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  • OFAC sanctions Venezuela’s state gold mining company and its president for assisting Maduro regime

    Financial Crimes

    On March 19, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against Venezuela’s state-owned metals mining company and the company’s president pursuant to Executive Order 13850. According to OFAC, the designations target the “illicit gold operations that have continued to prop up the illegitimate regime of former President Nicolas Maduro.” As a result, all property and interests in property of the sanctioned entity and individual, and of any entities owned 50 percent or more by them, which are subject to U.S. jurisdiction are blocked and must be reported to OFAC. U.S. persons are also generally prohibited from entering into transactions with them. OFAC’s announcement referred to Financial Crimes Enforcement Network advisories FIN-2017-A006 and FIN-2017-A003 for further information concerning the efforts of Venezuelan government agencies and individuals to use the U.S. financial system and real estate market to launder corrupt proceeds.

    Visit here for continuing InfoBytes coverage of actions related to Venezuela.

    Financial Crimes Of Interest to Non-US Persons Venezuela Sanctions OFAC Department of Treasury

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  • White House releases 2020 budget proposal; key areas include appropriations and efforts to combat terrorist financing

    Federal Issues

    On March 11, the White House released its fiscal 2020 budget request, A Budget for a Better America. The budget was accompanied by texts entitled Major Savings and Reforms (MSR), which “contains detailed information on major savings and reform proposals”; Analytical Perspectives, which “contains analyses that are designed to highlight specified subject areas or provide other significant presentations of budget data that place the budget in perspective”; and an Appendix containing detailed supporting information. Funding through appropriations and efforts to combat terrorist financing remain key highlights carried over from last year. Notable takeaways of the 2020 budget proposal are as follows:

    CFPB. In the MSR’s “Restructure the Consumer Financial Protection Bureau” section, the budget revives a call to restructure the Bureau, and proposes legislative action to implement a two-year restructuring period, subject the CFPB to the congressional appropriations process starting in 2021, and “bring accountability” to the Bureau. Among other things, the proposed budget would cap the Federal Reserve’s transfers to the Bureau at $485 million in 2020.

    Financial Stability Oversight Council (FSOC). The 2020 budget proposal requests that Congress establish funding levels through annual appropriations bills for FSOC (which is comprised of the heads of the financial regulatory agencies and monitors risk to the U.S. financial system) and its independent research arm, the Office of Financial Research (OFR). Currently FSOC and OFR set their own budgets.

    Flood Insurance. The Credit and Insurance chapter of the budget’s Analytical Perspectives section discusses FEMA initiatives such as modifying the National Flood Insurance Program (NFIP) to become a simpler, more customer-focused program, and “doubling the number of properties covered by flood insurance (either the NFIP or private insurance) by 2022.” Separately, the budget proposal emphasizes that the administration believes that “flood insurance rates should reflect the risk homeowners face by living in flood zones.”

    Government Sponsored Enterprises. Noted within the MSR, the budget proposes doubling the guarantee fee charged by Fannie Mae and Freddie Mac to loan originators from 0.10 to 0.20 percentage points from 2020 through 2021. The proposal is designed to help “level the playing field for private lenders seeking to compete with the GSEs” and would generate an additional $32 billion over the 10-year budget window. 

    HUD. The budget proposes to eliminate funding for the Community Development Block Grant program, stating that “[s]tate and local governments are better equipped to address local community and economic development needs.” The proposal would continue to preserve access to homeownership opportunities for creditworthy borrowers through FHA and Ginnie Mae credit guarantees. The budget also requests $20 million above last year’s estimated level to help modernize FHA’s information technology systems and includes legislative proposals to “align FHA authorities with the needs of its lender enforcement program and limit FHA’s exposure to down-payment assistance practices.”

    SEC. As stated in both the budget proposal and the MSR, the budget again proposes to eliminate the SEC’s mandatory reserve fund and would require the SEC to request additional funds through the congressional appropriations process starting in 2021. According to the Appendix, the reserve fund is currently funded by collected registration fees and is not subject to appropriation or apportionment. Under the proposed budget, the registration fees would be deposited in the Treasury’s general fund.

    SIGTARP. As proposed in the MSR, the budget revives a plan that would reduce funding for the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) “commensurate with the wind-down of TARP programs.” According to the MSR, “Congress aligned the sunset of SIGTARP with the length of time that TARP funds or commitments are outstanding,” which, Treasury estimates, will be through 2023. The reduction reflects, among other things, that less than one percent of TARP investments remain outstanding.  This will mark the final time payments are expected to be made under the Home Affordable Modification Program.

    Student Loan Reform. As with the 2019 budget proposal, the 2020 proposed budget seeks to establish a single income-driven repayment plan that caps monthly payments at 12.5 percent of discretionary income. Furthermore, balances would be forgiven after a specific number of repayment years—15 for undergraduate debt, 30 for graduate. In doing so, the proposal would eliminate subsidized loans and the Public Service Loan Forgiveness program, auto-enroll “severely delinquent borrowers,” and create a process for borrowers to share income data for multiple years. With certain exceptions, these proposals will only apply to loans originated on or after July 1, 2020.

    Treasury Department. The budget states that combating terrorist financing, proliferation financing, and other types of illicit financing are a top priority for the administration, and $167 million has been requested for Treasury’s Office of Terrorism and Financial Intelligence to “continue its work safeguarding the financial system from abuse and combating other national security threats using economic tools.” The proposed budget also requests $125 million for the Financial Crimes Enforcement Network to administer the Bank Secrecy Act and its work to prevent the financing of terrorism, money laundering, and other financial crimes. An additional $18 million was proposed for strengthening and protecting Treasury’s IT systems.

    Federal Issues Trump Budget CFPB FSOC Flood Insurance National Flood Insurance Program GSE HUD SEC Student Lending Department of Treasury Of Interest to Non-US Persons Bank Secrecy Act FinCEN

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  • OFAC sanctions Russians for aggression against Ukraine

    Financial Crimes

    On March 15, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced its decision to sanction six Russian individuals and eight entities, pursuant to Executive Order 13661, for “playing a role in Russia’s unjustified attacks on Ukrainian naval vessels in the Kerch Strait, the purported annexation of Crimea, and backing of illegitimate separatist government elections in eastern Ukraine.” The action complements sanctions imposed the same day by the European Union and Canada as part of a coordinated effort “to counter Russia’s continued destabilizing behavior and malign activities.” As a result, all property and interests in property of the sanctioned individuals and entities, as well as any entities owned 50 percent or more by them, are blocked and U.S. persons are generally prohibited from entering into transactions with them.

    Visit here for continuing InfoBytes cover of actions related to Russia and Ukraine.

    Financial Crimes Of Interest to Non-US Persons Ukraine Sanctions Russia OFAC Department of Treasury

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  • OFAC identifies foreign financial institutions on new CAPTA list

    Financial Crimes

    On March 14, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced the introduction of the List of Foreign Financial Institutions Subject to Correspondent Account or Payable-Through Account Sanctions (CAPTA list). The CAPTA list will identify foreign financial institutions that are prohibited from opening or maintaining correspondent or payable-through accounts in the U.S. pursuant to sanctions including the Countering America's Adversaries Through Sanctions Act, North Korea Sanctions Regulations, Iranian Financial Sanctions Regulations, and the Hizballah International Financing Prevention Act of 2015. Certain regulations have also been amended to reflect the issuance of the new list. OFAC notes that the CAPTA list, which is separate from the Specially Designated Nationals List, will identify the specific prohibitions or strict conditions to which foreign financial institutions are subject.

    Financial Crimes Of Interest to Non-US Persons OFAC Department of Treasury Sanctions

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  • OFAC sanctions Russian bank for providing assistance to Venezuelan oil company

    Financial Crimes

    On March 11, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against a Moscow-based bank for materially assisting Venezuela’s state-owned oil company, which was sanctioned earlier this year by OFAC pursuant to Executive Order 13850. (See previous InfoBytes coverage here.) The bank, which is jointly owned by Russian and Venezuelan state-owned companies, “materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of,” the previously sanctioned entity. According to OFAC, the bank was also identified as “the primary international financial institution willing to finance” the Venezuelan cryptocurrency, Petro, which was allegedly created to help former President Maduro’s regime circumvent U.S. sanctions. As a result, any assets or interests therein belonging to the bank, as well as any entities directly or indirectly owned 50 percent or more by the bank that are subject to U.S. jurisdiction are blocked and must be reported to OFAC. U.S. persons are also prohibited generally from dealing with any such property or interests.

    Visit here for continuing InfoBytes coverage of actions related to Venezuela.

    Financial Crimes Of Interest to Non-US Persons Venezuela Sanctions OFAC Department of Treasury

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  • OFAC issues continued extension of Ukraine-related General Licenses

    Financial Crimes

    On March 6, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced the issuance of Ukraine-related General Licenses (GL) 13K and 15E, which extend the expiration date of previous Ukraine-based GLs to July 6, 2019 for wind-down transactions for certain companies that otherwise would be prohibited by Ukraine-Related Sanctions Regulations.

    GL 13K supersedes GL 13J and authorizes, among other things, activities and transactions “ordinarily incident and necessary” for (i) the divestiture of the holdings of specified blocked persons to a non-U.S. person; and (ii) the facilitation of transfers of debt, equity, or other holdings involving specified blocked persons to a non-U.S. person. GL 15E, which supersedes GL 15D, relates to permissible activities with the designated company and its subsidiaries, and applies to the maintenance and wind-down of operations, contracts, and agreements that were effective prior to April 6, 2018.

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    Financial Crimes Department of Treasury OFAC Of Interest to Non-US Persons Ukraine Sanctions

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  • OFAC sanctions Venezuelan security officials connected to Maduro regime

    Financial Crimes

    On March 1, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against six Venezuelan security officials connected to former President Maduro’s “illegitimate regime.” According to OFAC, the sanctions, taken pursuant to Executive Order 13692, designate the individuals in response to actions taken by groups under their control that have obstructed the delivery of humanitarian aid. As a result, any assets or interests therein belonging to the identified individuals, as well as any entities directly or indirectly owned 50 percent or more by such individuals that are subject to U.S. jurisdiction are blocked and must be reported to OFAC. U.S. persons are also prohibited generally from dealing with any such property or interests. OFAC also refers financial institutions to Financial Crimes Enforcement Network advisories FIN-2017-A006 and FIN-2017-A003 for further information concerning the use of the U.S. financial system and real estate market by Venezuelan government agencies and individuals to launder corrupt proceeds.

    See here for continuing InfoBytes coverage of actions related to Venezuela.

    Financial Crimes OFAC Department of Treasury Venezuela Sanctions Of Interest to Non-US Persons

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  • OFAC sanctions Venezuelan governors aligned with Maduro regime

    Financial Crimes

    On February 25, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against four Venezuelan governors connected to former President Maduro’s “illegitimate regime.” According to OFAC, the sanctions, taken pursuant to Executive Order 13692, designate the individuals for engaging in “endemic corruption” and allegedly “blocking the delivery of critical humanitarian aid.” As a result, any assets or interests therein belonging to the identified individuals—along with any entities directly or indirectly owned 50 percent or more by such individuals—subject to U.S. jurisdiction are blocked and must be reported to OFAC. U.S. persons are also prohibited generally from dealing with any such property or interests. In addition, OFAC refers financial institutions to Financial Crimes Enforcement Network advisories FIN-2017-A006 and FIN-2017-A003 for further information concerning the use of the U.S. financial system and real estate market by Venezuelan government agencies and individuals to launder corrupt proceeds.

    See here for continuing InfoBytes coverage of actions related to Venezuela.

    Financial Crimes Department of Treasury OFAC Of Interest to Non-US Persons Venezuela Sanctions FinCEN

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  • OFAC reaches settlement with Connecticut company resolving Iranian sanctions violations

    Financial Crimes

    On February 21, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $506,250 settlement with a Connecticut-based company for five alleged violations of the Iranian Transactions and Sanctions Regulations (ITSR). The settlement resolves potential civil liability for the company’s alleged transactions valued at over $14 million involving the purchase of Iranian-origin cement clinker from a supplier in the United Arab Emirates who misrepresented to the company that the material was not subject to U.S. economic sanctions on Iran.

    In arriving at the settlement amount, OFAC considered various aggravating factors, and noted, among that things, that while the company exercised “limited due diligence,” it failed to “substantively address the U.S. sanctions prohibitions in place with respect to Iran despite contemporaneous risk indicators” and “failed to have in place at the time of the alleged violations a compliance program “commensurate with its level of risk.”

    OFAC also considered numerous mitigating factors, including (i) the company has not received a penalty or finding of a violation in the five years prior to the transactions at issue; (ii) the company qualifies as a small business entity under U.S. Small Business Administration standards; (iii) the company took extensive preventative and remedial measures; and (iv) the company cooperated with OFAC’s investigation. OFAC further stressed the importance of implementing risk-based compliance measures when “engaging in transactions involving exposure to jurisdictions or persons implicated by U.S. sanctions.” 

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    Financial Crimes OFAC Department of Treasury Iran Sanctions Of Interest to Non-US Persons

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  • OFAC reaches settlement with chemical manufacturer resolving Cuban sanctions violations

    Financial Crimes

    On February 14, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $5.5 million settlement with a German chemical manufacturer for 304 alleged violations of the Cuban Assets Control Regulations (CACR). According to OFAC, the settlement resolves the manufacturer’s alleged involvement in fulfilling Cuban orders for chemical reagents on 304 invoices. Prior to and upon acquiring the manufacturer, an Illinois-based company sent warnings to the manufacturer that all Cuban transactions must be ceased, along with guidelines for complying with U.S. sanctions. OFAC noted, however, that the manufacturer designed and implemented a system to conceal its on-going transactions, engaged an external logistics company to handle shipping documents and declarations, and conducted training sessions for staff to ensure the system was concealed from the Illinois company.

    In arriving at the settlement amount, OFAC considered the following as aggravating factors: (i) the willful conduct of the manufacturer’s management; (ii) the utilization of written procedures to “engage in a pattern of conduct in violation of the CACR”; (iii) the number of transactions over an extended period of time “caused significant harm to the sanctions program objective of maintaining a comprehensive embargo on Cuba”; and (iv) the sophistication and revenue stream of the manufacturer, and the fact that it is a subsidiary of a large, international company.

    OFAC also considered several mitigating factors, including the Illinois company’s cooperation with OFAC, voluntary self-disclosure, and execution of a tolling agreement on behalf of the manufacturer. OFAC further stressed the importance of implementing risk-based controls and due-diligence procedures to ensure subsidiaries comply with OFAC sanction obligations.

    Visit here for additional InfoBytes coverage on Cuban sanctions.

    Financial Crimes OFAC Department of Treasury Cuba Sanctions Of Interest to Non-US Persons Settlement

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