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OFAC reaches multiple settlements to resolve Cuban sanctions violations
On April 21, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $141,442 settlement with a Colorado-based multinational mining firm for allegedly violating the Cuban Assets Control Regulations (CACR). According to OFAC’s web notice, between June 2016 to November 2017, a wholly-owned subsidiary of the firm purchased Cuban-origin explosives and explosive accessories from a third-party vendor to be used in a mine construction. The distributor, on the subsidiary’s behalf, imported Cuban-origin explosives and explosive accessories for the mine on at least four separate occasions, despite the subsidiary being “generally prohibited from dealing in Cuban-origin goods.” According to OFAC, shipping documents clearly identified that the goods were sourced from Cuba. In addition, purchase orders failed to contain express statements that items provided to the subsidiary may not originate from embargoed jurisdictions, nor did the subsidiary ask for country-of-origin information for the goods acquired from its suppliers. Additionally, OFAC contended that the subsidiary’s failure to provide appropriate export and trade sanctions training led to the apparent violations.
In arriving at the settlement amount, OFAC considered various aggravating factors, including that (i) the parent firm and subsidiary failed to exercise reasonable due diligence to ensure it complied with U.S. Cuba sanctions requirements; and (ii) the firm and its subsidiaries and affiliates are “a large and sophisticated organization operating globally as a leading gold producer with experience and expertise in international transactions.” OFAC also considered various mitigating factors, including that (i) the apparent violations were self-disclosed and constituted a non-egregious case; (ii) the firm and subsidiary have not received a penalty notice from OFAC in the preceding five years; (iii) the amount of payments were not significant compared to the total volume of transactions undertaken on an annual basis; and (iv) the firm and its subsidiary cooperated with the investigation, signed a tolling agreement, and are currently implementing remedial measures to prevent future violations.
Separately, OFAC also announced a $45,908 settlement with a Florida-based company affiliated with a distributor of explosives and accessories for mining operations. According to the web notice issued in this action, on four occasions in 2016 and 2017, the company and certain affiliates procured Cuban-origin explosives and related accessories from a third-party vendor originating from Cuba on behalf of a U.S. company for the U.S. company’s mining project in Suriname in violation of the CACR. OFAC contended that the company was responsible for overseeing the processing of purchase orders and invoices for these transactions, and that in 2018, after the U.S. company customer learned of the goods’ Cuban origins, it was asked to no longer procure goods from Cuba. According to OFAC, the apparent violations occurred primarily because of the company’s failure “to understand U.S. prohibitions on dealings in Cuban property or engaging in transactions related to merchandise of Cuban origin outside the United States,” adding that the company did not have a compliance program in place when the four transactions occurred, nor did it realize the transactions were prohibited until they were flagged by the customer. The company immediately ceased all activities involving Cuba after learning of the sanctions implications but did not voluntarily self-disclose the violations, which OFAC deemed non-egregious.
In arriving at the settlement amount, OFAC considered various aggravating factors, including that (i) the company failed to “exercise a minimal degree of caution or care” when procuring Cuban-origin goods from its supplier; (ii) the company “had actual knowledge that it was financing the provision of Cuban-origin goods for export to Suriname”; and (iii) the company’s actions harmed the U.S. sanctions program. Mitigating factors included that the company is (i) small and largely overseen by one individual; (ii) the company has not received a penalty notice from OFAC in the preceding five years; and (iii) the company provided timely information and entered into a tolling agreement. Providing context for the settlement, OFAC stated that “[t]his case illustrates the risks facing companies of any size operating internationally that do not develop or maintain basic awareness of sanctions risks and do not institute appropriate measures to identify and prevent potential violations.”
OFAC settles with money services business for Cuba sanctions violations
On January 3, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $91,172 settlement against a registered money services business for allegedly processing payment transactions for guests traveling to Cuba "for reasons outside of OFAC’s authorized categories” and failing to maintain certain required records associated with Cuba-related transactions. These actions, OFAC, stated, allegedly violated the Cuban Assets Control Regulations (CACR). According to OFAC’s web notice, as the company scaled up its traveler services in Cuba, its technology platforms were allegedly unable to manage the associated sanctions risks, which led to the alleged violations. Among other things, OFAC maintained that the company used a manual process to screen hosts and guests for potential sanctions issues until it began using a customized IP blocking system. Additionally, the company’s alleged recordkeeping violations were primarily attributed to technical defects involving an older version of the company’s mobile application that could be used for Cuba-related travel without “maintain[ing] complete functionality for [g]uests to make an attestation regarding their reason for travel to Cuba.”
In arriving at the settlement amount, OFAC considered various aggravating factors, including, among other things, that the company is a large, sophisticated U.S.-based technology company, and that its alleged violations followed a 2015 foreign policy change with respect to Cuba, as well as associated changes to the CACR, which maintained certain specified restrictions. OFAC also considered various mitigating factors, including that the company (i) did not receive a penalty notice or finding of violation in the past five years preceding the earliest transaction giving rise to this settlement; (ii) conducted a comprehensive review of its sanctions compliance program, voluntarily reported its findings to OFAC, and substantially cooperated with the investigation; and (iii) undertook significant remedial measures to ensure sanctions compliance.
OFAC sanctions Cuban officials
On August 20, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13818 against three Cuban individuals under the Global Magnitsky Human Rights Accountability Act. According to OFAC, this is the fourth round of sanctions since protests started in Cuba in July, as OFAC continues to impose sanctions on individuals and entities connected with actions to suppress peaceful, pro-democratic protests in Cuba (covered by InfoBytes here and here). As a result of the sanctions, all transactions by U.S. persons or in the U.S. that involve any property or interests in property of designated or otherwise blocked persons are generally prohibited. OFAC notes that its regulations generally prohibit U.S. persons from participating in transactions with these persons, which include “the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any blocked person or the receipt of any contribution or provision of funds, goods or services from any such person.”
OFAC sanctions Cuban officials
On August 13, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13818 against two Cuban individuals and one Cuban entity under the Global Magnitsky Human Rights Accountability Act. According to OFAC, this is the third round of sanctions since protests started in Cuba in July, as the Department continues to impose sanctions on individuals and entities connected with actions to suppress peaceful, pro-democratic protests in Cuba (covered by InfoBytes here and here). As a result of the sanctions, all transactions by U.S. persons or in the U.S. that involve any property or interests in property of designated or otherwise blocked persons are generally prohibited. OFAC notes that its regulations generally prohibit U.S. persons from participating in transactions with these persons, which include “the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any blocked person or the receipt of any contribution or provision of funds, goods or services from any such person.”
Treasury issues Cuba joint fact sheet
On August 11, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) and Department of Commerce’s Bureau of Industry and Security (BIS) released a fact sheet to emphasize the U.S. government’s commitment to promoting the ability of the Cuban people “to seek, receive, and impart information” through access to the internet. According to OFAC, “[t]he fact sheet highlights the most relevant exemptions and authorizations pertinent to supporting the Cuban people through the provision of certain internet and related telecommunications services.” The fact sheet also notes that though most transactions between persons subject to U.S. jurisdiction and Cuba are prohibited under the current embargo, the U.S. government permits certain activities to support the Cuban people’s access to information on the internet. The relevant OFAC regulations can be found in the Cuban Assets Control Regulations, 31 C.F.R. part 515 and the relevant BIS regulations can be found in the Export Administration Regulations, 15 C.F.R. parts 730-774.
OFAC sanctions Cuban officials
On July 30, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13818 against two Cuban individuals and one Cuban entity under the Global Magnitsky Human Rights Accountability Act. According to OFAC, the sanctions expand on Treasury’s July 22 designations by sanctioning additional persons in connection with actions to suppress peaceful, pro-democratic protests in that began on July 11 in Cuba (covered by InfoBytes here). As a result of the sanctions, all transactions by U.S. persons or in the U.S. that involve any property or interests in property of designated or otherwise blocked persons are generally prohibited. OFAC notes that its regulations generally prohibit U.S. persons from participating in transactions with these persons, which include “the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any blocked person or the receipt of any contribution or provision of funds, goods or services from any such person.”
OFAC sanctions Cuban officials
On July 22, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13818 against one Cuban individual and one Cuban entity under the Global Magnitsky Human Rights Accountability Act. According to OFAC, the sanctioned parties are connected with the repression of peaceful, pro-democratic protests in Cuba that began on July 11. As a result of the sanctions, all transactions by U.S. persons or in the U.S. that involve any property or interests in property of designated or otherwise blocked persons are generally prohibited. OFAC notes that its regulations generally prohibit U.S. persons from participating in transactions with these persons, which include “the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any blocked person or the receipt of any contribution or provision of funds, goods or services from any such person.”
OCC marks first anniversary of financial inclusion project
On July 15, the OCC marked the one-year anniversary of Project REACh, an initiative launched by the agency last year to promote greater financial inclusion of underserved populations. As previously covered by InfoBytes, Project REACh (Roundtable for Economic Access and Change) brings together leaders from the banking industry, national civil rights organizations, and various businesses and technology organizations to identify and reduce barriers to accessing capital and credit. While the project’s scope in its first year included a national workstream and a regional effort centered on Los Angeles, acting Comptroller Michael Hsu announced that Project REACh will soon expand its regional focus to Washington, D.C., Dallas, and Detroit in order “to replicate the success of the project’s national workstream.” In prepared remarks, Hsu emphasized that addressing economic inequality needs to be “transformational, not transactional,” pointing out that “the financial system can perpetuate inequality” as “traditional credit scores, traditional overdraft practices, and predatory lending make it expensive to be poor, while wealthy clients can borrow and access a wide range of financial services at lower cost.” Hsu explained that Project REACh’s structure and approach allows for collaborative problem identification and problem solving and creates opportunities for business and community representatives to incubate ideas and pilots “that can later be implemented on a broader scale than possible by any one institution.”
NYDFS announces Statewide Office of Financial Inclusion and Empowerment
On April 13, NYDFS announced the new Statewide Office of Financial Inclusion and Empowerment, which is intended to meet the financial services needs of low- and middle-income New Yorkers and provide a “single-stop state resource” for consumers to access financial help. Superintended Linda A. Lacewell stated that the intention of the office is to “advance the Department’s strategic financial inclusion initiatives” and “pilot and develop policy initiatives designed to help further financial inclusion and empowerment.” Among other things, the new office will (i) maintain a centralized list of financial services counseling providers from across the state in the areas of housing, student loan, debt, and general financial literacy; (ii) coordinate state and local services intended to expand access to credit and opportunities for wealth building; (iii) “[i]ncubate new programs to expand access to safe and affordable banking services, credit and financial education,” and “coordinate public-private partnerships”; and (iv) foster the provision of high-quality, low-cost financial products across New York. Lacewell also announced that the Honorable Tremaine Wright will serve as the office’s first director. Wright, who will develop and implement the office’s policies and programs, was previously elected to the New York State Assembly where she was chair of New York State Black, Puerto Rican, Hispanic & Asian Legislative Caucus.
Digital payment solutions company settles with OFAC for $500k
On February 18, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $507,375 settlement with a Georgia-based payment processing solutions company for 2,102 apparent violations of multiple sanctions programs. According to OFAC’s web notice, between 2013 and 2018, the company—which offers solutions for merchants to accept digital currency as payment for goods and services—allegedly processed thousands of transactions on behalf of individuals located in sanctioned jurisdictions based on IP addresses and invoice information. Specifically, OFAC alleged that the company “received digital currency payments on behalf of its merchant customers from those merchants’ buyers who were located in sanctioned jurisdictions, converted the digital currency to fiat currency, and then related that currency to its merchants.” While OFAC noted that the company screened its direct merchants against its List of Specially Designated Nationals and Blocked Persons and conducted due diligence to ensure merchants were not located in a sanctioned jurisdiction, the company’s transaction review process allegedly failed to screen identification and location data for its merchants’ buyers, many of whom were located in Crimea, Cuba, North Korea, Iran, Sudan, and Syria. As a result, these buyers, OFAC claimed, were able to make purchases from merchants located in the U.S. and elsewhere using digital currency on the company’s platform in violation of an executive order and multiple sanctions regulations.
In arriving at the settlement amount, OFAC considered various aggravating factors, including that the company (i) “failed to exercise due caution or care for its sanctions compliance obligations” by allowing buyers in sanctioned jurisdictions to transact with merchants despite having “sufficient information to screen those customers”; and (ii) conveyed more than $128,000 in economic benefit to individuals in OFAC sanctioned jurisdictions.
OFAC also considered various mitigating factors, including that the company (i) had implemented certain sanctions compliance controls, including due diligence and sanctions screening; (ii) trained employees—including senior management—that signing up merchants from sanctioned jurisdictions or trading with sanctioned persons is prohibited; (iii) cooperated with OFAC’s investigation; and (iv) terminated the conduct leading to the apparent violations and undertook remedial measures to minimize the risk of similar violations from occurring in the future. The base civil monetary penalty applicable in this action is $2,255,000; however, the lower settlement amount reflects OFAC’s consideration of the general factors under the Economic Sanctions Enforcement Guidelines.