations (EAR), 15 C.F.R. Parts 730-774 (2005), which are administered by the U.S. Commerce Department. Recent regulatory changes by Commerce have made it easier for NGO personnel to bring in such computers, but the rules need to be carefully examined before bringing or sending any such computer or software.
C. Tangible Humanitarian Donations and Personal Gifts.
Americans may, under the rules, donate tangible articles of food, clothing and medicine intended to relieve human suffering in Sudan, and arrange for their shipment to Sudan. 31 C.F.R. § 538.211(b). Sudanese customs duties and other import clearance problems often make this approach impractical and result in the effective loss of the tangible items. These losses result from spoilage of unrefrigerated medicine held on the loading dock pending resolution of issues concerning official and unofficial levies, seizures for lack of import permits, theft, or imposition of prohibitive customs duties.
These problems have arisen where medical teams have tried to bring in donated malaria medicine in their personal effects. The customs inspectors seized the medication, as lacking an import permit. Other problems have included the impoundment of containers of clothing and sale for unpaid (and exorbitant) customs duties, as well as customs duties of 100% imposed on books or other articles used in worship.
In the course of church work, it is often customary to bring gift items to hosts and colleagues. The sanctions rules provide that an individual may bring and receive gifts provided that:
the value of the gift is not more than $100; the goods are of a type and in quantities normally given as gifts between individuals; and the goods are not controlled for chemical and biological warfare, missile technology, national security or nuclear proliferation [reasons.]
31 C.F.R. § 538.510. The gift provision as written will allow most transfers of clothing, books, or art objects without problems under U.S. law, and allow their lawful importation into the United States when the church worker returns.
Gifts of money are governed by the personal remittance provision of the SSR as recently amended. Id. § 538.528(a). Such gifts are to individuals for their own use, and not for the support of the ministry in question. Thus, for example, a gift of money for the medical treatment of a clergyman’s family member would be a personal remittance. A gift to support a church clinic would need to be made pursuant to the correct OFAC registration number, even if it is handed to the bishop in cash.
V. Enforcement.
The U.S. government enforces the sanctions regulations (as well as currency export reporting regulations) through criminal prosecution, civil penalties, and seizures and forfeitures of property and money involved in violations. See 31 C.F.R. §§ 538.701 -704 (civil penalty procedures). Under the International Economic Emergency Powers Act (IEEPA), 50 U.S.C. §§ 1701-1706, civil penalties are up to $11,000 per violation. The criminal penalty for knowing and willful violations is up to ten years in prison and a $50,000 fine.
Review of published civil penalty information indicates that more than forty civil penalties have been levied by OFAC for violations of the Sudanese Sanctions Regulations in the past three years. There have also been criminal prosecutions for violations of these rules.
Churches are not immune from these rules, as shown by OFAC’s enforcement record under other U.S. sanctions rules. Published civil penalty information indicates that several church entities have been subject to civil penalties for violations of the rules enforcing the embargo on Cuba. For example, the Church Pension Fund apparently was assessed a penalty of nearly $75,000 for transfers to Cuba. In addition, criminal prosecutions have been brought against church officials who allegedly violated the Cuban embargo rules during the Mariel boatlift from Cuba. United States v. Frade, 707 F.2d 1387 (11th Cir. 1983). The Rev. (now Bishop) Leo Frade was acquitted by the court, but on grounds so narrow as to suggest that courts may be far less sympathetic to someone who willfully ignores or evades these rules, even for laudable church work.
Regardless of any enforcement action for penalties, failure to follow these rules may block needed financial support for ECS ministries, and hobble or cripple them.
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This discussion seeks to give an overview of the Sudanese Sanctions Regulations (SSR) and related American legal requirements affecting important church work in Sudan. Specific fund transfers, donations, and travel to Sudan need to be evaluated for compliance with these rules based on the specific facts of the proposed transfers, donations and travel, and not rely simply on this overview. Put differently, review of this overview is only a start towards compliance.
As has been explained, these rules create serious problems for church work in Sudan. So does the hostility of some elements within Sudanese society and the government. So does the extreme poverty of the areas the church tries to serve in southern Sudan. We need to remember that our Sudanese colleagues did not create these problems, but are rather trying to solve them.
As is clear from this memo, those committed to working with the ECS must deal flexibly with repeated delays, obstructions, and problems arising in that work. While these problems are often frustrating, they are a small dose of the difficult daily reality faced by our ECS colleagues. These problems challenge all of us in this ministry to be more patient, faithful, and persistent to overcome these problems and comply with the law. Our colleagues in Sudan, who face greater difficulties and challenges, deserve no less.