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OFAC issues sanctions for supporting Russian financier
On July 15, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Orders 13848, 13694, and 13661 against three individuals and five entities located in Sudan, Hong Kong, and Thailand, for allegedly enabling a Russian financier to evade U.S. sanctions. According to OFAC, the financier supported the Internet Research Agency (IRA), a Russian “troll farm” designated by OFAC in 2018, and is believed to be the financier behind Private Military Company, a “designated Russian Ministry of Defense proxy force.” OFAC alleged that this operation “advocated for the use of social media-enabled disinformation campaigns similar to those deployed by the IRA, and the staging of public executions to distract protestors seeking reforms.” Additionally, OFAC alleged that the individual and Thailand and Hong Kong-based entities “facilitated over 100 transactions exceeding $7.5 million that were sent in the interest of [the financier].” As a result, all property and interests in property belonging to, or owned by, the identified individuals and entities subject to U.S. jurisdiction are blocked, and “any entities that are owned, directly or indirectly, 50 percent or more by the designated entities, are also blocked.” U.S. persons are generally prohibited from dealing with any property or interests in property of blocked or designated persons.
OFAC issues amended Venezuela-related general license and FAQ
On July 15, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued Venezuela General License (GL) 5D, which supersedes GL 5C and authorizes certain transactions otherwise prohibited under Executive Orders 13835 and 13857 related to, or that provide financing for, dealings in the Petróleos de Venezuela, S.A. 2020 8.5 Percent Bond on or after October 20, 2020. Concurrently, OFAC issued a new Venezuela-related frequently asked question regarding GL 5D.
FinCEN updates FATF-identified jurisdictions with AML/CFT deficiencies
On July 14, the Financial Crimes Enforcement Network (FinCEN) issued an advisory to inform financial institutions of updates to the Financial Action Task Force (FATF)-identified jurisdictions with “strategic deficiencies” in their anti-money laundering and combating the financing of terrorism (AML/CFT) and counter-proliferation financing deficiencies. FATF notes that in response to measures taken by countries in response to the Covid-19 pandemic, it has temporarily paused reviewing most counties with strategic deficiencies. The advisory reminds members that its February 2020 statement High-Risk Jurisdictions Subject to a Call for Action remains in effect and urges “all jurisdictions to impose countermeasures on Iran and the Democratic People’s Republic of Korea (DPRK) to protect the international financial system from significant strategic deficiencies in their AML/CFT regimes.” The advisory also emphasizes that financial institutions should consider the Jurisdictions under Increased Monitoring document and consult the list of identified countries when reviewing due diligence obligations and risk-based policies, procedures, and practices. The advisory also outlines AML program risk assessment considerations, as well as suspicious activity report filing guidance.
OFAC sanctions persons for human rights violations in China’s Xinjiang region
On July 9, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13818 against a Chinese government entity and four current or former government officials for alleged corruption violations of the Global Magnitsky Human Rights Accountability Act. According to OFAC, the sanctioned persons are connected to serious human rights abuse against ethnic monitories in the Xinjiang region. The sanctions follow an advisory issued by the U.S. Departments of State, Treasury, Commerce, and Homeland Security advising “[b]usinesses with potential exposure in their supply chain to entities that engage in human rights abuses in Xinjiang or to facilities outside Xianjiang. . .[to consider] the reputational, economic, and legal risks of involvement with such entities.” As a result of the sanctions, all property and interests in property of the designated persons within U.S. jurisdiction must be blocked and reported to OFAC. OFAC notes that its regulations “generally prohibit” U.S. persons from participating in transactions with these individuals and entities. The prohibitions also “include the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any blocked person or the receipt of any contribution or provision of funds, goods or services from any such person.”
DOJ and SEC release second edition of FCPA resource guide
On July 3, the DOJ and SEC released an update to its longstanding joint FCPA guidance, A Resource Guide to the US. Foreign Corrupt Practices Act, Second Edition (the Guide), which was first released in 2012. The newest edition has been updated to reflect recent case law, insights into DOJ and SEC enforcement policies and practices, and examples of enforcement actions. While many aspects of the Guide remain the same, revisions were made to include new case law addressing the definition of a “foreign official” under the FCPA, as well as the FCPA’s jurisdictional reach and the foreign written laws affirmative defense. The agencies also incorporated their more recent policy statements designed to encourage cooperation and voluntary disclosures.
Recent case law is also discussed in the updated Guide, including the U.S. Court of Appeals for the Second Circuit’s decision in United States v. Hoskins (covered by InfoBytes here and here), which rejected the government’s argument for a broad interpretation of personal jurisdiction in FCPA cases and held that a non-resident foreign national lacking sufficient ties to a U.S. entity cannot be charged with conspiracy to violate the FCPA or with aiding and abetting an FCPA violation. Addressed as well are the U.S. Supreme Court’s recent decisions in Kokesh v. SEC and Liu v. SEC (covered by InfoBytes here and here) regarding the SEC’s forfeiture and disgorgement authority, and the statute of limitations.
OFAC settles with global e-commerce, digital service provider over multiple sanctions violations
On July 8, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $134,523 settlement with a Washington-based company that provides retail, e-commerce, and digital services worldwide. According to OFAC, due to deficiencies in the company’s sanctions screening process, between 2011 and 2018, the company provided goods and services to OFAC sanctioned persons; to persons located in the sanctioned region or countries of Crimea, Iran, and Syria; and “for persons located in or employed by the foreign missions of Cuba, Iran, North Korea, Sudan, and Syria.” Additionally, the company allegedly accepted and processed orders that primarily consisted of low-value retail goods and services from persons listed on OFAC’s List of Specially Designated Nationals and Blocked Persons who were blocked pursuant to sanctions regulations involving the Democratic Republic of Congo, Venezuela, Zimbabwe, among others. These apparent violations occurred “primarily because [the company’s] automated sanctions screening processes failed to fully analyze all transaction and customer data relevant to compliance with OFAC’s sanctions regulations,” OFAC stated, claiming the company also “failed to timely report several hundred transactions conducted pursuant to a general license issued by OFAC that included a mandatory reporting requirement, thereby nullifying that authorization with respect to those transactions.”
In arriving at the settlement amount, OFAC considered various mitigating factors, including that the apparent violations were non-egregious and (i) the company voluntarily disclosed the violations and cooperated with the investigation; and (ii) the company has undertaken significant remedial efforts to address the deficiencies and to minimize the risk of similar violations from occurring in the future.
OFAC also considered various aggravating factors, including that the company failed to exercise due caution or care to ensure its sanctions screening process was able to properly flag transactions involving blocked persons and sanctioned jurisdictions. “This case demonstrates the importance of implementing and maintaining effective, risk-based sanctions compliance controls,” OFAC stated. “[G]lobal companies that rely heavily on automated sanctions screening processes should take reasonable, risk-based steps to ensure that their processes are appropriately configured to screen relevant customer information and to capture data quality issues.”
OFAC revokes Venezuela-related general license
On July 2, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) revoked and archived Venezuela-related General License 37 “Authorizing the Wind Down of Transactions Involving Delos Voyager Shipping Ltd, Romina Maritime Co Inc, and Certain Vessels.” Additionally, OFAC removed eight companies from the Specially Designated Nationals and Blocked Persons list.
Pharmaceutical company settles FCPA-related bribery charges with SEC
On July 2, a Boston-based global pharmaceutical company agreed to pay over $21 million to settle claims by the SEC that the company violated the books and records and internal accounting controls provisions of the FCPA. According to the SEC, Turkish and Russian subsidiaries of the pharmaceutical company made payments to foreign government officials in those countries to obtain various types of favorable treatment for the pharmaceutical company’s primary drug, including prescription approvals. Specifically, the SEC alleged that from 2010 to 2015, the Turkish subsidiary made payments to a consultant who passed a portion of the funds on to government officials; the Turkish subsidiary also allegedly made payments to “improperly influence” health care providers (HCPs) to make decisions in favor of the pharmaceutical company. Additionally, the SEC claimed that from 2011 to 2015, Russian government health officials received improper payments from the Russian subsidiary in order to influence regional healthcare budget allocations for the primary drug and to increase the number of approved prescriptions. The SEC asserted that the two subsidiaries maintained false books and records of these improper payments, which the pharmaceutical company’s internal accounting controls failed to detect or prevent. As a result, according to the SEC, due to the pharmaceutical company’s lack of an effective anti-corruption compliance program and inadequate internal accounting controls, it was “unjustly enriched by over $14 million.” The SEC also claimed that two additional subsidiaries in Brazil and Colombia failed to maintain accurate books and records regarding third-party payments.
In entering into the administrative order, the SEC considered the pharmaceutical company’s cooperation and remedial efforts, including efforts to (i) strengthen and expand its global compliance organization; (ii) enhance third-party payment related policies and procedures; (iii) revamp engagement and oversight of HCPs; (iv) improve internal audit functions; (iv) conduct “proactive compliance market reviews”; and (v) improve employee anti-corruption training.
Without admitting or denying wrongdoing, the pharmaceutical company consented to a cease and desist order, and agreed to pay a $3.5 million civil money penalty and approximately $17.9 million in disgorgement and pre-judgment interest.
Global pharmaceutical company’s current and former subsidiaries settle alleged FCPA violations with DOJ
On June 25, the DOJ announced it had entered into a deferred prosecution agreement with a subsidiary of a Switzerland-based global pharmaceutical company to pay $225 million in criminal penalties related to alleged violations of the FCPA’s anti-bribery and books and records provisions. The DOJ also entered into a separate deferred prosecution agreement with a former subsidiary of the pharmaceutical company (current subsidiary of a multinational eye care company) for approximately $8.9 million in criminal penalties related to alleged violations of the FCPA’s books and records provisions.
According to the DOJ, between 2012 and 2015, the current pharmaceutical subsidiary violated the FCPA by engaging in a scheme to bribe employees of state-owned and state-controlled hospitals and clinics in Greece to increase the sales of its products. Moreover, between 2009 and 2010, the pharmaceutical subsidiary made improper payments, in connection with an epidemiological study, to providers in order to increase sales of certain prescription drugs. The DOJ alleged that the pharmaceutical subsidiary “knowingly and willfully conspired with others to cause [the pharmaceutical parent company] to mischaracterize and falsely record improper payments…in [the parent company]’s books, records, and accounts.” Under the terms of the agreement with the pharmaceutical subsidiary, the subsidiary agreed to cooperate with ongoing investigations, and both the subsidiary and its parent agreed to enhance their compliance programs and report to the DOJ on those improvements.
In the DPA with the former eye care subsidiary, the DOJ alleged that between 2011 and 2014, while still a subsidiary of the pharmaceutical parent company, the former subsidiary “knowingly and willfully conspired with others to cause [the pharmaceutical parent company] to maintain false books, records and accounts, as a result of a scheme to bribe employees of state-owned and state-controlled hospitals and clinics in Vietnam.” The agreement notes that the former eye care subsidiary and its current parent company have since implemented and will continue to implement enhanced FCPA compliance controls and will report to the government on the implementation.
The DOJ recognized that both subsidiaries engaged in remedial measures, including (i) terminating and disciplining individuals involved in the misconduct; (ii) adopting heightened controls and anti-corruption protocols; and (iii) increasing the resources devoted to compliance.
The SEC simultaneously announced a resolution with the pharmaceutical parent company to pay over $112 million in a related matter.
OFAC sanctions Iranian ship captains for delivering gasoline to Venezuela
On June 24, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced that the captains of five Iranian U.S.-sanctioned tankers have been added to the Specially Designated National and Blocked Persons List (SDN List) for allegedly delivering gasoline and gasoline components to Venezuela. Treasury emphasized it “will target anyone who supports Iranian attempts to evade United States sanctions,” and stated it will use its authority to disrupt the Iranian regime’s support to Venezuela. As a result of the sanctions, “all property and interests in property of these targets that are in the United States or in the possession or control of U.S. persons is blocked and must be reported to OFAC.” OFAC further noted that its regulations “generally prohibit all dealings by U.S. persons or within the United States (including transactions transiting the United States) that involve any property or interests in property of blocked or designated persons,” and warned foreign financial institutions that knowingly facilitating significant transactions for any of the designated individuals or entities may subject them to U.S. sanctions.