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OFAC Issues Amendments to Cuba Sanctions Regulations
On January 26, OFAC announced amendments to the Cuban Assets Control Regulations (CACR) to further implement policy changes announced by the Obama Administration on December 17, 2014. The regulatory changes will, among other things, “remove existing restrictions on payment and financing terms for authorized exports and reexports to Cuba of items other than agricultural items and commodities, and establish a case-by-case licensing policy for exports and reexports of items to meet the needs of the Cuban people, including those made to Cuban state-owned enterprises.” Significantly, under the amendments, U.S. depository institutions will be authorized to provide financing for authorized exports and reexports, including issuing a letter of credit. Prior to the amendments, cash-in-advance or third-country financing were the only financing options available for authorized exports.
OFAC issued new FAQs to address the amended CACR, which were published in the Federal Register on January 27, 2016 and are effective immediately.
Iran Sanctions: Treasury Comments on JCPOA Implementation Day
On January 16, the Department of the Treasury issued a statement regarding Implementation Day under the Joint Comprehensive Plan of Action (JCPOA), the plan reached between the P5+1 (the United States, China, France, Russia, the United Kingdom, and Germany), the European Union, and Iran concerning Iran’s nuclear program. In response to Iran taking the appropriate nuclear-related measures, the United States followed through on lifting nuclear-related “secondary sanctions” on Iran, which included certain financial and banking-related sanctions. To summarize the effect of Implementation Day, OFAC issued guidance and FAQs. As outlined in the FAQs and in addition to lifting the nuclear-related “secondary sanctions,” the United States removed more than 400 individuals and entities from OFAC’s List of Specially Designated Nationals and Blocked Persons (SDN List). Still, as Treasury Secretary Lew noted, “other than certain limited exceptions provided for in the JCPOA, the U.S. embargo broadly remains in place, meaning that U.S. persons, including U.S. banks, will still be prohibited from virtually all dealings with Iranian entities.”
OFAC Publishes Cyber-Related Sanctions Regulations
On December 31, OFAC issued regulations to implement Executive Order 13694 of April 1, 2015, “Blocking the Property of Certain Persons Engaging in Significant Malicious Cyber-Enabled Activities.” Effective immediately, the regulations prohibit all transactions prohibited by Executive Order 13694, including dealing in the property or interests in property, that come within the United States, of blocked persons. Among other things, under Executive Order 13694, a party may be blocked if the U.S. government finds the party “to be responsible for or complicit in, or to have engaged in, directly or indirectly, cyber-enabled activities originating from, or directed by persons located, in whole or in substantial part, outside the United States that are reasonably likely to result in, or have materially contributed to, a significant threat to the national security, foreign policy, or economic health or financial stability of the United States” and that have one of the purposes or effects enumerated in the Order. More information on the Executive Order is available here. OFAC’s Specially Designated Nationals (SDN) List will include persons blocked pursuant to the Executive Order and regulation. OFAC intends to supplement the new regulations with a more comprehensive set of regulations, “which may include additional interpretive and definitional guidance, regarding ‘cyber-enabled’ activities, and additional general licenses and statements of licensing policy.”
OFAC Updates SDN and Blocked Persons List
On December 22, OFAC updated its Specially Designated Nationals (SDNs) list to identify additional persons and entities with which U.S. citizens and permanent residents are prohibited from doing business and whose assets or interests in assets must be frozen if they come within the jurisdiction of the U.S. OFAC’s update to the SDN list names 34 individuals and entities under Ukraine-related sanctions and authorities. In addition, OFAC identified – under the Sectoral Sanctions Identifications List – a number of subsidiary companies that are at least 50% owned by two previously-sanctioned banks and/or one previously-sanctioned defense company.
New York DFS Announces Enforcement Action Against Pakistan-Based Bank's New York Branch
On December 17, the New York DFS announced an enforcement action against a New York branch of a Pakistan-based bank. The Federal Reserve Bank of New York (FRBNY) and the DFS recently conducted an examination of the branch and found significant risk management and compliance failures with regard to state and federal laws, rules, and regulations relating to anti-money laundering (AML) compliance. Under the terms of the DFS’s order, the branch agreed to reform its policies and procedures to ensure compliance with AML laws. Per the order, the bank must submit to the DFS, within 60 days of the order, a number of written programs regarding its (i) corporate governance and management oversight; (ii) BSA/AML compliance review; (iii) customer due diligence; and (iv) suspicious activity monitoring and reporting. The branch must also hire an independent third-party approved by the DFS and the FRBNY to review the effectiveness of the bank’s compliance program, and to prepare a written report of its findings, conclusions, and recommendations for the program. Because the branch’s compliance with OFAC regulations was insufficient, the order also mandates that the bank retain an independent third-party to examine its U.S. dollar-clearing transactions between October 2014 and March 2015. Significantly, the order does not require the branch to pay a civil money penalty.
OFAC Authorizes Certain Transactions and Activities to Liquidate Honduras-Based Bank, Replaces Previously Issued General License
On December 8, OFAC announced that it issued a revised General License replacing a previously issued license to a Honduras-based bank, which OFAC designated as a Specially Designated Narcotics Trafficker. The General License authorizes certain transactions and activities to assist with the liquidation and winding down of the bank. The revised General License permits liquidation-related transactions and activities that are otherwise prohibited by the Foreign Narcotics Kingpin Sanctions Regulations through 12:01 a.m. on June 12, 2016, with the following exceptions: (i) the unblocking of any blocked property pursuant the Foreign Narcotics Kingpin Sanctions Regulations; or (ii) transactions or dealings that are limited by Executive Order or are with another individual or entity on OFAC’s List of Specially Designated Nationals or Blocked Persons. U.S. persons involved in the bank’s liquidation process must file a report with OFAC’s Licensing Division to include the parties involved, and the type, scope, and dates of the activities conducted.
OFAC Issues General License Authorizing Certain Exports to or from Burma
On December 7, OFAC issued a six-month general license authorizing trade transactions involving Specially Designated Nationals and SDN-owned entities that would otherwise be prohibited by the Burmese Sanctions Regulations. The general license authorizes certain transactions that are “ordinarily incident to an exportation to or from Burma of goods, technology, or non-financial services” and also permits U.S. financial institutions to “unblock and return transactions blocked on or after April 1, 2015 that would have qualified as authorized had they been engaged in pursuant to the authorization in the general license.” U.S. financial institutions that unblock transactions blocked on or after April 1, 2015 must submit to the Department of the Treasury a report to include the following: (i) a copy of the original blocking report filed with OFAC; (ii) the date the transaction was unblocked; (iii) the amount unblocked, if applicable; (iv) the name of the party to whom the blocked property was returned; and (v) a reference to the general license as the legal authority under which the transaction was unblocked and the blocked property was returned. The general license is effective through June 7, 2016.
Federal Reserve and New York DFS Take Action Against Canadian Bank for Deficiencies Relating to AML Compliance
On November 10, the Federal Reserve and the New York DFS announced an enforcement action against a Canadian bank for alleged deficiencies relating to its BSA/AML compliance program. In order to resolve the allegations, the bank agreed to prepare various written policies and procedures, including (i) a written plan that provides for a sustainable governance framework, including improving the management information systems reporting of compliance with BSA/AML requirements, OFAC regulations, and State Regulations; (ii) a revised written BSA/AML compliance program; (iii) a revised written program for conducting customer due diligence; (iv) a written program that ensures that any suspicious activity is timely reported; and (v) a written plan to improve compliance with OFAC regulations. All policies must be submitted for approval within 60 days of the agreement’s issuance date.
Federal Reserve and New York DFS Announce $258 Million Penalty Against Global Bank
On November 4, the Federal Reserve and the New York DFS announced a combined $258 million penalty against a global bank for “violations in connection with transactions on behalf of countries and entities subject to U.S. sanctions.” According to the Fed’s cease and desist order, the bank failed to implement adequate risk management and compliance policies and procedures to “ensure that activities conducted at offices outside the United States complied with applicable OFAC Regulations and were timely reported in response to inquiries by the Federal Reserve Bank of New York.” Specifically, the Fed alleged that, from November 2001 to January 2006, foreign offices of the bank processed funds transfers with parties subject to OFAC Regulations through the bank’s New York-based subsidiary and other unaffiliated U.S. financial institutions without having the information necessary to determine that the transactions were consistent with U.S. law. The Fed’s order requires the bank to develop a compliance program that establishes (i) policies and procedures to ensure compliance with applicable OFAC regulations; (ii) an OFAC compliance reporting system; and (iii) requirements for employee training in OFAC-related issues. Under the terms of the DFS consent order, the bank agreed to hire an independent monitor to conduct a comprehensive review of its BSA/AML and OFAC sanctions compliance program, policies, and procedures.
OFAC Authorizes Transactions Involving Certain Belarusian Entities
On October 29, OFAC granted a General License authorizing nine Belarusian entities to make transactions otherwise prohibited by Executive Order 13405, effective October 30. The General License also authorizes transactions with any entities that are owned 50 percent or more by the nine named entities. U.S. persons must report authorized transactions or series of transactions exceeding $10,000 to the U.S. Department of State no later than 15 days after execution. The General License expires on October 31, 2016, unless extended or revoked.