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  • White House orders DOJ and CFPB to better protect citizens’ sensitive personal data

    Privacy, Cyber Risk & Data Security

    On March 1, the White House released Executive Order 14117 (E.O.) titled “Preventing Access to Americans’ Bulk Sensitive Personal Data and United States Government-Related Data by Countries of Concern” to issue safeguards against Americans’ private information. The E.O. was preceded by the White House’s Fact Sheet which included provisions to protect Americans’ data on their genomic and biometric information, personal health, geolocation, finances, among others. The E.O. shared how this data can be used by nefarious actors such as foreign intelligence services or companies and could enable privacy violations. Under the E.O., President Biden ordered several agencies to act but primarily called on the DOJ. The president directed the DOJ to issue regulations on protecting Americans’ data from being exploited by certain countries. The White House also directed the DOJ to issue regulations to protect government-related data, specifically citing protections for geolocation information and information about military members. Lastly, the DOJ was directed to work with DHS to prevent certain countries’ access to citizens’ data through commercial means and the CFPB was encouraged to “[take] steps, consistent with CFPB’s existing legal authorities, to protect Americans from data brokers that are illegally assembling and selling extremely sensitive data, including that of U.S. military personnel.”

    A few days before, the DOJ released its fact sheet detailing its proposals to implement the White House’s E.O., focusing on national security risks and data security. The fact sheet highlighted that our current laws leave open lawful access to vast amounts of Americans’ sensitive personal data that may be purchased and accessed through commercial relationships. In response to the E.O., the DOJ plans to release future regulations “addressing transactions that involve [Americans’] bulk sensitive data” that pose a risk of access by countries of concern. The countries of concern include China (including Hong Kong and Macau), Russia, Iran, North Korea, Cuba, and Venezuela. The DOJ will also release its Advance Notice of Proposed Rulemaking (ANPRM) to provide details of the proposal(s) and to solicit comments.

    Privacy, Cyber Risk & Data Security Federal Issues Department of Justice CFPB Executive Order Department of Homeland Security White House Big Data China Russia Iran North Korea Cuba Venezuela

  • 2nd Circuit: Court upholds dismissal of whistleblower suit alleging Iran sanctions violations

    Courts

    On October 27, the U.S. Court of Appeals for the Second Circuit denied a petition for a panel rehearing en banc in a False Claims Act (FCA) suit that was dismissed in 2020. The whistleblower suit, filed in 2019, alleged violations of the U.S.’s sanctions on Iran by exchanging foreign currency for U.S. dollars on behalf of Iranian and related terrorist entities. In July 2020, the whistleblower suit was dismissed after the court agreed with U.S. Attorney for the Southern District of New York’s motion to dismiss because the compliant was “legally deficient as it is premised on an incorrect legal theory of liability that is inconsistent with both the FCA and the law regarding civil forfeiture.” The plaintiff appealed to the 2nd Circuit arguing that the district court needed to hold a hearing; however, the 2nd Circuit found the suit had been properly dismissed and that the judge considered extensive briefing before making the determination of the dismissal.

    Courts Second Circuit En Banc FCA Whistleblower Sanctions Iran Appeals

  • OFAC clarifies impact of sanctions on humanitarian assistance and trade

    Financial Crimes

    On June 14, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued a Fact Sheet for “Provision of Humanitarian Assistance and Trade to Combat COVID-19.” The Fact Sheet, among other things, highlights Treasury’s humanitarian-related or other general licenses (GL) issued to support people impacted by Covid-19 across Iran, Venezuela, North Korea, Syria, Cuba, and Russia. Relatedly, OFAC issued Iran-related GL N-2, Venezuela-related GL 39B, and Syria-related GL 21B to authorize transactions and activities related to the prevention, diagnosis, or treatment of Covid-19, as well as several amended FAQs.

    Financial Crimes Of Interest to Non-US Persons Department of Treasury OFAC OFAC Designations OFAC Sanctions Iran Syria North Korea Cuba Russia Venezuela Covid-19

  • OFAC sanctions network supporting Iran’s missile and military programs

    Financial Crimes

    On June 6, the U.S. Treasury Department’s Office of Foreign Assets Control announced sanctions, pursuant to Executive Order 13382, against seven individuals and six entities in Iran, China, and Hong Kong for supporting Iran’s ballistic missile program. These sanctions build on OFAC’s March 30, 2022, designations against other supporters of the Iran-based missile program (covered by InfoBytes here) in an effort to target weapons of mass destruction proliferators and their supporters. OFAC explained that the designated individuals and entities have done business with and supported the procurement of critical parts and technology for Iran’s ballistic missile development.

    As a result of the sanctions, all property and interests in property belonging to the sanctioned individuals and entities that are in the U.S. or in the possession or control of U.S. persons are blocked and must be reported to OFAC. Further, “any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons are also blocked.” U.S. persons are generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons. Persons that engage in certain transactions with the designated individuals or entities may themselves be exposed to sanctions, and “any foreign financial institution that knowingly facilitates a significant transaction or provides significant financial services for any of the individuals or entities designated today pursuant to E.O. 13382 could be subject to U.S. sanctions.”

    Financial Crimes OFAC OFAC Designations OFAC Sanctions Department of Treasury SDN List Iran China Hong Kong

  • OFAC sanctions Iranian tech company and employees

    Financial Crimes

    On June 2, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Order 13846, against an Iran-based technology company, two senior employees, and an affiliate based in the UAE. According to OFAC, the sanctioned persons and entities partook in facilitating the Iranian regime’s censorship of the internet in Iran. The technology company is a key partner in Iran’s development of the National Information Network, which, OFAC states is, “a countrywide intranet that is being used to disconnect the Iranian people from the global internet.” As a result of the sanctions, all property and interests in property belonging to the sanctioned individuals and entities subject to U.S. jurisdiction are blocked and must be reported to OFAC. U.S. persons are also generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons. Additionally, OFAC warned that “persons that engage in certain transactions with the individuals and entities designated today may themselves be exposed to sanctions or subject to an enforcement action.” Also, OFAC noted that unless an exception applies, any foreign financial institution that knowingly takes part in a significant transaction or provides significant financial services for any of the persons designated could also be subject to U.S. sanctions.

    In conjunction with the sanctions, OFAC issued several Iran-related general licenses (see General License P).

     

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

  • OFAC reaches $3.3 million settlement with cosmetics company for Iranian sanctions violations

    Financial Crimes

    The U.S Treasury Department’s Office of Foreign Assets Control (OFAC) recently announced settlements with a California-based cosmetics company and a former senior company executive to resolve potential civil liability stemming from allegations that the company participated in a conspiracy to export goods and services from the United States to Iran over roughly an eight-year period. According to OFAC’s web notice, the company entered into an exclusive agreement with an Iranian distributor to sell products in the Middle East, specifically in Iran, without ever receiving a specific license or other applicable OFAC guidance to do so. OFAC maintained that these exported products (for which the company requested a license), were neither generally authorized nor exempt from prohibition. During a later acquisition, the company again applied for, but did not receive, a specific license to export products to Iran. The company knew that an OFAC license was required to lawfully export the products to Iran but continued to do so through departments generally overseen by the former senior company executive, OFAC said, adding that prior to the acquisition, the company did not disclosure the exports or its involvement with Iran, nor was this conduct discovered during pre-acquisition due diligence.  By conspiring to export approximately $11.1 million worth of goods to Iran over approximately eight years, the company allegedly violated the Iranian Transactions and Sanctions Regulations.

    In arriving at the settlement amount, OFAC considered, among other things, that the company willfully violated U.S. sanctions by exporting its products and services to Iran, despite having knowledge that such conduct was prohibited, and that senior company officials had actual knowledge of the alleged misconduct. The $3.3 million settlement (of which the former senior company executive is responsible for $175,000) reflects that while the company voluntarily self-disclosed the apparent violations, the violations constitute an egregious case. OFAC also considered several mitigating factors, including that: (i) the company has undertaking remedial measures to prevent future misconduct; (ii) the overall percentage represented by its sales to Iran is small; (iii) the company has not received a penalty notice from OFAC in the preceding five years; (iv) the company cooperated with OFAC during the investigation and agreed to toll the statute of limitations; and (v) the former senior company executive’s violations involved the export of benign consumer goods.

    Providing context for the settlement, OFAC said, among other things, that the “case highlights that U.S. sanctions on Iran encompass a wide range of potentially violative conduct, including the formation and execution of conspiracies to engage in prohibited activities such as exporting goods to Iran and causing such exports to occur.” OFAC reminded businesses that “placement of a U.S. entity under the compliance structure of a non-U.S. entity that may lack sufficient familiarity with U.S. sanctions laws could prevent the prompt identification of and response to potentially prohibited conduct.”

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

  • OFAC sanctions Iranian senior officials for wrongfully detaining U.S. nationals

    Financial Crimes

    On April 27, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Order 14078, against four senior officials of Iran’s Islamic Revolutionary Guard Corps Intelligence Organization (IRGC-IO). The IRGC-IO was concurrently designated by the State Department for its involvement in the hostage-taking or wrongful detention of U.S. nationals in Iran. OFAC also implemented the State Department’s designation of Russia’s Federal Security Service as well as the IRGC-IO for their role in wrongfully detaining U.S. nationals abroad. As a result of the sanctions, all property and interests in property of the designated persons that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC. Additionally, “any entities that are owned, directly or indirectly, individually or in the aggregate, 50 percent or more by one or more blocked persons are also blocked.” OFAC’s announcement further noted that its regulations “generally prohibit” U.S. persons from participating in transactions with designated persons unless exempt or otherwise authorized by a general or specific license. Financial institutions and persons that engage in certain transactions with the designated persons may themselves be exposed to sanctions or subject to enforcement.

    Financial Crimes Of Interest to Non-US Persons OFAC Department of Treasury OFAC Sanctions OFAC Designations SDN List Iran Department of State

  • OFAC sanctions senior Iranian officials for human rights abuses

    Financial Crimes

    On April 24, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Orders 13553 and 13846, against four senior Iranian security officials of the Law Enforcement Forces of Iran and the Islamic Revolutionary Guard Corps for aiding the Iranian regime’s crackdown on peaceful demonstrations. OFAC stressed that it has now “imposed 11 rounds of sanctions actions targeting the Iranian regime and its security elements and officials that are involved in brutal crackdown on peaceful demonstrations since nationwide protests began in September 2022.” Concurrently, the State Department imposed visa restrictions on 11 additional Iranian government officials for their alleged involvement in suppressing protestors. As a result of the sanctions, all property and interests in property belonging to the sanctioned persons subject to U.S. jurisdiction are blocked and must be reported to OFAC. Additionally, “any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons are also blocked.” OFAC further warned that “persons that engage in certain transactions with the persons designated today may themselves be exposed to sanctions or subject to an enforcement action,” and that, unless an exception applies, “any foreign financial institution that knowingly facilitates a significant transaction or provides significant financial services for any of the persons designated today could be subject to U.S. sanctions.”

    Financial Crimes Of Interest to Non-US Persons OFAC Department of Treasury OFAC Sanctions OFAC Designations Iran SDN List Department of State

  • OFAC sanctions network supporting Iran’s military programs

    Financial Crimes

    On April 19, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Order 13382, against one individual and six entities involved in a sanctions evasion network responsible for procuring electronic components for Iran’s military programs, including goods and technology used in unmanned aerial vehicles. The sanctions target the head of a previously U.S.-designated Iranian company, as well as its Iran-, Malaysia-, Hong Kong-, and PRC-based front companies and suppliers. OFAC’s action also updates the Specially Designated Nationals and Blocked Persons List to include an alias and fictious company names used by the designated company in its procurement efforts. The sanctions block all property and interests in property subject to U.S. jurisdiction belonging to the sanctioned persons and require such property, as well as “any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons,” to be reported to OFAC. U.S. persons are also generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons, OFAC said, warning that persons that engage in certain transactions with the designated individuals or entities may themselves be exposed to sanctions. Moreover, “any foreign financial institution that knowingly facilitates a significant transaction or provides significant financial services for any of the individuals or entities designated today pursuant to E.O. 13382 could be subject to U.S. sanctions.”

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

  • Multinational tech company to pay $3.3 million for OFAC and BIS violations

    Financial Crimes

    On April 6, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), in consultation with the Department of Commerce’s Bureau of Industry and Security (BIS), announced a $3.3 million settlement with a multinational technology company to resolve potential civil liabilities stemming from the exportation of services or software from the United States to sanctioned jurisdictions and to Specially Designated Nationals (SDNs) or blocked persons. The settlement comprised an agreement with OFAC to pay a civil penalty of $2,980,264.86 and an administrative penalty of $624,013 with BIS. In light of the related OFAC action, the company was given a $276,382 credit by BIS contingent upon the company fulfilling its requirements under the OFAC settlement agreement, resulting in a combined overall penalty amount of $3,327,896.86.

    According to OFAC’s web notice, the conduct underlying the administrative penalty imposed by BIS stemmed from certain conduct involving the company’s Russian subsidiary. The conduct underlying the settlement with OFAC took place between July 2012 and April 2019, when the company and certain subsidiaries allegedly “sold software licenses, activated software licenses, and/or provided related services from servers and systems located in the United States and Ireland to SDNs, blocked persons, and other end users located in Cuba, Iran, Syria, Russia, and the Crimea region of Ukraine.” The total value of the 1,339 apparent violations was more than $12 million. OFAC alleged that the causes of these apparent violations stemmed from a lack of complete or accurate information on end customers for the company’s products, and that during the relevant time period, there were shortcomings in the company’s restricted-party screening controls. Among other things, OFAC alleged that the company’s screening architecture did not aggregate identifying information across its various databases to identify SDNs or blocked persons, failed to screen and evaluate pre-existing customers in a timely fashion, and missed common variations of restricted party names.

    In arriving at the $2,980,265.86 settlement amount, OFAC considered various mitigating factors, including that (i) evidence did not show that persons located in U.S. offices or management were aware of the alleged activity at the time (the apparent violations were revealed during a self-initiated look back); (ii) upon identifying the apparent violations, the company self-disclosed the matter to OFAC, conducted a retrospective review of thousands of past transactions, cooperated with OFAC throughout the investigation, terminated the accounts of the SDNs or blocked persons, and updated internal procedures to disable access to products or services upon discovery of a sanctioned party; and (iii) the company “undertook significant remedial measures and enhanced its sanctions compliance program through substantial investment and structural changes.” OFAC outlined several compliance considerations for companies conducting business through foreign-based subsidiaries, distributors, and resellers, and reminded businesses that OFAC’s SDN List is dynamic, and that when changes to the list are made, “companies should evaluate their pre-existing trade relationships to avoid dealings with prohibited parties.”

    Financial Crimes Of Interest to Non-US Persons OFAC Department of Treasury OFAC Sanctions OFAC Designations Enforcement Settlement Department of Commerce Cuba Iran Syria Ukraine Russia

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