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?

Art.sy website.
Art.sy

Screenshot.

Art.sy is a slick, fine-art website that aims to digitize all of the world’s artworks. It uses artificial intelligence to guess people’s artistic preferences and guide them toward art that is similar and for sale (it earns a commission for every work bought through the site). The company calls itself a “Pandora for the fine art world,” and it has drawn millions of dollars in investment from such high profile ”angel” investors as Wendi Murdoch (wife of Rupert Murdoch), Eric Schmidt (Google’s executive chairman), Jack Dorsey (co-founder of Twitter), Peter Thiel, (co-founder of PayPal), and Dasha Zhukova (gallerist and girlfriend of Russian billionaire Roman Abramovich). It lists among its advisers the world’s pre-eminent art dealer, Larry Gagosian.

However, none of these boldface names appear to have asked how the company came upon its own name. Perhaps they should have, because “.sy” is the top-level domain suffix for the Syrian Arab Republic, and .sy domain names can only be purchased and renewed from a Syrian government entity run by a member of President Bashar al-Assad’s regime. By maintaining its undoubtedly cute domain name, Art.sy appears to have been breaking United States sanctions against the war-torn country.

According to an email from a company representative, Art.sy’s founder and CEO, the 25-year-old wunderkind Carter Cleveland, bought the .sy domain suffix because it “perfectly captures Art.sy's mission and accessible character, and is the shortest english spell-able domain that begins with the word 'art' making it perfect for sharing on social networks.” However, the need for a catchy brand name that would work well within the online worlds of Facebook and Twitter seems to have blinded Art.sy to an offline world of civil war and international politics.

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Domain names are delegated by domain name registrars. In 2009, when Cleveland bought the Art.sy domain name, the .sy suffix was managed by the Syrian Telecommunications Establishment (STE), a branch of the Syrian government overseen by Dr. Imad Al-Sabouni, the minister of communication and technology and a member of Assad’s Cabinet.

Cleveland used a third party to buy the name Art.sy. According to receipts provided by Art.sy, this was Marcaria.com, a seller of international domain names with headquarters in the British Virgin Islands. Marcaria uses a network of law firms spread across the world to buy up names from local domain name registrars. A Marcaria representative told me that to buy a .sy domain name, Art.sy would have had to sign over power of attorney to Marcaria’s legal proxy in Syria—the Karawani Law Firm of Damascus—who would have then sent the relevant funds to the STE. In early 2011, authority for Syrian domain name subscriptions was taken over by the National Agency for Network Services (NANS), another Syrian government entity, which directed that all registration and renewal payments be made to an account at the Commercial Bank of Syria.

Although the company’s money was going to fund a known dictator and U.S.-designated sponsor of terrorism, it was not, as yet, breaking any laws, because Syria was not yet under sanctions. However, with the rise of the Arab Spring and Assad’s bloody clampdowns on his population, on Aug. 10, 2011, the Office of Foreign Assets Control (OFAC) at the U.S. Treasury Department designated the Commercial Bank of Syria a Specially Designated National (SDN) and froze all property and assets of the bank. This prohibited U.S. persons from engaging in any transactions including payments, transfers, and “other dealings” in which the bank had an interest. A week later President Obama announced Executive Order 13582, which prohibited "investment in Syria by a United States person, wherever located."

Art.sy thought the timing of its purchase made it immune to these rulings—a position the company still maintains. They had renewed their domain name for two years through Marcaria for the sum of $800 in April 2011, well before sanctions were in place. However, NANS itself does not offer domain renewal for longer than one year at a time. To renew a domain name ending in .sy, a yearly subscription has to be paid. Although Art.sy thought they had renewed for two years, the NANS policy suggests that Marcaria was holding Art.sy’s money and paying the Karawani Law Firm (which was in turn paying NANS) on an annual basis. With annual subscription fees being paid to NANS through the Commercial Bank of Syria, Art.sy appears to have been, quite by accident, breaking both the OFAC ruling and the executive order.

Mark Dubowitz, a sanctions specialist who has advised both Congress and the Obama administration, admits it can be tough for U.S. companies that are trying to figure out the peculiarities and nuances of U.S. sanctions laws. But Dubowitz, who is also the executive director of the Washington-based Foundation for Defense of Democracies, has little sympathy for Art.sy’s situation: “If you’re doing business with Syria and you’ve got a legal counsel and if he’s worth the money you’re paying him, the first thing he should say is ‘Look, you’re doing business with Syria, we’ve got sanctions against Syria, I’ve got to get you a commerce license.’ ”

The Treasury Department issues specific licenses to U.S. companies that want to deal with countries under sanctions on a case-by-case basis. Art.sy does not claim to have been issued one.

“Clearly,” says Dubowitz, “every company should know that if you’re doing business with Syria or Iran, these are countries that are considered state sponsors of terror and are on the State Department list. ... To call your company by that name, it’s cute, but it’s not that cute when you consider the country whose name you are using is responsible for killing Americans. I think if you work in the technology sector or work in the internet you should know that buying a domain name is doing business with that country.”

Syria has been on the State Department’s list of state sponsors of terrorism since 1979.

In response to Slate’s request for comment, a representative for Art.sy said the company’s actions were lawful:

We have made no payment for our domain name rights since before the relevant sanction's effective date. We made a payment to Marcaria in April, 2011 with no awareness of, and accordingly no control over, the payment collection practices of NANS, or any transactions involving Marcaria and NANS.

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