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FinCEN focuses on securities industry BSA/AML information sharing
On February 6, Financial Crimes Enforcement Network (FinCEN) Deputy Director Jamal El-Hindi delivered remarks at the Securities Industry and Financial Markets Association’s 20th Anti-Money Laundering (AML) and Financial Crimes Conference discussing, among other things, the agency’s focus on the Bank Secrecy Act (BSA). Specifically, El-Hindi stressed the importance of information sharing in the BSA context, remarking that the financial sector is “in an evolutionary state” dealing with “new technologies and new payment systems, such as those that involve virtual currency.” He asserted that innovators in the development of cryptocurrencies and messaging systems “cannot turn a blind eye to illicit transactions that they may be fostering,” and noted that FinCEN will regulate these emerging systems in accordance with existing principles that underlie the BSA and AML rules and regulations for the financial sector. El-Hindi encouraged the securities industry to share information, observing that only 14 percent of eligible securities companies are registered to take part in the 314(b) business-to-business information sharing program. He suggested that the industry needs better communication and cooperation to increase the effectiveness of BSA information collection. El-Hindi also discussed how cooperation has helped FinCEN’s cross-agency coordination and enhanced the agency’s rulemaking and guidance—specifically in the establishment of the Customer Due Diligence and Beneficial Ownership rule, but recognized that the lack of information collected regarding the formation of new corporations can frustrate the agency’s risk assessment abilities. To motivate information sharing, El-Hindi emphasized the importance of BSA information financial companies collect, sharing that SARs filings by securities companies have “increased roughly eight-fold” from 2003 to 2019, and that data provided from BSA filings is used frequently by law enforcement and regulators to inform their investigations and examinations and to “identify trends and focus resources.”
Treasury announces anti-terrorist financing plan
On February 6, the U.S. Treasury Department announced the 2020 National Strategy for Combating Terrorist and Other Illicit Financing. The report provides an overview of the anti-money laundering/countering the financing of terrorism (AML/CFT) program in the U.S. and details how the program can be updated to be more efficient and effective. Among other things, the report covers the most noteworthy threats to the financial system such as fraud, drug trafficking, and human trafficking, and highlights that one of the greatest vulnerabilities to the U.S. financial system is a failure to collect beneficial ownership information when new companies are formed or when company ownership changes. The report also focuses on ways to make the AML/CFT framework stronger, including through increased transparency and improved financial institution regulation and supervision. Additionally, the report advocates boosting the AML/CFT operational framework through the use of technologies, expanded data analytics, increased information sharing, and promotion of worldwide standards.
Venezuela’s state-owned airline subject to OFAC sanctions
On February 7, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced that it identified a previously blocked state-owned Venezuelan airline and its fleet of aircraft pursuant to Executive Order (E.O.) 13884. The entities—subject to sanctions under E.O. 13884, which blocks property of the Venezuelan government—have been added to OFAC’s Specially Designated Nationals (SDN) List. According to OFAC’s press release, the commercial airline and its fleet have been used by Venezuela’s illegitimate government “to promote its own political agenda, including shuttling regime officials to countries such as North Korea, Cuba, and Iran.” OFAC observed that Venezuelan citizens may still travel by air on a number of other airlines that provide domestic service as well as service to and from Venezuela. OFAC also reiterated that its “regulations generally prohibit all transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of blocked persons.”
Iranian company employee charged in $115 million international bank fraud scheme
On January 31, the U.S. Attorney’s Office for the Southern District of New York announced charges against an employee (defendant) of an Iranian company for bank fraud, conspiracy to commit bank fraud, and for making false statements to federal agents regarding financial transactions made through U.S. banks to benefit Iranian entities and individuals. According to the indictment, an agreement between the Iranian government and the Venezuelan government resulted in a construction contract for housing units in Venezuela where an Iranian company would construct the units and be paid with money funneled through U.S. banks by a Venezuelan state-owned company subsidiary. The defendant was purportedly part of a committee formed to guide the project. In coordination with other individuals, the defendant allegedly directed money from the Venezuelan company to the Iranian company through bank accounts—set up to hide the transactions from U.S. banks—in Switzerland. The indictment charges that, among other things, the defendant “knowingly and willfully” conspired with others to commit bank fraud against an FDIC-insured institution by directing the Venezuelan company to route $115 million in payments for the Iranian company to the Swiss bank account through correspondent U.S. banks in New York. Additionally, when the defendant was interviewed by federal agents, he “knowingly and willfully” concealed the scheme and made materially false statements about his knowledge of the applicability of sanctions against Iran. The indictment seeks forfeiture of any proceeds or property obtained by the defendant in the course of the alleged offenses.
French aerospace company to pay more than $3.9 billion to resolve foreign bribery cases
On January 31, a French aerospace company that manufactures civilian and military aircraft agreed to pay combined penalties of more than $3.9 billion to U.S., French, and UK authorities. The company resolved foreign bribery charges with all three jurisdictions, as well as U.S. violations of the Arms Export Control Act (AECA) and its implementing regulations, and the International Traffic in Arms Regulations (ITAR). (See deferred prosecution agreement and information filed in the U.S. District Court for the District of Columbia.) The resolutions covered bribes paid in countries including China, Sri Lanka, Malaysia, Indonesia, Taiwan, and Ghana.
With respect to the FCPA, according to the DOJ’s announcement, beginning in at least 2008 and continuing through at least 2015 the company engaged in a global “scheme to use third-party business partners to bribe government officials, as well as non-governmental airline executives.” The bribes were offered to decision makers, including foreign officials, “in order to obtain improper business advantages and to win business from both privately owned enterprises and entities that were state-owned and state-controlled.” The AECA and ITAR violations involved “fil[ing] numerous applications for the export of defense articles and defense services to foreign armed forces[,]” but failing to provide the U.S. State Department’s Directorate of Defense Trade Controls (DDTC) “with accurate information related to commissions paid by [the company] to third-party brokers who were hired to solicit, promote or otherwise secure the sale of defense articles and defense services to foreign armed forces.” As part of the deferred prosecution agreement, the company agreed to cooperate with the DOJ’s ongoing investigations and prosecutions and enhance its compliance program. The DOJ also recognized the company’s cooperation and remediation.
OFAC, Canada, and the EU sanction Russian-backed officials for Crimean incursion
On January 29, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced that it took action against seven “Crimean Officials” backed by Russia, and a Russian railway company and its CEO. The announcement states that the officials unilaterally assumed governmental control of the Crimean Peninsula. OFAC designated the officials under Executive Order (E.O.) 13660, in partnership with Canada and the European Union (EU), which both also designated the officials “in a strong demonstration of the international community’s continued condemnation of Russia’s interference in Crimean politics.” According to the announcement, Secretary of the Treasury, Steven T. Mnuchin, asserts that he believes the coordinated designations by OFAC and the two nations may prevent the “illegitimate officials” from doing business internationally. The OFAC designations of the railway company and its CEO for operating in the Crimea Region of Ukraine under E.O. 13685, come shortly after the railway started a passenger route from Russia to the Crimean Peninsula in late December. As a result of the sanctions, “all property and interests in property of these individuals and entity that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC.” OFAC noted that its regulations “generally prohibit” U.S. persons from participating in transactions with the designated persons, and warned foreign persons that if they knowingly facilitate significant transactions for any of the designated persons, they may be designated themselves.
OFAC, shipping company settle sanctions violations for $1.1 million
On January 27, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $1,125,000 civil settlement with a Marshall Islands shipping company (respondent) with headquarters in the U.S. for 36 apparent violations of the Burmese Sanctions Regulations (BSR). According to OFAC, between 2011 and 2014, the respondent had dealings in the property of a Burma-related company (company) that is included on the Specially Designated Nationals (SDN List), and provided shipping services that benefited the designated company, which were apparent violations of the BSR.
According to the settlement agreement, OFAC considered various aggravating factors in reaching the settlement amount, including that (i) the apparent violations “conferred significant economic benefits to Burma’s military regime”; (ii) the respondent “demonstrated reckless disregard for U.S. sanctions requirements by ignoring” the license denial letters it received from OFAC; (iii) the respondent’s former president knew about and participated in the transactions that comprise the apparent violations; and (iv) the respondent is a “commercially sophisticated shipping company” that is familiar with international shipping transactions. OFAC determined that the apparent violations represent an egregious case.
OFAC also considered various mitigating factors, including that (i) the respondent is under new management, which self-disclosed the apparent violations and cooperated with the investigation; (ii) OFAC has not issued a violation against the respondent in the five years preceding the earliest date of the transactions at issue; and (iii) the respondent undertook extensive remedial measures in response to the alleged violations, including implementing a formal compliance program.
OFAC settles with lobbying firm over sanctions violations
On January 21, U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a settlement with a New York-based lobbying firm for alleged violations of the Global Terrorism Sanctions Regulations (GTSR). According to OFAC, between August 2017 and November 2017, the firm allegedly dealt in the property or interests in property of a Somalian organization designated as a Specially Designated Global Terrorist (SDGT), when it signed a contract with the organization and received payment for its lobbying services that were “outside the scope of generally authorized activities under the GTSR, including the GTSR general license for legal services.” In arriving at the settlement amount, OFAC considered various mitigating factors, including the fact that the firm voluntarily self-disclosed the issue to OFAC, and the firm implemented remedial measures, including adopting new screening procedures before entering into contracts with potential clients. OFAC also considered various aggravating factors, including that the firm’s executives had actual knowledge of the organization’s SDGT status and actively participated in signing the contract.
OFAC sanctions network for purchasing Iranian petroleum products
On January 23, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced that it took action against four petroleum products companies (network) designated pursuant to Executive Order (E.O.) 13846 for making payments to “an entity instrumental in Iran’s petroleum and petrochemical industries, which helps to finance Iran’s Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF) and its terrorist proxies.” The Iranian entity is on the List of Specially Designated Nationals and Blocked Persons and its property is blocked in conformance with E.O. 13599. According to OFAC, the network transferred payments to the Iranian entity for petroleum exports and “worked to conceal the Iranian origin of these products.” Among other things, these sanctions prohibit foreign financial institutions from “knowingly facilitat[ing] transactions for, or persons that provide material or certain other support to,” the designated petroleum products broker. See the new Iran-related designations here.
OFAC identifies Venezuelan aircraft as blocked property, issues amended Venezuela-related general licenses
On January 21, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced amendments to the list of property implicated by the Specially Designated Nationals List (SDN List) pursuant to Executive Order (E.O.) 13884, which blocks the property of the Venezuelan government. OFAC identified 15 aircraft that either transported senior members of the Maduro regime or “operated in an unsafe and unprofessional manner in proximity to U.S. military aircraft, while in international air space.” OFAC reiterated that its “regulations generally prohibit all transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of blocked persons.”
In connection with the designations, OFAC issued amended Venezuela General License (GL) 20B, titled “Authorizing Official Activities of Certain International Organizations Involving the Government of Venezuela.” GL 20B authorizes certain transactions and activities otherwise prohibited under E.O.s 13850 and 13857 involving Banco Central de Venezuela, and E.O. 13884 involving the Government of Venezuela.
Earlier, on January 17, OFAC issued two additional amended Venezuela GLs. GL 5B provides that on or after April 22, all transactions related to the financing for, and other dealings in the Petróleos de Venezuela SA 2020 8.5 Percent Bond that would be prohibited under a certain subsection of E.O. 13835, as amended by E.O. 13857, are authorized. GL 8E, titled “Authorizing Transactions Involving Petróleos de Venezuela, S.A. (PdVSA) Necessary for Maintenance of Operations for Certain Entities in Venezuela,” supersedes GL 8D to extend the expiration date for certain authorizations through April 22.