InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
OFAC issues temporary extensions of Ukraine-related General Licenses
On September 21, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced the issuance of Ukraine-related General Licenses (GL) 13D, 14A, and 16A, which amend previous licenses and extend the expiration date of those licenses from October 23 to November 12 for wind-down transactions relating to a specific list of companies and subsidiaries that otherwise would be prohibited by Ukraine-Related Sanctions Regulations. GL 13D supersedes GL 13C (see previous InfoBytes coverage here) and authorizes, among other things, (i) the divestiture of the holdings of specific blocked persons to a non-U.S. person; and (ii) the facilitation of transfers of debt, equity, or other holdings involving specified blocked persons to a non-U.S. person. GL 14A, which supersedes GL 14, relates to specific wind-down activities involving a Russian aluminum producer sanctioned last April (see previous InfoBytes coverage here). Finally, GL 16A supersedes GL 16 and authorizes, as previously covered by InfoBytes, the maintenance or wind down of operations, contracts, or other agreements that were in effect prior to April 6, 2018 and that involve a specific list of entities.
Visit here for additional InfoBytes coverage on Ukraine sanctions.
President Trump issues Executive Order delegating sanctions implementation authority; OFAC issues new CAATSA - Russia-related FAQ
On September 20, President Trump announced the issuance of Executive Order 13849 (E.O. 13849), “Authorizing the Implementation of Certain Sanctions Set Forth in the Countering America’s Adversaries Through Sanctions Act (CAATSA),” pursuant to national emergencies previously declared in Executive Orders 13660, 13694, and 13757. E.O. 13849 grants authority to the Secretary of the Treasury to take certain actions to implement the sanctions against identified persons, including the promulgation of regulations. Among other things, E.O. 13849 prohibits: (i) any U.S. financial institution from making loans or extending credits to sanctioned persons “totaling more than $10,000,000 in any 12-month period, unless the person is engaged in activities to relieve human suffering and the loans or credits are provided for such activities”; (ii) any foreign exchange transactions, subject to U.S. jurisdiction, in which the sanctioned person has any interest; and (iii) transfers of credit or payments between, by, or through financial institutions for the benefit of a sanctioned person subject to U.S. jurisdiction. E.O. 13849 further describes the actions that can be taken to implement the sanctions.
In response to E.O. 13849, the U.S. Treasury Department’s Office of Foreign Assets Control published a new CAATSA - Russia-related FAQ providing additional clarifying information.
Find continuing InfoBytes covered on CAATSA-related sanctions here.
Class certification granted to hedge fund investors
On September 14, a New York federal district court granted class certification to a group of shareholder investors suing an American hedge fund management firm and two of its senior executives on the grounds that the investors were misled about a government investigation into the company’s activities in Africa. In finding that the proposed class met all the requirements for certification, the court certified a class of investors that held some of the more than 100 million outstanding shares between February 2012 and August 2014, the time period in which the firm allegedly violated the Securities Exchange Act. Plaintiffs claim that the firm told investors it was not under any pending judicial or administrative proceeding that might have a material impact on the firm, when in fact it was under DOJ and SEC investigation over allegations that its employees were bribing government officials in Africa. The allegations against the firm were made public in 2014 media reports detailing government scrutiny into its dealings in Africa.
Click here for prior FCPA Scorecard’s coverage of this matter.
OFAC publishes new Ukraine-related FAQs providing guidance on “maintenance” related to wind-down activities
On September 14, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced the publication of two new FAQs to provide additional guidance on “maintenance” as that term is used in General Licenses (GLs) 14, 15, and 16. As previously covered in InfoBytes (see posts here, here, and here), the GLs authorize specified wind-down activities otherwise prohibited by Ukraine-related sanctions regulations. According to OFAC, maintenance “generally includes all transactions and activities ordinarily incident to performing under a contract or agreement in effect prior to April 6, 2018, provided that the level of performance is consistent with the terms of the general license and consistent with past practices that existed between the party and the blocked entity prior to April 6, 2018.”
Visit here for additional InfoBytes coverage on Ukraine/Russia-related sanctions.
President Trump issues Executive Order authorizing sanctions in the event of foreign interference in U.S. elections
On September 12, President Trump announced the issuance of Executive Order 13848 (E.O.), which authorizes sanctions against foreign persons found to have engaged in, assisted, or otherwise supported foreign interference in U.S. elections. Should an intelligence assessment determine such activity has occurred, Section 2 of the E.O. requires that transactions in property and interests of such interfering persons that are in the U.S. or under control of a U.S. person be blocked, and Section 3 of the E.O. directs the Secretaries of State and Treasury—in consultation with the heads of other appropriate agencies—to recommend to the President additional sanctions against “the largest business entities licensed or domiciled in a country whose government authorized, directed, sponsored, or supported election interference, including at least one entity from each of the following sectors: financial services, defense, energy, technology, and transportation.” Such additional sanctions may include, with respect to the targeted entities, (i) blocking all transactions related to property and interests subject to U.S. jurisdiction; (ii) prohibitions on U.S. financial institutions making loans or extending credit to identified entities; (iii) prohibitions on transfers of credit or payments between, by, or through financial institutions for the benefit of such an entity; and (iv) prohibitions on U.S. persons investing in equity or debt of such entities.
OFAC reaches $1.5 million settlement with electronics company for alleged Iranian sanctions violations
On September 13, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $1.5 million settlement with a California-based electronics company for alleged violations of the Iranian Transactions and Sanctions Regulations when it sold equipment to a Dubai-based distributor it knew or had reason to know distributed most, if not all, of its products to Iran. The settlement resolves litigation between the California company and OFAC stemming from a 2014 lawsuit challenging OFAC’s initial $4.07 million civil penalty. While the lower count ultimately granted summary judgment in favor of OFAC after finding enough evidence that the company knew the distributor’s business was primarily in Iran at the time the shipments were made, upon appeal, the D.C. Circuit reached a split decision in May 2017 setting aside OFAC’s initial penalty. While the appellate court affirmed that 34 of 39 shipments in question were in violation of the sanctions regulations, the company had produced emails indicating that the other shipments were intended for a retail store in Dubai. Because the penalty was calculated in such a way that the two shipments categories were “intertwined,” the court remanded the matter to OFAC for further consideration of the total penalty calculation.
In arriving at the settlement amount, OFAC considered the following aggravating factors: (i) “the [a]lleged [v]iolations constituted or resulted in a systematic pattern of conduct”; (ii) the company exported goods valued at over $2.8 million; and (iii) the company had no compliance program in place at the time of the alleged violations. However, OFAC also considered mitigating factors such as the company’s status as a small business, the company not receiving a penalty or finding of a violation in the five years prior to the transactions at issue, and some cooperation with OFAC. OFAC further noted that following litigation, the company “took additional remedial actions to address the conduct that led to the [a]lleged [v]iolations, including terminating its relationship with [the Dubai-based distributor] and instituting an OFAC sanctions compliance program.”
Financial advisor pleads guilty to money laundering in Ecuadorian energy company case
On September 11, a Miami-based financial advisor pleaded guilty to one count of conspiracy to commit money laundering in connection with his role in making corrupt payments to officials of an Ecuador state-owned and state-controlled energy company. He is scheduled to be sentenced on Nov. 14 in the Southern District of Florida.
He is the fourth individual, including two former officials of the company, to plead guilty in this case, which concerns efforts by an oil services contractor to make payments to the company's officials in an effort to retain existing contracts and win new business with the company. Another individual who was charged in the same indictment as him, has pleaded not guilty and is currently set to go to trial on October 15. His charges include one count of conspiring to violate the FCPA and one count of violating the FCPA.
Aircraft manufacturing company settles FCPA charges with SEC
On September 12, the SEC announced that an aircraft manufacturing company agreed to pay $13.9 million to settle FCPA charges related to payments made through a subsidiary in connection with the sales of elevator and airline equipment in Azerbaijan and China. According the SEC’s Order, from 2012 through 2014, the Connecticut-based company, through its wholly owned subsidiary, made illicit payments to Azerbaijani officials to facilitate the sales of elevator equipment.
The Order also included other conduct that both the DOJ and SEC have focused on in recent years, including the use of agents and gifts and entertainment. For example, the Order detailed conduct by the company and a joint venture partner from 2009 to 2013 in which an agent in China received improper commissions totaling $55 million in connection with the company’s attempt to win airline business in China. The Order also found that the company, from 2009 through 2015, improperly “provided trips and gifts to various foreign officials in China, Kuwait, South Korea, Pakistan, Thailand, and Indonesia” in order to obtain business. The company consented to the SEC’s order without admitting or denying the findings that it violated the anti-bribery, books and records, and internal accounting controls provisions of the FCPA.
DOJ secures additional guilty pleas in wide-ranging Venezuelan energy company case
On September 13, the DOJ announced two additional guilty pleas in its wide-ranging foreign bribery investigation into payments to officials of a Venezuela’s state-owned energy company. The first individual, a former manager of a Texas-based logistics and freight forwarding company, pleaded guilty to one count of conspiracy to violate the FCPA in connection with corruptly securing contracts, contract extensions, and favorable contract terms from the energy company. He pleaded guilty in the Southern District of Texas, as did the second individual, the energy company official who accepted the bribes, and whose guilty plea was also unsealed. As now revealed, in July 2017, the second individual pleaded guilty under seal to conspiracy to commit money laundering. Both individuals are scheduled to be sentenced in February 2019. Prior Scorecard coverage of the PDVSA matter can be viewed here.
With these guilty pleas, DOJ has now brought charges against 18 individuals as part of its investigation into bribery at the company. Fourteen individuals have pleaded guilty. Due to the limits inherent in the FCPA, the DOJ’s charges against the corrupt foreign officials such as the second individual (i.e., the energy company's employees) have been based on money laundering and not FCPA (see Prior FCPA Scorecard Coverage here and here) whereas the charges against the U.S.-based individuals who made and/or directed the corrupt payments generally have included FCPA violations (see Prior FCPA Scorecard Coverage here).
OFAC adds North Korea-controlled information technology companies in China and Russia to Specially Designated Nationals List
On September 13, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced that it made additions to the Specially Designated Nationals List pursuant to Executive Order (E.O.) 13722 and E.O. 13810. These additions identify one individual and two entities connected to illicit revenue earned by North Korea from overseas information technology (IT) workers. According to OFAC, the China and Russia-based front companies were actually managed and controlled by North Koreans, while the designated North Korean individual acted on behalf of the Chinese company. All designees were purported to have (i) “engaged in, facilitated, or been responsible for the exportation of workers from North Korea, including exportation to generate revenue for the Government of North Korea or the Workers’ Party of Korea”; and (ii) operated in the North Korean IT industry. As a result, all assets belonging to the identified individual and entities subject to U.S. jurisdiction are blocked, and U.S. persons are generally prohibited from engaging in transactions with them.
See here for previous InfoBytes coverage on North Korean sanctions.