Skip to main content
Menu Icon Menu Icon
Close

InfoBytes Blog

Financial Services Law Insights and Observations

Filter

Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.

  • OFAC amends communist Chinese military companies general license and related FAQs

    Financial Crimes

    On January 27, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued General License (GL) 1A, “Authorizing Transactions Involving Securities of Certain Communist Chinese Military Companies,” which supersedes and replaces GL 1 (covered by InfoBytes here). GL 1A permits transactions and activities otherwise prohibited by Executive Order (E.O.) 13959 involving “publicly traded securities, or any securities that are derivative of, or are designed to provide investment exposure to such securities, of any entity whose name closely matches, but does not exactly match, the name of a Communist Chinese Military Companies List as defined by section 4(a) of E.O. 13959, as amended.” OFAC also published related frequently asked questions 878 and 879, the latter of which clarifies that GL 1A does not authorize transactions with subsidiaries of companies on the Communist Chinese Military Companies List.

    Financial Crimes OFAC Department of Treasury China Sanctions Of Interest to Non-US Persons OFAC Designations

    Share page with AddThis
  • OFAC issues new general license and related FAQs involving Chinese military companies

    Financial Crimes

    On January 14, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued General License (GL) 2, “Authorizing Securities Exchanges Operated by U.S. Persons to Engage in Transactions Involving Securities of Communist Chinese Military Companies.” This license permits transactions and activities otherwise prohibited by Executive Order (E.O.) 13959 (which was recently amended) involving “publicly traded securities, or any securities that are derivative of, or are designed to provide investment exposure to such securities, of any entity that is listed on the [OFAC]’s Non-SDN Communist Chinese Military Companies List (NS-CCMC List).” OFAC also published several new frequently asked questions, 871, 872, 873, 874, related to E.O. 13959.

    Financial Crimes OFAC OFAC Designations Of Interest to Non-US Persons Department of Treasury Sanctions China

    Share page with AddThis
  • OFAC announces several actions related to securities transactions involving Chinese military companies

    Financial Crimes

    On January 8, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued General License (GL) 1—“Authorizing Transactions Involving Securities of Certain Communist Chinese Military Companies.” This license permits transactions and activities otherwise prohibited by Executive Order (E.O.) 13959 involving “publicly traded securities, or any securities that are derivative of, or are designed to provide investment exposure to such securities, of an entity whose name closely matches the name of a Communist Chinese military company identified in the Annex to E.O. 13959” but does not appear on OFAC’s Non-SDN Communist Chinese Military Companies List. Authorization is granted through 9:30 am eastern standard time, January 28. The Non-SDN Communist Chinese Military Companies List was also updated the same day.

    OFAC also recently published several new frequently asked questions related to E.O. 13959. Specifically, FAQ 862 states that U.S. persons are not required “to divest their holdings in publicly traded securities (and securities that are derivative of, or are designed to provide investment exposure to, such securities) of the Communist Chinese military companies identified in the Annex to E.O. 13959 by January 11, 2021.” FAQ 863 explains that U.S. persons are permitted to engage in activity related to the following services: “custody, offer for sale, serve as a transfer agent, and trade in covered securities.” Meanwhile, FAQ 864 clarifies that E.O. 13959’s prohibitions apply to “publicly traded securities (or any publicly traded securities that are derivative of, or are designed to provide investment exposure to, such securities)” of any entities with names that exactly or closely match the name of an entity identified in the aforementioned annex. Additionally, FAQ 865 clarifies that “[m]arket intermediaries and other participants may engage in ancillary or intermediary activities that are necessary to effect divestiture” from publicly traded securities of Communist Chinese military companies during relevant wind-down periods or that are otherwise not prohibited under E.O, 13959.

    Financial Crimes OFAC Department of Treasury China Sanctions Of Interest to Non-US Persons OFAC Designations Securities

    Share page with AddThis
  • OFAC issues FAQs on E.O. prohibiting investments supporting Chinese military companies

    Financial Crimes

    On December 28, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) published FAQs covering Executive Order (E.O.) 13959, “Addressing the Threat from Securities Investments that Finance Communist Chinese Military Companies.” As previously covered by InfoBytes, the E.O. generally prohibits “any transaction in publicly traded securities, or any securities that are derivative of, or are designed to provide investment exposure to such securities, of any Chinese military company. . .by any US person.” The E.O. establishes the deadlines for divestment of investments in companies currently listed as Chinese military companies as well as companies that later may be added to the list of Chinese military companies pursuant to Section 1237, or those that the Secretary of the Treasury publicly lists as meeting the criteria set forth in Section 1237(b). In addition to the FAQs, OFAC published a list of the entities identified pursuant to the E.O. as Communist Chinese military companies, along with additional identifying information.

    Financial Crimes OFAC China Of Interest to Non-US Persons Sanctions

    Share page with AddThis
  • OFAC sanctions entities supporting the sale of Iranian petrochemicals

    Financial Crimes

    On December 16, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13846 against four entities for facilitating the export of Iranian petrochemical products on behalf of a previously designated petrochemical company. According to OFAC, the designated entities—China- and United Arab Emirates-based companies—have allegedly provided the previously designated company “with critical shipping services or conducted financial transactions on” its behalf, which has enabled the previously designated company to “continue brokering and moving Iranian petrochemical exports.” As a result of the sanctions, all property and interests in property of the designated persons subject to U.S. jurisdiction are blocked, and any “entities that are owned, directly or indirectly, 50 percent or more by such persons, are also blocked.” OFAC noted that its regulations “generally prohibit” U.S. persons from participating in transactions with the designated persons. OFAC further warned foreign financial institutions that knowingly facilitating significant transactions or providing significant support to the designated persons may subject them to sanctions and could sever their access to the U.S. financial system.

    Financial Crimes OFAC Department of Treasury Sanctions Iran China Of Interest to Non-US Persons OFAC Designations

    Share page with AddThis
  • OFAC announces Hong Kong-related designations

    Financial Crimes

    On December 7, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) added 14 Chinese citizens to the Specially Designated Nationals List. The individuals were designated under Executive Order (E.O.) 13936, which was issued by President Trump in July and, among other things, targets and authorizes the imposition of sanctions on persons who materially assist, sponsor, or provide financial, material, or technological support to activities contributing to the undermining of Hong Kong’s democracy and autonomy. Additionally, E.O. 13936 states that “[a]ll property and interests in property that are in the United States, that hereafter come within the United States, or that are or hereafter come within the possession or control of any United States person, . . .are blocked and may not be transferred, paid, exported, withdrawn, or otherwise dealt in” with any foreign person identified to have engaged in the aforementioned activities.

    Financial Crimes OFAC Department of Treasury Sanctions Hong Kong China Of Interest to Non-US Persons OFAC Designations

    Share page with AddThis
  • President Trump issues Executive Order prohibiting securities investments that finance Chinese military companies

    Financial Crimes

    On November 12, President Trump issued an Executive Order (E.O.) on “Addressing the Threat from Securities Investments that Finance Communist Chinese Military Companies.” The E.O. generally prohibits “any transaction in publicly traded securities, or any securities that are derivative of, or are designed to provide investment exposure to such securities, of any Chinese military company. . .by any US person.” The E.O. establishes the deadlines for divestment of investments in companies currently listed as Chinese military companies as well as companies that later may be added to the list of Chinese military companies pursuant to Section 1237, or those that the Secretary of the Treasury publicly lists as meeting the criteria set forth in Section 1237(b).

    Among other things, the prohibitions apply “except to the extent provided by statutes, or in regulations, order, directives, or licenses that may be issued pursuant to the order, and not withstanding any contract entered into or any license or permit granted before the date of the order.” The E.O. also prohibits any transactions by U.S. persons or within the United States that evade or avoid, have the purpose of evading or avoiding, cause a violation of, or attempt to violate the provisions set forth in the order, as well as any conspiracy to violate any of these prohibitions. Additionally, the Secretary of Treasury—after consulting with heads of other executive departments as deemed appropriate—is authorized to take actions, including promulgating rules and regulations, to carry out the purposes of the E.O.

    Financial Crimes Trump Department of Treasury China Of Interest to Non-US Persons Securities

    Share page with AddThis
  • OFAC sanctions entities for Iranian petrochemical sales

    Financial Crimes

    On October 29, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13846 against eight entities for their alleged “involvement in the sale and purchase of Iranian petrochemical products brokered by [a petrochemical company]. . .designated by Treasury in January 2020.” The designated entities—based in Iran, China, and Singapore—allegedly aided the petrochemical company’s efforts to process and move funds generated by the sale of these products, which were then used to finance the Iranian regime’s “destabilizing agenda of support to corrupt regimes and terrorist groups throughout the Middle East and, more recently, Venezuela.”

    In addition, OFAC also updated its List of Specially Designated Nationals and Blocked Persons to add additional aliases for an Iraq-based bank that was previously designated, among other things, for being “used by Iran’s Central Bank Governor to covertly funnel millions of dollars on behalf of the IRGC-QF to support Hizballah.”

    As a result, all property and interests in property belonging to, or owned by, the designated persons subject to U.S. jurisdiction are blocked, and U.S. persons are also “generally prohibited from engaging in transactions with them.” OFAC further warned foreign financial institutions that knowingly facilitating significant transactions or providing significant support to the designated persons may subject them to sanctions that terminate their access to the U.S. financial system.

    Financial Crimes OFAC Department of Treasury Iran Sanctions Of Interest to Non-US Persons China

    Share page with AddThis
  • Nutrition company settles DOJ, SEC FCPA charges for over $123 million

    Financial Crimes

    On August 28, the DOJ and the U.S. Attorney’s Office for the Southern District of New York announced (see here and here) they had entered into a deferred prosecution agreement with a multinational nutrition company headquartered in Los Angeles, in which the company agreed to pay a criminal fine of over $55.7 million related to violations of the FCPA’s books and records provisions. According to the DOJ, the company “knowingly and willfully conspired with others in a scheme to falsify its books and records and provide corrupt payments and benefits to Chinese government officials.” Between 2007 and 2016, the company’s books showed that its Chinese subsidiary reimbursed its employees “more than $25 million for entertaining and giving gifts to Chinese government officials and Chinese media personnel. . ., some of which was used for improper purposes,” which the DOJ said was part of a scheme to obtain, retain, and increase business in China and remove negative media reports about the subsidiary. The payments were used to obtain and retain “certain direct selling licenses for its wholly-owned subsidiaries in China” and to “improperly influenc[e] certain Chinese governmental investigations into [the subsidiary’s] compliance with Chinese laws,” as well as to influence state-owned or controlled media.

    As part of the deferred prosecution agreement, the company agreed to cooperate with the DOJ’s ongoing or future criminal investigations and to enhance its compliance program. The company received credit for cooperating with the investigation and taking remedial measures such as “terminating and disciplining individuals who orchestrated the misconduct, adopting heightened controls and anti-corruption protocols, and significantly increasing the resources devoted to compliance.”

    The SEC simultaneously announced a resolution in which the company agreed to pay over $58.6 million in disgorgement and more than $8.6 million in prejudgment interest to settle allegations that the company violated the FCPA’s books and records and internal accounting controls provisions.

    Financial Crimes DOJ SEC FCPA Of Interest to Non-US Persons China

    Share page with AddThis
  • OFAC sanctions persons for providing support to Iranian airline, DOJ files concurrent criminal charges

    Financial Crimes

    On August 19, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) designated two companies, as well as the owner of one of the companies, pursuant to Executive Order 13224 for allegedly providing material support to an Iranian airline previously “designated under counterterrorism authorities for support to Iran’s Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF), as well as under a counter proliferation authority that targets weapons of mass destruction proliferators and their supporters.” According to OFAC, the designated persons allegedly provided services to assist the airline sustain its fleet of aircraft and allow it to support the IRGC-QF, as well as transport Iranian technicians and technical equipment to Venezuela to support the Maduro regime. The designations follow a recent OFAC action that targeted a China-based company for allegedly acting as a general sales agent for or on behalf of the Iranian airline (covered by InfoBytes here), and serves as “another warning to the international aviation community of the sanctions risk for individuals and entities that choose to maintain commercial relationships with [the Iranian airline] and other designated airlines.” As a result of the sanctions, all property and interests in property of the designated persons that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC. OFAC further noted that its regulations “generally prohibit all dealings by U.S. persons or within (or transiting) the United States that involve any property or interests in property of blocked or designated persons, unless licensed or exempt,” and warned foreign financial institutions that knowingly facilitating significant transactions or providing significant financial services to the designated persons may subject them to U.S. correspondent account or payable-through sanctions.

    On the same day, the DOJ announced criminal charges against the designated individual and one of the companies for allegedly conspiring to violate U.S. export laws, defraud the U.S., and violate the International Emergency Economic Powers Act (IEEPA) and the Iranian Transactions and Sanctions Regulations (ITSRs).

    Financial Crimes OFAC Department of Treasury Sanctions Iran DOJ Of Interest to Non-US Persons China

    Share page with AddThis

Pages