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OFAC sanctions Iran’s central bank and national development fund
On September 20, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13224 against Iran’s central bank, the country’s national development fund, and an Iran-based company for providing financial support to the Islamic Revolutionary Guards Corps, its Qods Force (IRGC-QF), and Hizballah, the regime’s terrorist proxy. OFAC designated the bank for purportedly providing billions of dollars to these entities, and alleged that the national development fund “has been a major source of foreign currency and funding” for both the IRGC-QF and Iran’s Ministry of Defense and Armed Forces Logistics (MODAFL). Sanctions were brought against the Iran-based company for concealing financial transfers for MODAFL’s military purchases, including those originating from the national development fund. As a result of the sanctions, “all property and interests in property of these entities 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 financial institutions that if they knowingly facilitate significant transactions for any of the designated entities, they may be subject to U.S. correspondent account or payable-through account sanctions.
OFAC settles with London bank for Sudanese sanctions violations
On September 17, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $4,000,000 settlement with a London-based commercial bank for 72 alleged violations of the Sudanese Sanctions Regulations (SSR). The settlement resolves allegations that between September 2010 and August 2014, the bank processed 72 bulk funding payments totaling $190,700,000 related to Sudan, which involved transactions processed to or through U.S. financial institutions in apparent violation of the SSR, which prohibits U.S. persons, including U.S. financial institutions, from processing such transactions. OFAC notes that it lowered the penalty to $4,000,000 from the proposed $228,840,000, in light of the bank’s operating capacity and the fact that it represented that it ceased the conduct at issue.
In arriving at the settlement amount, OFAC considered various mitigating factors including that (i) OFAC has not issued a violation against the bank in the five years preceding the earliest date of the transactions at issue; (ii) the bank fully cooperated with the investigation into the alleged violations, including by entering into a statute of limitations tolling agreement and agreeing to extend the agreement; (iii) the bank provided significant investigative leads regarding a foreign financial institution that hosted an account involved in processing the transactions; and (iv) the bank undertook several remedial measures in response to the alleged violations, such as exiting the Sudanese market in 2014, hiring new senior management, and implementing improvements to its compliance program.
OFAC also considered various aggravating factors, including that (i) the bank exhibited “reckless disregard" for U.S. sanctions regulations when it entered the Sudanese market; (ii) the bank ignored warning signs that it may have been violating U.S. law; and (iii) several of the bank’s senior managers were aware of and involved in the conduct giving rise to the alleged violations.
OFAC sanctions persons linked to corruption network in Venezuela
On September 17, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13850 against three individuals and 16 entities connected to two previously sanctioned Colombian nationals (covered by InfoBytes here) for enabling the Maduro regime “to corruptly profit from imports of food aid and distribution in Venezuela.” According to OFAC, the designated individuals are immediate family members with business connections to the sanctioned Colombian nationals “who are responsible for or complicit in, or have directly or indirectly engaged in, any deceptive or corrupt transaction or series of transactions with the Government of Venezuela or projects or programs administered by the Government of Venezuela.” The 16 designated entities, OFAC noted, are either owned or controlled by the designated individuals or one of the sanctioned Colombian nationals. As a result of the sanctions, “all property and interests in property of the individuals and entities designated today, and of any entities that are owned, directly or indirectly, 50 percent or more by those individuals or entities, that are in the United States or in the possession or control of U.S. persons are blocked and must be reported to OFAC.” OFAC noted that its regulations “generally prohibit” U.S. persons from participating in transactions with the designated entities and individuals. OFAC also referred financial institutions to Financial Crimes Enforcement Network advisories FIN-2019-A002, FIN-2017-A006, FIN-2017-A003, and FIN-2018-A003 for further information concerning the efforts of Venezuelan government agencies and individuals to use the U.S. financial system and real estate market to launder corrupt proceeds, as well as human rights abuses connected to corrupt foreign political figures and their financial facilitators.
OFAC sanctions North Korean cyber groups
On September 13, the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order (E.O.) 13722 against three North Korean state-sponsored cyber groups allegedly responsible for North Korea’s malicious cyber activity on critical infrastructure around the world. OFAC cited cyber attacks using phishing and backdoor intrusions, targeting a range of organizations that included financial institutions. In addition to malicious cyber activities on conventional financial institutions and major companies, North Korea’s cyber operations also targeted Virtual Asset Providers and cryptocurrency exchanges “to possibly assist in obfuscating revenue streams and cyber-enabled thefts that also potentially fund North Korea’s WMD and ballistic missile programs.” As a result of the sanctions, “all property and interests in property of these individuals and entities 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 financial institutions that if they knowingly facilitate significant transactions for any of the designated individuals, they may be subject to U.S. correspondent account or payable-through account sanctions.
FinCEN deputy director discusses innovation, non-bank supervision, and “culture of compliance”
On September 11, Financial Crimes Enforcement Network (FinCEN) Deputy Director Jamal El-Hindi delivered remarks at the 2019 Money Transmitter Regulators Association’s annual conference. El Hindi’s remarks focused on innovation and reform pertaining to the Bank Secrecy Act (BSA), supervision in the non-bank financial institution sector and coordination with state supervisors, and “the importance of a strong culture of compliance and what it means in a national and global security context.” According to El-Hindi, the BSA/anti-money laundering system “is good; but it can always be improved,” including through innovations that can “help better detect and safeguard against illicit activity.” El-Hindi reiterated FinCEN’s policy statement from December 2018, which encouraged innovation in the banking sector. (Previously covered by InfoBytes here.)
El-Hindi also highlighted recent discussions related to the role artificial intelligence can play in reducing false positives to assist human analysis, and the potential for blockchain technology to enhance transparency through the understanding of customer identity or transaction profiles. He noted that these themes and others emerged from FinCEN’s recent “Innovation Hours Program,” which encourages fintech companies, regtech companies, and financial institutions to present to FinCEN new and innovative products and services for potential use in the financial sector. The program’s upcoming September meeting will focus on innovations in “know your customer” compliance, BSA reporting, and core inter-bank payment and messaging systems associated with industry anti-money laundering/combating the financing of terrorism efforts. Additionally, El-Hindi noted that FinCEN’s enhanced supervision of nonbank financial institutions involves “actively prioritizing and engaging in,” among other activities, (i) conducting examinations of “specialized, rapidly evolving” financial services providers (e.g., virtual currency exchangers and administrators); (ii) identifying sector data to support FinCEN's analytic endeavors; and (iii) developing a stronger framework for risk assessments of the nonbank financial sector “from both the compliance and illicit activity standpoints.” El-Hindi closed his remarks by encouraging FinCEN and other regulators to discuss with foreign counterparts “the concept of a culture of compliance in the United States and what underpins it, and explore with our counterparts concepts that could underpin a culture of compliance in their own jurisdictions.”
U.S. enforcement authorities seize $3.7 million, arrest 281 for involvement in Business Email Compromise schemes
On September 10, the DOJ announced a coordinated effort with the U.S. Department of Homeland Security, the U.S. Department of the Treasury, the U.S. Postal Inspection Service, and the U.S. Department of State, against a series of Business Email Compromise (BEC) scams. The effort was conducted over a four-month period, resulting in the seizure of nearly $3.7 million and the arrest of 281 individuals in the U.S. and overseas, including 167 in Nigeria, 18 in Turkey and 15 in Ghana, along with arrests in France, Italy, Japan, Kenya, Malaysia, and the U.K. According to the DOJ, “BEC, also known as ‘cyber-enabled financial fraud,’ is a sophisticated scam often targeting employees with access to company finances and businesses working with foreign suppliers and/or businesses that regularly perform wire transfer payments.” BEC scams can involve requests for paper checks and may not actually “compromise” an email account or computer network. The DOJ notes that many BEC scams are perpetrated by foreign citizens, who are often members of transnational criminal organizations.
As previously covered by InfoBytes, the Financial Crimes Enforcement Network (FinCEN), in July, discussed efforts designed to restrict and impede Business Email Compromise (BEC) scammers and other illicit actors who profit from email compromise fraud schemes and issued an updated advisory, providing general trends in BEC schemes, information concerning the targeting of non-business entities, and risks associated with the targeting of vulnerable business processes.
OFAC announces anti-terrorism sanctions targeting foreign banks that transact with designated terrorists
On September 10, the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) announced the designation of 15 leaders, individuals, and entities affiliated with terror groups, pursuant to the newly issued Executive Order (E.O.) 13886, “Modernizing Sanctions to Combat Terrorism,” which updates E.O. 13224. E.O. 13886 provides Treasury and the State Department with “new tools” to identify and designate perpetrators. Most notably, under E.O. 13886, foreign financial institutions are now subject to secondary sanctions, allowing OFAC to prohibit or impose strict conditions on the opening or maintaining in the U.S. of a correspondent account or a payable-through account by any foreign financial institution that knowingly facilitates a significant transaction for any Specially Designated Global Terrorist (SDGT), or a person acting on behalf of or at the direction of, or owned or controlled by, a SDGT.
As a result of the sanctions, all property and interests in property of the sanctioned targets subject to U.S. jurisdiction are blocked and must be reported to OFAC. U.S. persons are also generally prohibited from entering into transactions with designated persons. Finally, OFAC warns that persons that engage in transactions with the designated individuals “may themselves be exposed to sanctions or subject to an enforcement action.”
OFAC issues new Venezuela-related general license
On September 9, the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) issued Venezuela-related General License (GL) 34, “Authorizing Transactions Involving Certain Government of Venezuela Persons,” related to Executive Order (E.O.) 13884. As previously covered by InfoBytes, E.O. 13884, among other things, prevents all property and property interests of the Government of Venezuela existing within the U.S. or in the possession of a U.S. person from being transferred, paid, exported, withdrawn, or otherwise dealt in.
GL 34 authorizes transactions with certain Government of Venezuela individuals, including United States citizens; permanent resident aliens of the United States; individuals in the United States who have a valid U.S. immigrant or nonimmigrant visa, other than individuals in the United States as part of Venezuela’s mission to the United Nations; and former employees and contractors of the Government of Venezuela. OFAC also updated FAQ 680 to reflect the new GL.
OFAC strengthens Cuba sanctions, revokes “U-turn” authorization
On September 6, the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) announced amendments effective October 9 to the Cuban Assets Control Regulations (CACR), which implement changes in accordance with President Trump’s 2017 National Security Presidential Memorandum “Strengthening the Policy of the United States Towards Cuba.” Key elements of the changes include:
- Lowering the value of permitted remittances to Cuba. Family remittances will be capped at $1,000 U.S. dollars per quarter that a single remitter can send to an individual Cuban national. Remittances to close family members of prohibited Cuban officials and members of the Cuban Communist Party will be forbidden. While the amendments rescind the authorization for donative remittances, they add a new provision authorizing remittances to certain individuals and independent non-governmental organizations in Cuba “to support the operation of economic activity . . . independent of government control.”
- “U-turn” transactions. The amended sanctions revoke what is commonly referred to as the Cuban “U-turn” authorization. Effective next month, financial institutions subject to U.S. jurisdiction will no longer be authorized to process Cuba-related payments that originate and terminate outside the United States. However, financial institutions subject to U.S. jurisdiction will be permitted to reject such transactions.
An updated list of FAQs related to the CACR has also been published, as well as guidance on recent changes to the sanctions.
The changes will have the greatest impact on U.S. banks offering foreign correspondent banking services and foreign banks utilizing those services, increasing compliance risks for both. They also shut a significant window to the U.S. financial system that foreign persons conducting international trade with Cuba previously enjoyed.
OFAC sanctions Iranian petroleum shipping network
On September 4, the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order (E.O.) 13224 against a complex shipping network “that is directed by and financially supports the Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF) and its terrorist proxy Hizballah.” According to OFAC, the IRGC-QF managed to obfuscate its involvement in moving hundreds of millions of dollars’ worth of Iranian oil over the past year through the use of the sanctioned shipping network for the benefit of illicit actors. The sanctioned shipping network includes 16 entities and 10 individuals, as well as 11 vessels identified as “as property in which blocked persons have an interest.”
As a result of the sanctions, “all property and interests in property of these entities 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 financial institutions that if they knowingly facilitate significant financial transactions for any of the designated entities, they may be subject to U.S. correspondent account or payable-through account sanctions. Additionally, OFAC issued a reminder that “the purchase, acquisition, sale, transport, or marketing of petroleum or petroleum products from Iran is sanctionable pursuant to E.O. 13846,” and released a new shipping advisory warning the maritime community of these types of schemes and the sanctions risks associated with blocked persons.