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Bureau of Industry and Security U.S. Department of Commerce Rick Shimon Special Agent In Charge Washington Field Office May 22, 2006 National Security A shared responsibility between Exporting Community and Law Enforcement Export Enforcement …task is to prevent the export of U.S. goods and technology that may be used by rogue states or terrorists to make chemical, biological or nuclear weapons What we can do for you… 1) We can assist you in avoiding illegal transactions. 2) We can assist you in avoiding negative publicity. 3) We can assist you in avoiding fines and prison 4) We can assist you in avoiding a situation where your company has to pay enormous costs for legal representation resulting from a criminal or administrative proceeding. Illinois Tool Works Inc. PAN AVIATION AVS INDUSTRIAL SCIENTIFIC CORPORATION HOUGHTON CHEMICAL INTERNATIONAL Bet Air ATT Communications OMEGA CCP SWISSCO JML FREIGHT ICS INC Why do we need controls on Dual-Use commodities? Top Cape Technologies Cape Town South Africa Owner: Asher Karni, (b 1954) • Israeli citizen -- MBA from Tel Aviv Univ • Major in the Israeli military (‘71 to ’85) • Emigrated to South Africa to work for a Jewish charity • Worked for Eagle Technology -- specializes in obtaining sophisticated sensitive equipment…terminated • Lived on Ocean View Drive, Cape Town SA in exclusive “Millionaires’ Row” Pakland PME Corporation Islamabad, Pakistan Owner: Humayun Khan • Supplies Pakistan’s conventional and nuclear weapons programs • Connected to Al Jammu and Kashmir Muslim Conference: Pakistani opposition party that supports extremist fighters in Kashmir, a disputed territory between Pakistan and India The Commodities Triggered Spark Gap • ECCN 3A228 • South Africa – No License Required • Pakistan and UAE – License Required • End Uses: – Lithotripsy Machines – Nuclear Device Triggering • $447 a piece The Commodities High Speed Oscilloscopes • ECCN 3A292 • South Africa – No License Required • Pakistan – License Required • End use – Electronics testing – Nuclear detonation testing The Crime… Players: Asher Karni and Humayun Khan Crime: Conspire to ship 200 nuclear trigger devices and numerous oscilloscopes to nuclear end users in Pakistan The Scheme… X $$ $$ $$ The rest of the story… Asher Karni • Arrested…Jan 04 • Guilty Plea…Aug 04 • Sentenced 3 years Fed Prison… Aug 05 – Old Sentencing Guidelines • “I felt shock and horror…how such a devout Jew could be supplying nuclear triggers for the nuclear weapons of a staunch Islamic country.” -- Michael Bagraim, Chairman of the South African Jewish Board of Deputies ASHER KARNI Inmate # 32338-016 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA Grand Jury INDICTMENT UNITED STATES OF AMERICA v. HUMAYUN A. KHAN, Defendant VIOLATIONS: 18 U.S.C. § 371 (Conspiracy) 50 U.S.C. (Export Admin Act) Export Enforcement Investigations and Sanctions • Criminal Investigations • Sanctions – Criminal fines and imprisonment – Civil fines and penalties – Denial of export privileges What Makes a Criminal Case? • Willfulness • Deliberate Ignorance (Self Blinding) • Corporate Knowledge Press Release on a Criminal Case: “ They did everything they could to evade (the) regulations There really was a problem with the corporate culture here – a failure to take responsibility – all the way up to the CEO. They made up documents, destroyed documents and made false statements.” - Julie Myers, Asst. Sec. Export Enforcement Criminal Penalties Patriot Act - Reauthorization Act of 2005 – Criminal penalty increases from 10 years to 20 years. – Criminal monetary penalties stay the same. – $250,000 fine for individuals and/or – 20 years imprisonment – $1 Million or five times the value of the exports involved for firms Administrative Sanctions • Strict Liability -- knowledge is not a prerequisite for imposition of an administrative penalty • Administrative violations must be proven by a preponderance of the evidence • 5 year statute of limitations administrative enforcement cases Administrative Penalties Patriot Act - Reauthorization Act of 2005 – Civil penalties increase from $10,000 to $50,000 per action – $120,000 for violations involving national security controlled items Denial of Export Privileges “…export privileges under the Export Administration Regulations (EAR) have been denied for 20 years for violating and conspiring to violate the EAR for the unauthorized export and attempted export of industrial commodities from the United States to Iran…” Standard Denial Order covers all items (commodities, technology, and software) subject to the EAR …there is no limit on how long we can deny export privileges. Proliferation Security Initiative Dec 2002: Spanish marines seize North Korean vessel So San – Thousands of bags of cement camouflaged the So San's more important cargo: 15 SCUD missiles bound for Yemen – Hidden cargo also included missiles, fuel cells and conventional explosive warheads Proliferation Security Initiative Mission: • Impede and stop shipments of WMD, their delivery systems (e.g., missiles), and related materials (dual-use goods) to and from proliferators • 60+ PSI supporting nations are focused on all forms of transport (maritime, air, and land shipments) Legal Authority: • Uses existing laws -- does not grant new authorities to participating states PSI - BBC China October 2003: German freighter, BBC China, intercepted in Mediterranean by U.S., Italian, and British agents. – U.S. Navy ship escorted BBC China to an Italian port – Agents seized thousands of Uranium-enrichment centrifuge parts destined for Libya – German company BBC Chartering and Logistics was very cooperative with investigators – Deal had been arranged by A.Q. Khan, the creator of Pakistan’s nuclear bomb Proliferation Security Initiative Where do you fit in to PSI? • All parts of the supply chain must be vigilant to identify ‘bad-actors’ in order to prevent the proliferation of WMD materials • Governments want to partner with industry to minimize financial impacts and disruptions “There is the easy way…or the hard way…” True or False? 1. BIS permits exporters to use the “When in Doubt Use NLR” rule to ensure shipments are not delayed? 2. You shouldn’t contact Export Enforcement to report your sleazy competitor, who always seems to secure those deals that you refuse to take, because nobody likes a snitch… True or False? 3. Stopping a customer in mid-sentence when he is discussing the end-user of a particular transaction is an example of Self-Blinding? 4. False statements on an SED may result in both criminal charges and administrative sanctions? 5. OEE Special Agents are willing and eager to meet with you and your company to discuss export requirements? A Shared Responsibility Keeping the most sensitive goods out of the most dangerous hands Report Suspicious Transactions Washington Field Office - (703) 487-9300 24 Hour Hot Line - (800) 424-2980 www.bis.doc.gov