The Fine Art Startup Art.sy Has a Syrian Domain Name. Could It Be Violating U.S. Sanctions?

Opinions about events beyond our borders.
Aug. 13 2012 5:57 PM

What’s in a Name?

Art.sy, the much-hyped online startup, has a Syrian domain name. Could it be violating U.S. sanctions?

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But according to Clif Burns, a lawyer who works on economic sanctions matters in the Washington office of Bryan Cave LLP, the use of an intermediary to purchase the domain name makes little or no difference. “Even if you have a third party involved in getting the name for you, the people who have the right to dispense the domain name are the Syrian [government agencies]. And always entwined in economic sanctions is the Foreign Corrupt Practices Act. If you’re hiring someone to obtain the .sy, you have to make sure they’re not paying someone off in [the Syrian government] to get it. That’s why it’s a lot easier to deal with a domestic registrar.”

Burns says that Art.sy’s problem is not the buying of their name, which occurred before sanctions. He said:

The problem comes up on annual renewal. The sanctions that are in play here have been longer than a year [since Art.sy last renewed its domain name in April 2011], so that’s going to be trouble for everybody. There’s a general provision that would prohibit any financial transactions with the Syrian government. And that’s going to be in both OFAC rules and the executive order.

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But could this really be prosecuted? “Yes, if somebody made the payment and didn’t get a license, this could be prosecuted,” Burns says. “After all, they chase people for Cuban cigars.”

The selling of Internet domain names is big business. In 2000, Tuvalu, a Polynesian island nation, negotiated a contract leasing its Internet domain name “.tv” for $50 million, doubling the island’s GDP. A similar storm erupted in 2011 when the Libyan Internet domain suffix “.ly”—which hosted, among other sites, the popular URL shortening service bit.ly—was revealed to be issued by the General Post and Telecommunications Company, a Libyan state firm whose chairman was Muammar Qaddafi’s eldest son. (According to Burns, the Treasury Department issued licenses to some U.S. businesses during that period, allowing them to deal with third parties in order to maintain their .ly domain names.) Today, Libya is no longer under U.S. sanctions, and in any case bit.ly seems to have learned a lesson—it now redirects visitors to bitly.com.

As Burns suggests, the .sy suffix is not nearly as popular as .ly. I was unable to discover any other U.S.-based company that actually uses a Syrian domain suffix. Indeed, so unappealing is the .sy suffix that even popular commercial names that you imagine would have been bought years ago—such as sex.sy—are still available for sale from domain name sellers for relatively inexpensive amounts. (Sex.sy is available from 101domains.com for $389.)

But not from Marcaria. Shortly after I sent them an email asking for comment, Marcaria halted all sale of .sy domain names and stated that it does “not offer services for the .sy domain extension due to Syria being sanctioned by the U.S."

When asked whether Art.sy would consider changing their name—since continued renewal of it would violate sanctions—Art.sy ignored the question and stated simply that "as a startup with limited resources, we need to focus on building our company." None of the site's high-profile financial backers or advisers responded to inquiries about their possible involvement in the breaking of sanctions, with the exception of Thiel, whose spokesman merely confirmed that Thiel was "a passive investor" in the website. Requests to speak to Cleveland were referred to the company's representative.

In response to Slate's queries, the Treasury Department released a statement saying that:

E.O. 13582 generally prohibits U.S. persons from engaging in transactions with the entire Syrian government or its entities whether they are individually listed on the SDN list or not and also prohibits the exportation of services to Syria from the United States or by U.S. persons. Penalties for each violation could include OFAC civil penalties of up to $250k or twice the value of the transaction. DOJ may also pursue criminal penalties, up to $1m and 20 years in prison.

Art.sy is no doubt unfortunate to be in this situation. It presumably didn't intend to break sanctions and seemingly didn't even know that it might be violating sanctions until Slate approached it. Nevertheless, its use of a Syrian domain name has gone from being in questionable taste to being of questionable legality. Where this leaves Art.sy and its investors is uncertain. But what it does demonstrate is the shocking insularity of the dot.com and fine-art worlds. In seeking a cute and easily tweetable brand name, Art.sy ended up owning a bloodstained one.

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