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OFAC designates shipping network for aiding North Korea
On August 30, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced additions to the Specially Designated Nationals List pursuant to Executive Order 13810. The additions identify two Taiwanese individuals and three entities, as well as one Hong Kong-based vessel identified as blocked property, for allegedly facilitating the delivery of fuel originally intended for the Philippines to North Korean vessels via ship-to-ship transfers. According to OFAC, the additions highlight “North Korea’s continued use of illicit ship-to-ship (STS) transfers to circumvent United Nations . . . sanctions that restrict the import of petroleum products, as well as the U.S. Government’s commitment to implement existing UN Security Council Resolutions.” 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.
OFAC sanctions bank connected to Hizballah; identifies several individuals as facilitators for HAMAS
On August 29, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13224 (E.O. 13224) against a Lebanon-based financial institution, along with three of its subsidiaries, for allegedly facilitating banking activities for Hizballah. OFAC designated the financial institution as a Specially Designated Global Terrorist “for assisting in, sponsoring, or providing financial, material, or technological support for, or financial or other services to or in support of, Hizballah.” 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 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. The designated entities are also subject to secondary sanctions pursuant to the Hizballah Financial Sanctions Regulations, which implement the Hizballah International Financing Prevention Act of 2015, and allow OFAC the authority to “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 knowingly facilitates a significant transaction for Hizballah, or a person acting on behalf of or at the direction of, or owned or controlled by, Hizballah.”
The same day, OFAC also designated several financial facilitators pursuant to E.O. 13224 for allegedly acting as intermediaries between Iran’s Islamic Revolutionary Guard Corps-Qods Force and HAMAS’s operational arm. According to OFAC, the Lebanon and Gaza-based financial facilitators are responsible for moving tens of millions of dollars from Iran through Hizballah to HAMAS, funding violence against people in Gaza. As a result, 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. Furthermore, “persons that engage in certain transactions with the individuals designated today may themselves be exposed to sanctions or subject to an enforcement action.”
FinCEN division will investigate global money-laundering threats
On August 28, the Financial Crimes Enforcement Network (FinCEN) announced a new division intended to investigate global money laundering threats. The Global Investigations Division (GID)—led by Matthew Stiglitz, a former senior official in the Department of Justice’s Criminal Division—will target activities such as weapons of mass destruction proliferation, rogue state actors, transnational organized crime, and narcotics trafficking. According to FinCEN, GID will utilize the agency’s Bank Secrecy Act authorities, including Section 311 of the USA PATRIOT Act, to combat both domestic and international illicit terrorist finance and money laundering threats.
OFAC sanctions procurement networks supporting Iran’s missile programs
On August 28, the U.S. Treasury Department's Office of Foreign Assets Control (OFAC), pursuant to Executive Order (E.O.) 13382, designated two Iranian networks involved in the procurement of materials for persons related to the Islamic Revolutionary Guard Corps, the Iranian regime’s missile program, and Iran’s Ministry of Defense and Armed Forces Logistics. According to OFAC, one of the identified networks utilized a Hong Kong-front company to evade U.S. and international sanctions in order to “facilitate tens of millions of dollars’ worth of proliferation activities targeting U.S. technology and electronic components.” As a result of the sanctions, “all property and interests in property of these individuals 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 individuals, 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.
OFAC and FinCEN target synthetic opioids
On August 21, the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) and Treasury’s Financial Crimes Enforcement Network (FinCEN) announced coordinated actions related to the manufacturing, selling, or distribution of synthetic opioids or their precursor chemicals. OFAC identified two Chinese nationals, a trafficking organization, and a related entity as “significant foreign narcotics traffickers” pursuant to the Foreign Narcotics Kingpin Designation Act, for running “an international drug trafficking operation that manufactures and sells lethal narcotics, directly contributing to the crisis of opioid addiction, overdoses, and death in the United States.” OFAC notes that, in August 2018, the U.S. Attorney’s Office for the Northern District of Ohio unsealed an indictment, which charged one of the Chinese nationals and his father with operating a conspiracy that allegedly manufactured and shipped deadly fentanyl analogues, cathinones, and cannabinoids to at least 37 U.S. states. Additionally, in September 2017, the U.S. Attorney’s Office for the Southern District of Mississippi indicted another significant foreign narcotics trafficker on two counts of conspiracy to manufacture and distribute multiple controlled substances, including fentanyl, and seven counts of manufacturing and distributing the drugs in specific instances. As a result of the sanctions designation, “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.”
Additionally, FinCEN released an advisory alerting financial institutions to financial schemes related to the trafficking of fentanyl and other synthetic opioids. The advisory provides detailed explanations of the funding mechanisms associated with fentanyl trafficking patterns, including (i) purchases from a foreign source of supply made using money services businesses (MSBs), bank transfers, or online payment processors; (ii) purchases from a foreign source of supply made using convertible virtual currency (CVC); (iii) purchases from a U.S. source of supply made using a MSB, online payment processor, CVC, or person-to-person sales; and (iv) more general money laundering mechanisms associated with procurement and distribution. The advisory also provides a list of red flags financial institutions should be aware of that may assist in identifying suspected schemes related to illicit fentanyl trafficking. Lastly, the advisory reminds financial institutions of their regulatory obligations to combat illicit financing and anti-money laundering, such as due diligence obligations, customer identification, and suspicious activity reporting.
OFAC announces settlement with trade credit insurer for sanctions violations
On August 16, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $345,315 settlement with a Maryland-based trade credit insurer for two alleged violations of the Foreign Narcotics Kingpin Sanctions Regulations. The settlement resolves potential civil liability for the company’s receipt of payment from the liquidation of assets belonging to a company that was added to the List of Specially Designated Nationals and Blocked Persons in 2016. According to OFAC, by accepting the assignment to collect debt owed by the designated company and receiving payment, the company violated sanctions regulations.
In arriving at the settlement amount, OFAC considered various mitigating factors, including (i) the company has not received a penalty or finding of a violation in the five years preceding the transactions at issue; (ii) the company voluntarily conducted a full internal review, cooperated with OFAC during the investigation, and undertook remedial efforts to minimize the risk of similar violations from occurring in the future; and (iii) the company agreed to implement certain compliance commitments to ensure the strength of its sanctions compliance program.
OFAC also considered various aggravating factors, including that the company did not voluntarily self-disclose the issue to OFAC and the company failed to undertake measures to confirm the assignment of debt and acceptance of payment was permitted under existing authorizations.
FinCEN director discusses gaming industry AML compliance
On August 13, Financial Crimes Enforcement Network (FinCEN) Director Kenneth Blanco delivered remarks at the 12th Annual Las Vegas Anti-Money Laundering Conference stressing the need for compliance within the gaming industry, particularly as new technologies emerge such as mobile gaming and the use of convertible virtual currencies (CVC) increases. With the U.S. Supreme Court issuing a decision in May holding that states can legalize sports gambling (previously covered by InfoBytes here), Blanco stated that casinos need to consider ways to integrate their sports betting programs—including mobile sports betting apps—into their existing anti-money laundering programs. These measures must include establishing and implementing procedures for detecting and reporting suspicious activities, Blanco noted, reminding the audience of FinCEN’s FAQs designed to assist financial institutions when reporting cyber indicators and cyber-enabled financial crime.
Blanco also discussed FinCEN’s work with respect to cybersecurity and virtual payments, noting, among other things, that both online and physical casinos that accept CVC need to consider how they review transactions to determine the source of the currency and recognize indicators of suspicious activity. Blanco referred casinos to consolidated guidance issued by FinCEN in May (previously covered by InfoBytes here), and expressed a concern that “CVC-related SAR filings by casinos have not been as robust as expected since the May CVC guidance and advisory were published.” He further stressed the importance of information-sharing between casinos, and highlighted that sharing SARs can contribute to the identification of suspicious transactions as well as Bank Secrecy Act compliance responsibilities.
OFAC amends sanctions regulations targeting Iran’s metal sector
On August 6, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced that the “Iranian Human Rights Sanctions Regulations” has been renamed as the “Iranian Sector and Human Rights Abuses Sanctions Regulations.” The amended sanctions regulations implement Executive Order (E.O.) 13871 (previously covered by InfoBytes here), which authorizes the imposition of sanctions on persons determined to operate in Iran’s iron, steel, aluminum, and copper sectors. OFAC concurrently amended and published several new FAQs, including a discussion of the relevant 90-day wind-down period for affected transactions as well as sanction exceptions. The amendments take effect August 7.
Visit here for additional InfoBytes coverage of actions related to Iran.
OFAC fines truck manufacturer for Iranian sanctions violations
On August 6, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a roughly $1.7 million settlement with a Washington-based truck manufacturer for 63 alleged violations of the Iranian Transactions and Sanctions Regulations. The settlement resolves potential civil liability for actions taken by a wholly-owned subsidiary of the company that allegedly sold or supplied trucks with a total transactional value of over $5.4 million to European customers, but knew or had reason to know the trucks were ultimately intended for buyers in Iran.
In arriving at the settlement amount, OFAC considered various mitigating factors, including that (i) neither the company nor the subsidiary have received a penalty or finding of a violation in the five years prior to the transactions at issue; (ii) the subsidiary had in place at the time of the alleged violations a trade sanctions compliance program with contractual prohibitions on dealers and service partners that were re-selling products in violation of U.S. trade sanctions; and (iii) the company and subsidiary voluntarily self-disclosed the issue to OFAC, cooperated with OFAC during the investigation, and undertook remedial efforts to minimize the risk of similar violations from occurring in the future.
OFAC also considered various aggravating factors, including that the subsidiary failed to exercise caution when alerted to warning signs regarding the potential sales, and that in each instance, a subsidiary employee was aware of the conduct leading to the alleged violations.
Visit here for additional InfoBytes coverage of actions related to Iran.
President Trump issues Executive Order blocking property of the Government of Venezuela
On August 5, President Trump issued Executive Order (E.O.) 13884 titled “Blocking Property of the Government of Venezuela,” which, among other things, prevents all property and interest in property 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. E.O. 13884 is being issued in light of the actions of the Maduro regime, “as well as human rights abuses, including arbitrary or unlawful arrest and detention of Venezuelan citizens, interference with freedom of expression, including for members of the media, and ongoing attempts to undermine Interim President Juan Guaido and the Venezuelan National Assembly's exercise of legitimate authority in Venezuela.”
In connection with the issuance of the E.O, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued new and revised FAQs, as well as 12 amended general licenses (General Licenses 2A, 3F, 4C, 7C, 8C, 9E, 10A, 13C, 15B, 16B, 18A, 20A) and 13 new general licenses (General Licenses 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33) related to Venezuela.
Additionally, OFAC issued new guidance highlighting the U.S. government’s “commitment to the unfettered flow of humanitarian aid to the Venezuelan people.” OFAC notes that its regulations and general licenses allow U.S. persons to continue to provide humanitarian support to the Venezuelan people, including via transactions through the U.S. financial system for authorized activities. OFAC sanctions do not prohibit transactions involving the country or people of Venezuela, provided blocked persons or proscribed conduct are not involved.
For continuing InfoBytes coverage on Venezuela, including more information on blocked persons or actions, click here.