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OFAC sanctions Syrian financial facilitators allied with IRGC-QF
On May 30, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Order 13582 and the Caesar Syrian Civilian Protection Act of 2019 (Caesar Act), against two Syrian money service businesses and the three owners and operators of Al-Fadel Exchange, which have secretly helped the Syrian regime under Bashar al-Assad and its Hizballah and Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF) allies maintain access to the international financial system in violation of international sanctions. Both E.O. 13582 and the Caesar Act underscore the gravity of enabling violent regimes to circumvent sanctions. These sanctions come on the heels of OFAC’s March 28 designation, also pursuant of the Caesar Act, of individuals involved in Syria’s drug production and trafficking (previously covered by InfoBytes here). As a result of these sanctions, “all property and interests in property of these persons which are in or come within the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC. In addition, 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 also generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons. Additionally, “persons that engage in certain transactions with the persons designated today may themselves be exposed to sanctions or subject to an enforcement action.”
OFAC designates evasion network supporting Hizballah financier
On April 18, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Order 13224, as amended, against a “vast international money laundering and sanctions evasion network” comprised of 52 individuals and entities in Lebanon, the United Arab Emirates, South Africa, Angola, Côte d’Ivoire, the Democratic Republic of the Congo, Belgium, the United Kingdom, and Hong Kong. The designated network assisted a Hizballah financier and Specially Designated Global Terrorist (previously sanctioned by OFAC in 2019) in evading U.S. sanctions by facilitating the payment, shipment, and delivery of goods and services, including cash, diamonds, art, and luxury goods, for the benefit of the sanctioned individual who used the funds to finance the Hizballah financier and his lifestyle, OFAC said, explaining that the network used shell companies and fraudulent schemes to disguise the Hizballah financier’s role in the financial transactions. Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson warned in the announcement that “[l]uxury good market participants should be attentive to these potential tactics and schemes, which allow terrorist financiers, money launderers, and sanctions evaders to launder illicit proceeds through the purchase and consignment of luxury goods.” Treasury has issued warnings on money laundering and terrorist financing risks associated with the trade of works of art in a February 2022 report and an October 2020 art advisory (covered by InfoBytes here and here).
As a result of the sanctions, all property and interests in property belonging to the sanctioned persons that are in the U.S. or in the possession or control of U.S. persons are blocked and must be reported to OFAC. “[A]ny entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons are also blocked.” 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 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.” Additionally, “any foreign financial institution that knowingly facilitates a significant transaction or provides significant financial services for any of the targets designated today pursuant to E.O. 13224, as amended, could be subject to U.S. sanctions.”
The action by Treasury was taken in coordination with the Department of Homeland Security, the Department of State’s Rewards for Justice program, and the United Kingdom. The same day, the DOJ unsealed a nine-count indictment charging the Hizballah financier and eight co-defendants with conspiring to evade terrorism-related sanctions. According to the DOJ, despite being sanctioned and prohibited from engaging in transactions with U.S. persons, the Hizballah financier and the other co-defendants used a complex web of business entities to conduct money laundering transactions involving valuable artwork and diamond-grading services.
OFAC sanctions individuals involved in Syria’s drug production and trafficking
On March 28, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) designated key individuals for supporting the regime of Syrian President Bashar al-Assad and the regime’s billion-dollar illicit drug production and trafficking enterprise. Taken in coordination with the UK, the designations, issued pursuant to Executive Orders 13572, 13582, and 13224, “also highlight the important role of Lebanese drug traffickers—some of whom maintain ties to Hizballah—in facilitating the export of Captagon[,]” the dangerous amphetamine at issue. 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.” U.S. persons are also 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 or subject to an enforcement action, OFAC warned.
OFAC sanctions key Hizballah money exchanger
On January 24, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13224 against several individuals and associated entities, including a Lebanese money exchanger and a money service business, for facilitating financial activities for Hizballah. Commenting that Treasury “is taking action against a corrupt money exchanger, whose financial engineering actively supports and enables Hizballah and its interests at the expense of the Lebanese people and economy,” Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson issued a warning that the U.S. is committed to holding persons accountable should they “exploit their privileged positions for personal gain.” The sanctions follow designations imposed last month against several individuals and companies that manage and enable Hizballah’s financial operations throughout Lebanon, including Hizballah’s “quasi-financial institution” and its central finance unit. (Covered by InfoBytes here.)
As a result of the sanctions, all property, and interests in property of the designated persons, “and of any entities that are owned, directly or indirectly 50 percent or more by them, individually, or with other blocked persons, that are in the United States or in the possession or control of U.S. persons, must be blocked and reported to OFAC.” OFAC regulations generally prohibit all transactions by U.S. persons or within the United States (including transactions transiting the United States) that involve any property or interests in property of designated persons unless authorized by an OFAC general or specific license. OFAC further cautioned that “engaging in certain transactions with the individuals and entities designated today entails risk of secondary sanctions,” and noted that the designated persons are also subject to the Hizballah Financial Sanctions Regulations. Pursuant to these regulations, “OFAC can prohibit or impose strict conditions on the opening or maintaining in the United States of a correspondent account or a payable-through account by a foreign financial institution that either knowingly conducted or facilitated any significant transaction on behalf of an SDGT or, among other things, knowingly facilitates a significant transaction for Hizballah or certain persons designated for their connection to Hizballah.”
OFAC designates sanctions evasion network connected to IRGC-QF
On December 8, the U.S. Treasury Department’s Office of Foreign Assets Control announced sanctions pursuant to Executive Order 13224 against a sanctions evasion network for facilitating and concealing the sale and shipment of hundreds of millions of dollars’ worth of oil for Iran’s Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF). According to OFAC, the designated individual’s companies “established international sales contracts for Iranian oil with foreign purchasers, arranged shipments of oil, and helped launder the proceeds, obscuring the oil’s Iranian origin and the IRGC-QF’s interest in the sales.” The action supplements designations announced in May, which targeted an element of this network responsible for facilitating millions of dollars’ worth of Iranian oil sales for both the IRGC-QF and Hizballah, backed by senior levels of the Russian Federation government and state-run entities (covered by InfoBytes here). As a result, all property, and interests in property of the designated individuals and entities, “and of any entities that are owned, directly or indirectly, 50 percent or more by them, individually, or with other blocked persons, that are in the United States or in the possession or control of U.S. persons, must be blocked and reported to OFAC.” U.S. persons are generally prohibited from engaging in transactions with the designated persons unless authorized by a general or specific OFAC license or are otherwise exempt. OFAC further warned that “engaging in certain transactions with the individuals and entities designated today entails risk of secondary sanctions.”
OFAC sanctions Hizballah accountants and weapons facilitator
On December 1, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13224 against two individuals and two companies based in Lebanon for providing financial services to Hizballah. OFAC also designated another individual for actively working to procure weapons for Hizballah. According to OFAC, the designations target persons that manage and enable Hizballah’s financial operations throughout Lebanon, including Hizballah’s “quasi-financial institution” and its central finance unit. As a result, all property, and interests in property of the designated persons, “and of any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons are also blocked.” OFAC regulations generally prohibit all transactions by U.S. persons or within the United States (including transactions transiting the United States) that involve any property or interests in property of designated persons. OFAC cautioned that “persons that engage in certain transactions with the persons designated today may themselves be exposed to sanctions or subject to an enforcement action.” Additionally, OFAC warned that a foreign financial institution that knowingly conducts or facilitates a significant transaction on behalf of any of the designated persons could be subject to U.S. sanctions.
OFAC sanctions oil shipping network connected to IRGC-QF and Hizballah
On November 3, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13224 against members of an international oil smuggling network for allegedly facilitating oil trades and generating revenue for Hizballah and the Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF). Included are “several key individuals and numerous front companies and vessels involved in blending oil to conceal the Iranian origins of the shipments and exporting it around the world in support of Hizballah and the IRGC-QF.” According to Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson, the responsible individuals “use a web of shell companies and fraudulent tactics including document falsification to obfuscate the origins of Iranian oil, sell it on the international market, and evade sanctions” in order to generate revenue to enable Hizballah and IRGC-QF terrorist activities. The sanctions follow the designation of another Iranian oil smuggling network earlier in May (covered by InfoBytes here). As a result, all property, and interests in property of the designated persons, “and of any entities that are owned, directly or indirectly, 50 percent or more by them, individually, or with other blocked persons, that are in the United States or in the possession or control of U.S. persons, must be blocked and reported to OFAC.” Unless authorized by general or specific OFAC licenses or otherwise exempt, OFAC regulations generally prohibit all transactions by U.S. persons or within the United States (including transactions transiting the United States) that involve any property or interests in property of designated individuals. OFAC further warned that “engaging in certain transactions with the individuals and entities designated today entails risk of secondary sanctions.” Additionally, OFAC warned that a foreign financial institution that knowingly conducts or facilitates a significant transaction on behalf of a Specially Designated Global Terrorist could be subject to U.S. correspondent or payable-through account sanctions.
OFAC sanctions Hizballah financial facilitator
On May 19, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13224 against a Lebanese businessman and Hizballah financial facilitator, as well as five of his associates and eight of his companies in Lebanon and Iraq. According to OFAC, the sanctions “illuminate[] Hizballah’s modus operandi of using the cover of seemingly legitimate businesses to generate revenue and leverage commercial investments across a multitude of sectors to secretly fund Hizballah and its terrorist activities.” OFAC also highlighted Hizballah’s practice of building “a web of businesses” with “opaque ownership structures” to “hide its activities and generate funds for its destabilizing activities.” According to Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson, the “designation of this network demonstrates the U.S. government’s commitment to protect Lebanon’s private sector and financial system from Hizballah’s abuse by targeting and exposing the group’s financial activities.”
As a result of the sanctions, all property and interests in property of the designated individuals and entities within U.S. jurisdiction must be blocked and reported to OFAC. OFAC further noted that its regulations “generally prohibit” U.S. persons or persons within the U.S. from participating in transactions with the designated persons unless exempt or authorized by a general or specific OFAC license. OFAC also warned that the agency “can prohibit or impose strict conditions on the opening or maintaining in the United States of a correspondent account or a payable-through account of a foreign financial institution that knowingly conducted or facilitated any significant transaction on behalf of [a Specially Designated Global Terrorist] or, among other things, knowingly facilitates a significant transaction for Hizballah or certain persons designated for their connection to Hizballah.”
OFAC sanctions Hizballah financiers in Guinea
On March 4, the U.S. Treasury Department’s Office of Foreign Assets Control announced sanctions pursuant to Executive Order 13224, as amended, against two Hizballah-affiliated financial facilitators operating in Guinea. The action is intended to disrupt Hizballah’s business network in West Africa, which relies on bribes and other corrupt activity, OFAC stated, and is part of “Treasury’s ongoing efforts to target the terrorist group’s international commercial activities and its global network of financiers, supporters, donors, and facilitators, which enable Hizballah to persistently threaten the security, stability, and prosperity of Lebanon and other jurisdictions.” As a result of the sanctions, all transactions by U.S. persons or in the U.S. that involve any property or interests in property of the designated persons are prohibited. Additionally, “any entities that are owned, directly or indirectly 50 percent or more by them, individually, or with other blocked persons, that are in the United States or in the possession or control of U.S. persons, must be blocked and reported to OFAC.” U.S. persons are generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons, unless exempt or authorized by a general or specific OFAC license. OFAC further warned that the agency “can prohibit or impose strict conditions on the opening or maintaining in the United States of a correspondent account or a payable-through account of a foreign financial institution that knowingly conducted or facilitated any significant transaction on behalf of a [Specially Designated Global Terrorist.]”
Treasury publishes risk assessments for money laundering, terrorist financing, and proliferation financing
On March 1, the U.S. Treasury Department published the 2022 National Risk Assessments on money laundering, terrorist financing, and proliferation financing, which highlight significant illicit finance threats, vulnerabilities, and risks facing the United States.
The 2022 National Money Laundering Risk Assessment found that “[c]riminals continue to use a wide range of money laundering techniques, including traditional ones, to move and conceal illicit proceeds depending on what is available or convenient to them.” Crimes generating the largest amount of laundered illicit proceeds in or through the U.S. include fraud, drug trafficking, cybercrime, human trafficking and smuggling, and corruption. The assessment found that continued and emerging money laundering risks involve, among other things, the persistent misuse of legal entities, a lack of transparency in certain real estate transactions, merchants and professionals that misuse their positions or businesses, and compliance and supervision weaknesses at some regulated U.S. financial institutions. Additionally, operators of virtual asset service providers (VASPs) are reminded that violating the Bank Secrecy Act or neglecting regulatory requirements, “such as failing to establish effective AML programs or report suspicious activities,” present vulnerabilities to the financial system.
The findings of the 2022 National Terrorist Financing Risk Assessment, according to the press release, included that, with respect to foreign terrorist groups, “the most common form of financial support from U.S.-based individuals continues to be the transfer of small sums (several hundred to tens of thousands of dollars) to facilitators outside of the U.S. working on behalf of ISIS and its affiliates, Al-Qaida and its affiliates, and Hizballah.” For the first time, the assessment also analyzed funding methods used to support domestic violent extremists.
The 2022 National Proliferation Financing Risk Assessment found that most significant proliferation finance threats are posed by the Democratic People’s Republic of Korea followed by Iran. These networks misuse correspondent banking relationships and create front/shell companies to facilitate financial activity and conduct trade, and they generate significant revenue from the maritime sector. The press release stated that the assessment further found that these networks are beginning to “increasingly exploit[] the digital economy, including through the systematic mining and trading of virtual assets, and the hacking of virtual asset service providers.” In the upcoming weeks, Treasury will release the 2022 National Strategy for Combatting Terrorist and Other Illicit Finance, which will be informed by the analysis contained in these risk assessments and will share recommendations for addressing these highlighted threats.