Congressmen Call For Investigation of Two U.S. Companies for Possible Syrian Sanctions Violations
On November 10, 2011 several U.S. Congressmen sent letters to the Departments of State and Commerce urging them to investigate two U.S. IT companies, NetApp, Inc. and Blue Coat Systems, Inc. (“Blue Coat”), for possible violations of U.S. trade sanctions against Syria. The alleged violations stem from the exporting or re-exporting of the companies technology for use in internet surveillance projects by the Syrian government.
Generally speaking, the sanctions program in place against Syria prohibits U.S. persons from engaging in transactions with the Government of Syria and separately prohibits the exportation, reexportation, sale, or supply, directly or indirectly, by a United States person, wherever located, of any services to Syria. More information regarding the sanctions against Syria can be found on the Office of Foreign Assets Controls (“OFAC”) website here.
According to a recent Bloomberg report, Area SpA, an Italian surveillance company, is working with the Syrian government to create an internet surveillance system designed to “intercept and catalog virtually every e-mail that flows through the country.” As part of this massive project, it is alleged that Area SpA is using NetApps hardware and software technology to create four petabytes of storage for archiving e-mails. (By comparison, a database with four petabytes of storage space can store more than 15 times the amount of data stored in the online archives of the Library of Congress.) Additionally, it is alleged that the Syrian government has been using Blue Coats technology to censor and filter website content within Syria.
NetApp and Blue Coat have come under criticism not only because their activities may violate the sanctions scheme in place against Syria, but also because of concerns that the purpose of the Syrian surveillance programs is to suppress activists and dissidents opposed to the totalitarian Assad regime. Since March of 2011, the Syrian government has engaged in a brutal crackdown of dissidents resulting in the deaths of more than 3,000 Syrian citizens.
Both companies have denied wrongdoing. NetApp has stated that it is not aware of any of its products being sold to Syria. However, a November 4, 2011 Bloomberg report reported that the NetApp structured its contract in a way to avoid direct dealing with Syria or Area SpA. According to the report, NetApps Italian subsidiary sold its products to a authorized vendor which then re-sold NetApps technology to Area SpA for use in the Syrian surveillance program. Blue Coat has also denied violating U.S. sanctions claiming its products were illegally transferred to the Syrian government. Blue Coat has launched an internal investigation to determine how its web filtering technology was transferred to Syria.
This situation provides an important reminder to businesses which engage in international trade. Because of the breadth and complexity of these regulatory schemes, although businesses may not directly engage in trade with Syria, they may still unknowingly violate OFAC sanctions because of the nature of their relationships with foreign businesses who do. Examples of this can be read in our previous reports here and here. If you have questions pertaining to the OFAC sanctions on trade with Syria, the BSA, anti-money laundering compliance, or how to ensure that your business maintains regulatory compliance at both the state and federal levels, please contact us at firstname.lastname@example.org.