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OFAC continues to sanction Iran’s UAV procurement network
On March 21, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions in coordination with the FBI against four entities and three individuals in Iran and Turkey accused of supporting Iran’s unmanned aerial vehicle (UAV) procurement efforts. The sanctions, taken pursuant to Executive Order (E.O.) 13382, follow the recent designation of a China-based network, as well as several prior OFAC actions targeting Iran’s UAV manufacturers and their executives (covered by InfoBytes here). According to OFAC, the procurement network operates on behalf of Iran’s Ministry of Defense and Armed Forces Logistic, which was sanctioned by OFAC in 2007 “for having engaged, or attempted to engage, in activities or transactions that have materially contributed to, or pose a risk of materially contributing to, the proliferation of weapons of mass destruction or their means of delivery.”
As a result of the sanctions, all property interests 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 interests 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.”
OCC releases enforcement actions
On March 17, the OCC released a list of recent enforcement actions taken against national banks, federal savings associations, and individuals currently and formerly affiliated with such entities. Included is a cease and desist order against a New York-based bank for allegedly engaging in unsafe or unsound practices related to its information technology security and controls, as well as its information technology risk governance and board of director/management oversight of its corporate risk governance processes. The OCC also found alleged deficiencies (including unsafe or unsound practices) in the bank’s Bank Secrecy Act (BSA)/anti-money laundering risk management controls in the following areas: “internal controls, BSA officer, customer identification program, customer due diligence, enhanced due diligence, [] beneficial ownership,” and suspicious activity monitoring and reporting. The order requires the bank to, among other things, maintain a compliance committee, develop a corporate governance program to ensure appropriate board oversight, establish a written strategic plan and conduct an internal audit to assess the sufficiency of the bank’s internal controls program, implement information technology governance and security programs, and adopt an automated clearing house risk management program. The bank is also required to appoint a BSA officer to ensure adherence to the bank’s BSA/AML internal controls, conduct a suspicious activity review lookback, implement a customer information program that is reasonably designed to identify and verify beneficial owners of legal entity customers, and develop and adopt a BSA/AML model risk management process.
U.S., German law enforcement disable darknet crypto mixer
On March 15, U.S. law enforcement, along with German criminal authorities, disabled a darknet cryptocurrency “mixing” service used to allegedly launder more than $3 billion in cryptocurrency underlying ransomware, darknet market activities, fraud, cryptocurrency heists, hacking schemes, and other activities. According to the DOJ’s announcement, law enforcement agencies seized two domains and back-end servers, as well as more than $46 million in cryptocurrency. The DOJ claimed the mixing service allowed criminals to obfuscate the source of stolen cryptocurrency by commingling users’ cryptocurrency in a way that made it difficult to trace the transactions. In conjunction with the action taken against the mixing service, a Vietnamese national responsible for creating and operating the online infrastructure was charged with money laundering, operating an unlicensed money transmitting business, and identity theft connected to the mixing service. Separate actions have also been taken by German law enforcement authorities, the DOJ said. “Criminals have long sought to launder the proceeds of their illegal activity through various means,” Special Agent in Charge Jacqueline Maguire of the FBI Philadelphia Field Office said in the announcement. “Technology has changed the game, though[.] In response, the FBI continues to evolve in the ways we ‘follow the money’ of illegal enterprise, employing all the tools and techniques at our disposal and drawing on our strong partnerships at home and around the globe.”
OFAC sanctions additional persons in Bosnia and Herzegovina
On March 15, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against three individuals in Bosnia and Herzegovina (BiH), pursuant to Executive Orders 14033 or 14059. The designations build on other sanctions measures taken in the region (covered by InfoBytes here) and “collectively underscore the United States’ willingness to hold accountable those who are undermining democratic institutions and furthering their agendas for political and personal gain, at the expense of peace, stability, and progress in the Western Balkans,” OFAC explained. Specifically, the sanctions target the director general for BiH’s Intelligence Security Agency, a BiH national who headed an agency responsible for obstructing or threatening the implementation of the Dayton Peace Agreement, and a significant Balkans narcotics trafficker.
As a result of the sanctions, all property and interests in property belonging to the sanctioned individuals subject to U.S. jurisdiction are blocked and must be 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 further noted that “transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of designated or blocked persons are prohibited unless authorized by a general or specific license issued by OFAC, or exempt,” which “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.” OFAC warned financial institutions and other persons that should they engage in certain transactions or activities with the sanctioned individuals they may expose themselves to sanctions or be subject to an enforcement action.
REPO task force highlights efforts taken against sanctioned Russians
On March 9, the multilateral Russian Elites, Proxies, and Oligarchs (REPO) Task Force released a statement on the group’s continued work one year after Russia’s invasion of Ukraine. As previously covered by InfoBytes, the U.S. Treasury Department, along with representatives from Australia, Canada, Germany, France, Italy, Japan, the United Kingdom, and the European Commission, formed REPO last February to collect and share information among authorities in order “to take concrete actions, including sanctions, asset freezing, and civil and criminal asset seizure, and criminal prosecution.” REPO noted that it has, among other things, (i) blocked or frozen more than $58 billion in sanctioned Russian assets; (ii) taken collective measures to restrict sanctioned Russians’ access to the global financial system and “to investigate and counter Russian sanctions evasions, including attempts to hide or obfuscate assets, illicit cryptocurrency and money laundering schemes, illicit Russian defense procurement, and sanctioned Russians’ use of financial facilitators”; (iii) led international sanctions enforcement efforts; (iv) “[w]orked to update or expand and implement REPO members’ respective legal frameworks that enable the freezing, seizure, forfeiture and/or disposal of assets”; and (v) brought about the first forfeiture of assets of a sanction Russian as part of $5.4 million foreign assistance funds transfer to Ukraine. REPO also issued a joint Global Advisory on Russian Sanctions Evasion, intended to ensure effective sanctions implementation and compliance across member jurisdictions.
OFAC sanctions Iran’s international UAV procurement network
On March 9, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against a China-based network of five companies and one individual accused of supporting Iran’s unmanned aerial vehicle (UAV) procurement efforts, pursuant to Executive Order 13382. According to OFAC, the network “is responsible for the sale and shipment of thousands of aerospace components, including components that can be used for UAV applications,” to an Iranian aircraft manufacturing company previously sanctioned by OFAC in 2008, for being owned or controlled by Iran’s Ministry of Defense and Armed Forces Logistics and for having provided support to Iran’s Islamic Revolutionary Guard Corps.
As a result of the sanctions, all property interests 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 interests 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.”
FinCEN comments on Russia’s suspended FATF membership; issues statements on jurisdictions with AML/CFT/CPF deficiencies
On March 9, FinCEN informed U.S. financial institutions that last month the Financial Action Task Force (FATF) suspended the Russian Federation’s membership after determining that the country’s “actions unacceptably run counter to the FATF core principles aiming to promote security, safety, and the integrity of the global financial system.” (Covered by InfoBytes here.) FATF also urged jurisdictions to monitor for and mitigate emerging risks resulting “from the circumvention of measures taken in order to protect the international financial system.”
Additionally, FinCEN noted that at the end of February, FATF issued public statements updating its lists of jurisdictions with strategic deficiencies in anti-money laundering (AML), countering the financing of terrorism (CFT), and countering the financing of proliferation of weapons of mass destructions (CPF) regimes. These include (i) Jurisdictions under Increased Monitoring, “which publicly identifies jurisdictions with strategic deficiencies in their AML/CFT/CPF regimes that have committed to, or are actively working with, the FATF to address those deficiencies in accordance with an agreed upon timeline,” and (ii) High-Risk Jurisdictions Subject to a Call for Action, “which publicly identifies jurisdictions with significant strategic deficiencies in their AML/CFT/CPF regimes and calls on all FATF members to apply enhanced due diligence, and, in the most serious cases, apply counter-measures to protect the international financial system from the money laundering, terrorist financing, and proliferation financing risks emanating from the identified countries.”
With respect to jurisdictions under increased monitoring, FinCEN’s announcement reminded U.S. covered financial institutions of their due diligence obligations for foreign financial institutions (including correspondent accounts maintained for foreign banks), and instructed them to ensure that they implement “appropriate, specific, risk-based, and, where necessary, enhanced policies, procedures, and controls that are reasonably designed to detect and report known or suspected money laundering activity conducted through or involving any correspondent account established, maintained, administered, or managed in the United States.” Money services business are reminded of parallel requirements with respect to foreign agents or counterparties. Members were informed that FATF removed Cambodia and Morocco from its list of Jurisdictions under Increased Monitoring but added Nigeria and South Africa to the list.
FinCEN’s announcement also informed members that Burma remains on the list of High-Risk Jurisdictions Subject to a Call for Action, and advised U.S. financial institutions to apply enhanced due diligence. Moreover, U.S. financial institutions should continue to refer to existing FinCEN and OFAC guidance on engaging in financial transactions with Burma. With respect to the Democratic People’s Republic of Korea and Iran, “financial institutions must comply with the extensive U.S. restrictions and prohibitions against opening or maintaining any correspondent accounts, directly or indirectly, for North Korean or Iranian financial institutions,” FinCEN said, adding that “[e]xisting U.S. sanctions and FinCEN regulations already prohibit any such correspondent account relationships.”
OFAC sanctions “shadow banking” network responsible for moving billions for Iranian regime
On March 9, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against “39 entities constituting a significant ‘shadow banking’ network,” pursuant to Executive Order 13846. OFAC explained that this network is “one of several multi-jurisdictional illicit finance systems,” which grants sanctioned Iranian entities access to the international financial system and obfuscates sanctioned entities’ trade with foreign customers. “Iran cultivates complex sanctions evasion networks where foreign buyers, exchange houses, and dozens of front companies cooperatively help sanctioned Iranian companies to continue to trade,” Deputy Secretary of the Treasury Wally Adeyemo said in the announcement. “Today’s action demonstrates the United States’ commitment to enforcing our sanctions and our ability to disrupt Iran’s foreign financial networks, which it uses to launder funds.” The action follows previous designations of six Iran-based petrochemical manufacturers or their subsidiaries, as well as three firms located in Malaysia and Singapore, for their involvement in the sale and shipment of petroleum and petrochemicals on behalf of a previously designated company (covered by InfoBytes here).
As a result of the sanctions, all property interests belonging to the sanctioned targets 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 individuals or entities designated today may themselves be exposed to sanctions or subject to enforcement. Additionally, OFAC warned that “any foreign financial institution that knowingly facilitates a significant transaction for any of the individuals or entities designated today could be subject to U.S. sanctions” unless an exception applies.
OFAC sanctions Iranian officials for serious human rights abuses
On March 8, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Orders 13553 and 13846, against several Iranian regime officials and entities for serious human rights abuses against women and girls. Included among the sanctioned individuals are “the top commander of the Iranian army and a high-ranking leader in the Islamic Revolutionary Guard Corps (IRGC), as well as an Iranian official who was central to the regime’s efforts to block internet access.” OFAC also imposed sanctions against three Iranian companies and their leadership for their role in enabling the violent repression by the Iranian Law Enforcement Forces of peaceful protestors. The actions, taken in coordination with the EU, UK, and Australia, mark the continued effort to impose sanctions on persons who engage in serious human rights abuse or censorship with respect to Iran.
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 “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.”
SEC fines gaming company $4 million as successor to a company charged with FCPA violations
On March 6, the SEC announced that an Ireland-based global gaming and sports betting company, as successor-in-interest to a company it acquired in 2020 (the “acquired company”), agreed to pay a $4 million civil money penalty to settle claims that the acquired company violated the books and records and internal accounting controls provisions of the FCPA by using third-party consultants in Russia. According to the SEC’s order, the acquired company operated several gaming brands, including an online poker website. The SEC said that between May 26, 2015 and May 15, 2020, while the acquired company’s shares were registered with the SEC, it paid roughly $8.9 million to consultants in Russia in an effort to legalize poker in the country. During this time period, the SEC explained, the acquired company lacked sufficient internal accounting controls over its Russian operations with respect to third-party consultants, and failed to “consistently make and keep accurate books and records regarding its consultant payments in Russia.” Many of these third-party consultants, the SEC said, were “retained without adequate due diligence or written contracts, and paid without adequate proof of services.” The order indicated that certain payments were inaccurately recorded as lobbying fees, and that some payments went towards reimbursements for gifts given to individuals, including Russian government officials, and to a Russian state agency responsible for administering internet censorship filters. The SEC charged the Ireland company, as successor-in-interest to the acquired company, with violating Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934. The resolution requires the Ireland company, which neither admitted nor denied the allegations, to pay a $4 million civil money penalty. The SEC recognized the Ireland company’s cooperation and remedial efforts.