Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
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.
On February 15, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced additions to the Specially Designated Nationals List pursuant to Executive Order 13692. OFAC’s additions to the list include five current or former officials connected to former President Maduro, including the president of Venezuela’s state-owned oil company, which was sanctioned at the end of January. (See previous InfoBytes coverage here.) According to OFAC, the designated individuals have engaged in “significant corruption and fraud against the people of Venezuela,” and continue to assist the Maduro regime’s repression of Venezuelan people. 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 prohibited generally from dealing with any such property or interests.
See here for continuing InfoBytes coverage of actions related to Venezuela.
OFAC sanctions Iranian entities and individuals supporting intelligence gathering and cyber targeting of U.S. persons
On February 13, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against an Iran-based entity and four affiliated Iranian individuals for their alleged roles in providing support for the Islamic Revolutionary Guard Corps-Qods Force’s (IRGC-QF) efforts to recruit and collect intelligence from foreign attendees of international conferences, including facilitating contact between the IRGC-QF and U.S. persons. According to OFAC, the sanctions were issued pursuant to Executive Order 13224, which authorizes “the U.S. government to designate and block the assets of foreign individuals and entities that commit, or pose a significant risk of committing, acts of terrorism.” The same day, OFAC also sanctioned a separate Iran-based entity and six associated individuals, pursuant to Executive Order 13606, for their alleged involvement in the cyber targeting of current and former U.S. government and military personnel, in an effort to gain access to their computer systems and implant malware.
As a result of the OFAC sanctions, all property and interests in property belonging to the identified individuals and entities and subject to U.S. jurisdiction are blocked, and U.S. persons are generally prohibited from entering into transactions with the individuals and entities. Additionally, OFAC notes that “any foreign financial institution that knowingly facilitates a significant transaction or provides significant financial services for any of the persons designated today pursuant to E.O. 13224 or that are Iranian persons on OFAC’s list of Specially Designated Nationals and Blocked Persons . . . could be subject to U.S. correspondent account or payable-through sanctions.”
Visit here for additional recent InfoBytes coverage of actions related to Iran.
On February 11, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) amended two General Licenses (GL) and issued three revised FAQs regarding sanctions against Venezuela’s state-owned oil company pursuant to Executive Order 13850. GL 3C, which supersedes GL 3B, authorizes transactions related to, provision of financing for, and other dealings in certain bonds, provided the divestment or transfer (including the facilitation) of any holdings of these bonds are to a non-U.S. person. GL 9B, which supersedes GL 9A, authorizes certain transactions related to securities issued prior to August 25, 2017 by the oil company and its subsidiaries. Additionally, OFAC issued revised FAQs 650, 661, and 662 to provide additional clarification on expected levels of due diligence, as well as implications for U.S. and non-U.S. persons.
Visit here for additional InfoBytes coverage of actions related to Venezuela.
OFAC designates Turkish individual as “Foreign Sanctions Evader” in relation to settlement resolving alleged Iranian sanctions violations
On February 7, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $13,381 settlement with a Virginia-based corporation on behalf of its Turkish affiliate for six alleged violations of the Iranian Transactions and Sanctions Regulations (ITSR). The settlement resolves potential civil liability for the Turkish affiliate’s alleged practice of dispatching employees to Iran to fulfill service agreements and providing products, parts, and services while knowing that they were going to Iranian end-users. OFAC’s findings included that the Turkish affiliate willfully took steps to continue its Iranian business despite the Virginia corporation’s “extensive efforts to ensure [the affiliate] complied with the ITSR,” and “fraudulently certified” that no Iranian business was continuing.
In arriving at the settlement amount, OFAC considered the following aggravating factors: (i) the Turkish affiliate violated Iranian sanctions by “willfully provid[ing] goods and services to Iran”; (ii) the Turkish affiliate’s management was aware of and directed its employees’ actions; (iii) the Turkish affiliate’s management took actions to delete and falsify records in an attempt to conceal the apparent violations; and (iv) the violations economically benefitted Iran.
OFAC also considered numerous mitigating factors, including (i) neither the Virginia corporation nor the Turkish affiliate had received a penalty or finding of a violation in the five years prior to the transactions at issue; (ii) the Virginia corporation voluntarily self-disclosed the apparent violations and conducted an extensive internal investigation; and (iii) the Virginia corporation took “extensive preventative and remedial” measures.
In a concurrent action the same day, OFAC sanctioned a Turkish individual as a “Foreign Sanctions Evader,” pursuant to Executive Order 13608, for allegedly instructing the Turkish affiliate to violate the Iranian sanctions. According to OFAC, the sanctioned individual “regularly and fraudulently” certified to the Virginia corporation that no products were being sent to Iran. Additionally, OFAC claims that upon learning of the corporation’s internal investigation, the individual and other members of the Turkish affiliate’s management team attempted to conceal the apparent violations. As a result, all direct and indirect transactions involving the individual intended for the U.S., or provided by or to U.S. persons, are prohibited. Moreover, U.S. financial institutions are instructed to reject payments involving the identified individual.
View here for additional InfoBytes coverage of actions related to Iran.
On February 1, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) amended two General Licenses (GL) and issued two new FAQs regarding sanctions against Venezuela’s state-owned oil company pursuant to Executive Order 13850.
OFAC amended GL 3B to authorize transactions related to, provision of financing for, and other dealings in certain bonds. GL 9A, which supersedes GL 9, authorizes certain transactions related to securities issued prior to August 25, 2017 by the oil company and its subsidiaries. GL 9A and related FAQ 661 clarify that trades in the oil company’s securities placed prior to 4:00 pm EST on January 28, 2019, are generally authorized “to settle in the ordinary course, irrespective of whether the sale or transfer is to a non-U.S. person.”
Visit here for additional InfoBytes coverage of Venezuela actions.
On January 31, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $996,080 settlement with a California-based cosmetics company for 156 alleged violations of the North Korean Sanctions Regulations. According to OFAC, the settlement resolves potential civil liability for the company’s alleged involvement in the importation of goods from two Chinese suppliers containing materials sourced from North Korea.
In arriving at the settlement amount, OFAC considered the following as aggravating factors: (i) the alleged violations may have resulted in the North Korean government gaining control of U.S.-origin funds; (ii) the company is “large and commercially sophisticated [and] engages in a substantial volume of international trade”; and (iii) during the period of the alleged activity, the company’s compliance program, which was either non-existent or inadequate, failed to have “exercised sufficient supply chain due diligence” in its sourcing of products from a region posing a high risk to the effectiveness of the North Korean Sanctions Regulations.
OFAC also considered numerous mitigating factors, including (i) company personnel did not have actual knowledge of the suppliers’ conduct; (ii) the company has not received a penalty or finding of a violation in the five years prior to the transactions at issue; (iii) the alleged violations are not a large part of the company’s business; and (iv) the company voluntarily self-disclosed the apparent violations and cooperated with OFAC’s investigation. In addition, the company has adopted an enhanced compliance program to lower the risk of recurrence of similar conduct in the future.
Visit here for additional InfoBytes coverage on North Korea sanctions.
OFAC announces sanctions against Venezuela’s state-owned oil company; President Trump issues related Executive Order
On January 28, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against Venezuela’s state-owned oil company pursuant to Executive Order 13850 (E.O. 13850). According to OFAC, the designation follows a determination made by the Secretary of the Treasury that persons who operate in the oil sector of the Venezuelan economy are subject to sanctions pursuant to E.O. 13850, which was issued in order to “help prevent further diverting of Venezuela’s assets by Maduro and preserve these assets for the people of Venezuela.” As a result, all assets belonging to the company subject to U.S. jurisdiction are blocked, and U.S. persons generally are prohibited from dealing with the company. However, OFAC concurrently issued eight new General Licenses (GL), and amended GL 3, in order to authorize certain transactions with the company and identified subsidiaries, including those necessary to wind down operations or existing contracts. Specifically, GL 7 and GL 12 permit Venezuelan oil to be imported into the U.S. through April 28, provided any payments made to the company or its majority-owned subsidiaries (minus certain identified exceptions) be made into a blocked, interest-bearing account located in the U.S.
In a separate action the same day, President Trump issued an Executive Order to, among other things, expand the definition of “Government of Venezuela” to include the Central Bank of Venezuela, the state-owned oil company, and “any person who has acted or purported to act directly or indirectly for or on behalf of” the Government of Venezuela, including members of the Maduro regime. The E.O. is issued in conjunction with E.O.s 13692, 13808, 13827, 13835, and 13850. In connection with the issuance of the new E.O., OFAC published a FAQ explaining E.O.’s impact on Venezuela-related sanctions, which all remain in effect.
Visit here for additional InfoBytes coverage of Venezuela actions and E.O.s.
On January 27, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) lifted sanctions on three companies identified last April in connection with sanctions imposed against a Russian oligarch. (See previous InfoBytes coverage here on the full list of sanctioned Russian oligarchs and government officials.) Under the terms of removal from OFAC’s Specially Designated Nationals and Blocked Persons List (SDN List), the companies reduced the sanctioned Russian oligarch’s “direct and indirect shareholding stake in these companies and severed his control.” The majority of directors on the companies’ boards going forward will be independent directors and include U.S. and European persons with no ties to identified persons on the SDN List. OFAC reports that the companies “have also agreed to unprecedented transparency for Treasury into their operations by undertaking extensive, ongoing auditing, certification, and reporting requirements.” The sanctions imposed against the Russian oligarch remain in place.
Visit here for additional InfoBytes coverage on Ukraine/Russian sanctions.
On January 16, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced the issuance of Ukraine-related General Licenses (GL) 13J, 14E, and 16E, which modify the expiration dates of previous Ukraine-based general licenses for wind-down transactions for certain companies that otherwise would be prohibited by Ukraine-Related Sanctions Regulations.
GL 13J supersedes GL 13I 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 14E, which supersedes GL 14D, relates to specific wind-down activities involving a Russian aluminum producer sanctioned last April as previously covered by InfoBytes here. GL 16E supersedes GL 16D and authorizes 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.
- Michelle L. Rogers to discuss "Preparing for servicing exams in the current regulatory environment" at the Mortgage Bankers Association National Mortgage Servicing Conference & Expo
- Jon David D. Langlois to discuss "Regulatory risks of convenience fees" at the Mortgage Bankers Association National Mortgage Servicing Conference & Expo
- APPROVED Webcast: NMLS Annual Conference & Ombudsman Meeting: Review and recap
- Brandy A. Hood to discuss "Keeping your head above water in flood insurance compliance" at the Mortgage Bankers Association National Mortgage Servicing Conference & Expo
- Melissa Klimkiewicz to discuss "Servicing super session" at the Mortgage Bankers Association National Mortgage Servicing Conference & Expo
- Jessica L. Pollet to discuss "Law & compliance speedsmarts" at the American Financial Services Association Law & Compliance Symposium
- Daniel P. Stipano to discuss "Lessons learned from recent high profile enforcement actions" at the Florida International Bankers Association AML Compliance Conference
- Moorari K. Shah to provide "Regulatory update – California and beyond" at the National Equipment Finance Association Summit
- Sasha Leonhardt and John B. Williams to discuss "Privacy" at the National Association of Federally-Insured Credit Unions Spring Regulatory Compliance School
- Aaron C. Mahler to discuss "Regulation B/fair lending" at the National Association of Federally-Insured Credit Unions Spring Regulatory Compliance School
- Heidi M. Bauer to discuss "'So you want to form a joint venture' — Licensing strategies for successful JVs" at RESPRO26
- Jonice Gray Tucker to discuss "Small business & regulation: How fair lending has evolved & where are we heading?" at CBA Live
- Jonice Gray Tucker to to discuss "DC policy: Everything but the kitchen sink" at CBA Live
- Daniel P. Stipano to discuss "Lessons learned from ABLV and other major cases involving inadequate compliance oversight" at the ACAMS International AML & Financial Crime Conference
- Daniel P. Stipano to discuss "A year in the life of the CDD final rule: A first anniversary assessment" at the ACAMS International AML & Financial Crime Conference
- Moorari K. Shah to discuss "State regulatory and disclosures" at the Equipment Leasing and Finance Association Legal Forum
- Hank Asbill to discuss "Creative character evidence in criminal and civil trials" at the Litigation Counsel of America Spring Conference & Celebration of Fellows
- Hank Asbill to discuss "Pay no attention to the man behind the curtain: Addressing prosecutions driven by hidden actors" at the National Association of Criminal Defense Lawyers West Coast White Collar Conference
- Daniel P. Stipano to discuss "Keep off the grass: Mitigating the risks of banking marijuana-related businesses" at the ACAMS AML Risk Management Conference
- Daniel P. Stipano to discuss "Mid-year policy update" at the ACAMS AML Risk Management Conference
- Benjamin W. Hutten to discuss "Requirements for banking inherently high-risk relationships" at the Georgia Bankers Association BSA Experience Program