Thursday, 1 January 2009

OFAC, banks, and Syria travel sanctions

A year ago today, my travelling companion and I were en route from Rome to Damascus. It took us all day to get there: Travel agencies in the USA aren't able to sell tickets on the direct flight on Syrian Arab Airlines, so we went way out of our way on the next-cheapest route on Qatar Airways, with a long layover in Doha. (That's me, bored, in the airport, in the photo here .)

We thought that awkward flight routing would be the end of our problems with USA sanctions against travel to Syria. Unfortunately, it was only the beginning.

We spent most of January 2008 in Syria -- longer than we had planned, even though it required a certain amount of extra time and effort to extend our visas after we arrived. Getting our original visas, while not difficult (as long as we could truthfully state that we had never visited "Occupied Palestine", and had nothing in our passports that might suggest that wasn't true) had required a detour through Washington, DC, to get our visas last thing before we left the USA. As is the practice with some other countries like China , visas to Syria for citizens of the USA are issued only in the USA.

Going to Syria was well worth the minor visa and flight hassles, in too many ways to list here. I don't know anyone who has been to Syria who does not count it among the most welcoming -- for me, perhaps the most welcoming -- countries they have ever visited. (There's a lot more I could say about the experience of travel in Syria, but that's not the point of this article.)

There's a catch, though, one that isn't mentioned in any of the major English-language guidebooks to Syria (from Bradt, Rough Guides, and Lonely Planet) and that our bank didn't warn us about, even when we told them in advance that we would be going to Syria.

Here's what you need to know, if you are planning to travel to Syria:

  • There are USA government economic sanctions against exports from the USA to Syria (not aganist imports from Syria to the USA), against the Syrian government , and against certain specified Syrian people and entities. Additional sanctions were imposed in early 2008.

  • Under these sanctions, it has been and remains legal for citizens and residents of the USA to travel to Syria as tourists, and to spend money in Syria. The USA sanctions related to Syria are very different from those against, for example, travel to Cuba.

  • But some banks and financial services providers in the USA have imposed their own private corporate sanctions, not disclosed to their customers, and not just against those entities designated by the government of the USA, but against anyone and everyone who travels to Syria, regardless of whether they do anything that violates the government sanctions.

  • Don't rely on your bank to disclose their practices. To avoid possible problems, get enough cash (US dollars or Euros) before you arrive in Syria to cover the costs of your stay. Don't use credit or ATM cards (virtually all of which are affiliated with US-based financial networks) in Syria. Don't visit Web sites of US-based banks or other financial institutions or make phone calls to such institutions while you are in Syria. None of this is required by law, but it might keep you away from serious problems such as those I had.

We were careful to avoid running afoul of the Syria sanctions administered by the Office of Foreign Assets Contol (OFAC) of the US Treasury. But since we had no way of knowing about the broader corporate sanctions policy of our bank -- our bank didn't tell us about it, even when we told them we would be travelling in Syria -- we got caught unawares.

Corporate sanctions may have affected us even before we arrived in Syria. Syrian Arab Airlines (IATA code "RB") used to be on the list of Specially Designated Nationals (SDN's) with whom "U.S. persons" (including green-card holders as well as U.S. citizens) are forbidden to do business, but is no longer on that list -- it's subject to a different rule that only forbids it from operating flights to or from the USA. But computerized reservation systems (even Amadeus, which is based in Europe and actually hosts all RB reservations) inhibit their subscribers in the USA from making reservations or issuing tickets for RB flights.

It's possible that the airline's bank, or the area bank in Syria for the IATA financial clearinghouse, is on the enbargoed list, so that payments for RB tickets would be routed through them in violation of the sanctions. Or it might be that the CRS's just don't want to bother to figure out which Syria-related transactions are prohibited, or haven't updated their restrictions since RB was taken off the embargoed list. (Perhaps we should have seen that as a foreshadowing of what other companies like banks might do, but we didn't.)

That left us uncertain whether we could legally buy tickets on RB from an office or agency outside the USA. No one would have prevented us, but we might have been subject to a fine if OFAC found out. (They have their ways, even for transactions abroad.) Not wanting to take an unnecessary risk, and not wanting to count on seats being available at the last minute, during a holiday travel period, we took another airline. But that was the least of our problems.

Why didn't we ask the US government exactly what was allowed? The last time I had to do that, as part of my job at Airtreks.com, it took almost a year to get an (unfavorable, arbitrary, and inexplicable, but precedent-setting) answer, which resulted in an involuntary government-mandated transfer of money from our travel agency and our clients to the supposedly embargoed entity! We didn't want to wait that long for permission for this trip. And OFAC's industry-specific informational brochure on sanctions relevant to travel and tourism has been listed as being updated for more than a year. So we relied on reading the OFAC rules, and my extensive experience working with them as they are applied to travel.

My travelling companion has already told the story of what happened, so I won't repeat it all here. The short version is that after we tried to log into the Charles Schwab Web site from a Syrian IP address, Schwab "froze" our investment and retirement accounts, and told Charles Schwab Bank (a separately chartered institution) to do likewise. While our accounts were "frozen", checks were dishonored, pre-authorized electronic payments weren't made (I nearly lost my health maintenance organization membership), deposits made by mail (and postmarked in the USA) were refused and returned, and we couldn't log in to the Schwab or Schwab Bank Web sites.

To make matters worse, the only initial "notice" we got was a Web site log-in failure message saying that Schwab needed to verify our ID, and giving only an 800 number as a contact. For all we knew, that just meant that the intrusive Syrian national censorware firewall was blocking secure HTTPS traffic to prevent communication that the government couldn't eavesdrop on. You can't [usually] call 800 numbers from outside the USA and Canada. [As reader and long-time expat Wendy Grossman corrects me, it is sometimes possible to call toll-free numbers from abroad. Whether it is possible to call a toll-free number in the USA depends on the country you are calling from, the telephone carrier you are using, and the specific number you are calling. But none worked for us from Syria, either from our mobile phone or from a landline at a hotel.] The VOIP service we'd been using to get around that restriction didn't work from Syria either. But that raised no red flags: We weren't able to access lots of Web sites and services from Syria. Aside from the national firewall, bandwidth was limited, several major undersea cables serving the region had broken that week, and the workstations in all the cybercafes we found were slow and heavily infected with viruses and malware.

After we had left Syria, we eventually found out that someone from Schwab had called our home phone (not the voicemail number we had given them, in advance, as our contact during our trip), and listened to the message saying, "Ruth and Edward are on sabbatical, and travelling around the world. We'll be back in San Francisco in July 2008. So please don't leave any messages here. If you need to reach us, call [another voicemail number]" Rather than follow those directions, they left a message at our home number asking us to call them at a different 800 number, and giving no clue as to why they had called or that our accounts had been "frozen".

Months later, Schwab e-mailed me a copy of a letter that they claimed had been sent by snail-mail to my home address. Our tenants never reported receiving such a letter, and it seems a strangely slow and likely ineffective way to notify someone of an urgent matter, when you believe (correctly, in this case) that they aren't at home but are travelling overseas. Significantly, the purported letter listed my Schwab brokerage and retirement (IRA) accounts, but referred merely to "Schwab" and made no mention of "Schwab Bank" or my Schwab Bank account number.

Through all of this -- (a) the message about ID verification rather than account blockage, (b) the 800 numbers that couldn't be called from abroad (when the reason for the message was that they thought we were in Syria), ( c ) the call to our home (where we specifically told them we weren't), (d) the snail-mail letter purportedly sent to our home (where they -- correctly -- believed we weren't), (e) the lack of notice from Schwab Bank (for most people, having your bank account blocked is more immediately problematic than not being able to make trades in your brokerage or retirement account), and (e) the complete lack of any attempt at e-mail notification (even though I have requested to receive my statements and notifications electronically) -- they did nothing that would be likely to give us actual notice of the restrictions they had unilaterally placed on our accounts, especially our bank accounts.

As one law professor and export law expert who wrote about our case recently noted, the fact that Schwab itself was able to "unfreeze" our accounts is fairly conclusive evidence that they did not believe that their action was required by OFAC sanctions or regulations: If our accounts had been blocked on the basis of OFAC regulations, Schwab and Schwab Bank would have been required to report that to OFAC, and we would have had to apply to OFAC to get our accounts unblocked.

While we were still in Syria, and when they "unfroze" our accounts shortly after we moved on to Turkey, Schwab apologized verbally and gave us nominal compensation as a "customer service gesture" for their mistake. But since we've gotten home and tried to get a coherent account of what happened, or get them to take action so that the same thing wouldn't happen to others of their customers, we've gotten the runaround. We've pointed out that whatever action was taken against us wasn't based on OFAC regulations, and we've asked to see the Schwab and Schwab Bank policies and disclosures (if there are any, which we increasingly doubt) related to those corporate practices. But we've received nothing, and we've still found nothing in Schwab's or Schwab Bank's customer disclosures, terms, and conditions, or on their Web sites, that even admits the existence of such corporate sanctions.

Schwab's OFAC compliance department refers us to customer service, and customer service refers us back to the OFAC department. Schwab Bank has given us no answer at all. The furthest we've gotten is this letter from Schwab's "Client Advocacy Team". These are the people who answer correspondence to "Ask Chuck", and supposedly Schwab's highest level of customer service escalation. Even if I could afford to sue, Schwab and Schwab Bank both have mandatory arbitration clauses in their contracts So unless I can identify some violation of Federal or Nevada (Schwab Bank is is nominally in Reno, for jurisdictional reasons) brokerage or banking rules to complain about to regulatory authorities, there's not much I can do except to warn you that your bank or financial institution might have similar, undisclosed practices.

Schwab and Schwab Bank had otherwise given us excellent service throughout our trip. They have relatively low fees for foreign-currency ATM withdrawals, and (with prompting) they rebate all fees charged by other banks, worldwide, for use of their ATM cards. We were able to manage all our transactions securely online (as long as we had our own computer or Internet-access device with a full browser) or by phone. For added security, they provide a tiny hardware security token, at no charge, that generates one-time Web sign-in passcodes. When we called them, they would call us back, promptly, at their expense, even when we were abroad. When one of us sent our ATM cards to the cleaners in a pants pocket and it was ruined by the heat of the dryer, they sent a replacement the next day by international Fedex, at no charge. (Another of our credit card issuers took weeks to send a replacement card by regular mail, and would only send it to an address in the USA.) Were it not for this issue, I would continue to recommend them. But I don't really feel I can afford to take the risk that my bank, in carrying out its own corporate foreign policy, will --without warning -- impose their own corporate sanctions and "freeze" all my money because I, as their customer, travel to a country they have decided they don't want me to visit.

I invite comments, suggestions, and feedback, particularly as to other travellers' experiences and other banks' and financial institutions' practices with respect to travel to Syria by their customers.

[More on Charles Schwab Bank: Say it ain't so, Chuck Schwab (7 March 2009)]

[Follow-up, and more comments from readers about their experiences with banks, ATM's, and credit cards in Syria: USA ends Syria travel 'warning' but keeps financial sanctions (23 February 2010)]

Link | Posted by Edward on Thursday, 1 January 2009, 11:22 (11:22 AM) | TrackBack (0)
Comments

I like this post..and the picture on top is funny...

Posted by: , 1 January 2009, 23:07 (11:07 PM)

How many hats and caps did you carry on your around the world travels??? Almost every photo you have another hat.

Posted by: Jan Becher, 3 January 2009, 08:07 ( 8:07 AM)

I like hats, and they are often inexpensive souvenirs. But they are bulky to carry around! I took only one hat with me throughout my trip: a wool beret that could be crushed into very little space in my luggage, but was still warm enough (with a scarf and a windbreaker with a hood) for winter in Europe. When I needed a sun hat, I bought one locally (in Bolivia, in Brazil, in Ethiopia, and again in Australia). Only the Bolivian "cowboy" hat from "Sombreros Sucre" (they have a Web site at http://www.sombrerossucre.com/ but I don't think they sell online) was nice enough to be worth finding a box for and mailing home: even including the postage, it cost less than US$20 for materials and workmanship comparable to a Stetson that would cost well over $100 in the USA.

Posted by: Edward Hasbrouck, 3 January 2009, 08:28 ( 8:28 AM)

Your pictures are magnificently clear. What kind of camera are you using? How did you like Syria?

Posted by: Sheri, 15 February 2009, 23:48 (11:48 PM)

Most of our pictures were taken with a Canon PowerShot SD1000. It's small enough to fit easily in any pocket, sturdy enough (with a metal body) not to need much of a case, has a compact universal (dual-voltage) charger and long battery life, and takes great pictures of stationary scenes in daylight. However, it's too small to easily hold steady for a long exposure without a tripod, takes too long from shutter press to exposure (like every digital camera I've ever used), and has only a very minimally useful flash (OK for closeups but inadequate to light indoor subjects more than a meter away).

I *loved* my time in Syria. It's a police state, and I wouldn't want to live there. (To be clear, it was *perfectly* safe -- we never felt threatened by the police, or anyone else, *especially* when people found out that we were from the USA.) The language barrier is high, and there is little or no infrastructure for independent foreign budget tourists. The extroardinary, universal, and unconditional welcome, however, more than made up for any of the minor hassles. It's poor but not starving, inexpensive, and has virtually no "Western" tourists. If you are going to visit one Arab country, I would put Syria at the top of your list. Just bring cash, not plastic, to pay for your entire stay.

Posted by: Edward Hasbrouck, 7 March 2009, 15:05 ( 3:05 PM)

Good information. I know of credit card companies completely deactivating cards if you make a charge outside of the US or approved countries, but this seems like a step beyond. And you did your due diligence by informing the bank before you left. They didn't uphold their end of the bargain.

Posted by: brian, 28 March 2009, 07:29 ( 7:29 AM)

Look. The USG sucks. Period. Proof in the pudding above. I don't believe in sanctions and in fact the USG needs sanctions placed upon its own terrorist ways. The USG foreign and domestic policies is terrorist of and in itself. Nobody should do business with any US banks or organizations. Reverse the heat. The time is overdue. Fail and fail again U.S.institutions on the behalf of the government legislating them. Enough said.

Posted by: us sucks, 17 May 2009, 01:53 ( 1:53 AM)

My lover lives in Syria and I am dying to go there but my parents will not let me. I know it's a beautiful place for two reasons and I am so jealous of you.

Posted by: buu, 29 June 2009, 12:51 (12:51 PM)

The banks face a lot of government pressure on this... one transaction can be a $250K fine for them if they violate the policies, not to mention all the corrective audits and self-flagellating exercises they have to perform to keep their regulators happy.

You must know, from reading, that the policies issued by the government are not easy to read let alone easy to understand. The simple fact is that it's expedient, and their relationship with the government matters more than their relationship to any client.

A lot of bankers (OK, a lot don't care, but some care a lot) really want to provide good service to individuals travelling to Iran or to Syria or other politically targeted countries, but are incredibly hampered by regulation, so end up by saying "never mind... it's not worth the hassle." I won't say it's right, but it's just what is.

Posted by: Mr_A, 16 March 2010, 16:06 ( 4:06 PM)

As a compliance officer at a bank who would be faced with such decisions as to what to do with your account, I can say that 99% would make the same call. The risk for the bank is too great. It goes well beyond OFAC - several banks are facing lawsuits here in the US by victims for allowing transactions to flow through them that supported terrorist acts (everyone picks on banks - why? - thats where the money is). Syria is after all designated by our government as a state sponsor of terrorism. It would be nice if banks were set up to handle every exigency that a customer might bring up, but that is just not realistic. Just like it is not realistic to expect that you would know that you should have asked the compliance officer at the bank what the ramifications of your trip would be. My first reaction (and I don't think I am alone here) would be to invite you to bank elsewhere just for asking the question. I hope you manned up and took care of the unpaid bills, fines and penalties and did not blame it on the bank protecting itself and its shareholders from your ignorance, but I suspect from the tone of your article you did not.

Posted by: Mr. J, 17 August 2010, 07:53 ( 7:53 AM)

Dear Mr. J. -- Thank you for your comment, which gives useful information for my readers about how banks are likely to view such incidents.

You say that, "it is not realistic to expect that you would know that you should have asked the compliance officer at the bank what the ramifications of your trip would be." In fact (a) I *did* contact my bank, both before my trip and several times during my trip before I arrived in Syria, and gave them the list of countries I would be visiting, and (b) even after my trip, my bank was never willing to identify the "compliance officer" or responsible person, or put me in touch with anyone who admitted to being the responsible person.

You also refer to my "ignorance", but in fact I researched the law carefully, to make sure that what I did was legal.

I was forced to absorb substantial costs, but only because I couldn't afford to sue the bank.

Posted by: Edward Hasbrouck, 17 August 2010, 08:08 ( 8:08 AM)

Great info dude,

I'm going to Syria in two days, and I think I have to re-check some points...

Thanks a lot!

Posted by: Alex, 3 September 2010, 10:59 (10:59 AM)

I remember that when I went to live in Syria for a year in 2003/2004 ATMs were a really new thing there. So I asked my bank whether they would work with my regular bank card. My bank didn't know.

They worked - which was good because otherwise very trip to the ATM would have required crossing the border into Lebanon (which was the usual practice the year before).

My visa card also worked in the ATM but it was really inconveniently located. So I used the Visa ATM locator on their website to find to my surprise that, according to Visa, there were zero ATMs that accepted Visa. Huh? Didn't I just do that? So used the form provided, informed them of their own ATM and they wrote back saying that they wouldn't deal with individual ATMs.

Right. But if a country only has like half a dozen ATMs wouldn't it be interesting to know beforehand that they did indeed have ATMs at all (unlike Iran, which doesn't have any ATMs that are connected to any international networks)

Posted by: Max Schneider, 28 April 2011, 04:37 ( 4:37 AM)

I am planning on going to Syria next year. I wonder if these sanctions are still in place. I will have to find out whether my bank in SA has any problem regarding this.

Posted by: Quinn Martin, 30 October 2011, 07:49 ( 7:49 AM)
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