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OFAC Issues License and Guidance on Amended Ukrainian/Russian Sanctions
On November 28, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) released General License 1B to address amendments made to Directives 1 and 2 (Directives) of its Ukrainian/Russian-related Sectoral Sanctions. The amendments were made in accordance with the Countering America’s Adversaries Through Sanctions Act of 2017 (CAATSA). (See previous InfoBytes coverage on Directives here.) The Directives prohibit U.S. persons from dealings in certain equity and debt of persons determined by OFAC to be part of the Russian financial and energy sectors. According to a Treasury press release, General License 1B addresses the decrease in the maturity dates of debt transactions prohibited by Directive 1 from 30 days to 14 days, and the decrease in the maturity dates of debt transactions prohibited by Directive 2 from 90 days to 60 days. General License 1B authorizes transactions by U.S. persons, wherever located, and transactions within the United States that involve derivative products whose value is linked to an underlying asset that constitutes prohibited debt issued by person subject to Directives 1, 2 or 3 of the Sectoral Sanctions, including those issued on or after November 28 that have the reduced maturity dates targeted by CAATSA. OFAC also released updated FAQs to answer questions related to the Ukrainian-/Russian-related amended directives.
OFAC Sanctions North Korean Officials, Amends Global Terrorism Sanctions Regulations
On October 26, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions on an additional seven individuals (pursuant to Executive Order 13687) and three entities (pursuant to Executive Order 13722) connected to the North Korean government for ongoing human rights abuses. According to Treasury Secretary Steven T. Mnuchin, the sanctions target “financial facilitators who attempt to keep the regime afloat with foreign currency earned through forced labor operations.” The sanctions freeze all property or interests in property within U.S. jurisdiction, and transactions by U.S. persons involving these individuals and entities are also “generally prohibited.” Please see here for previous InfoBytes coverage on North Korean sanctions.
Separately, on October 30, OFAC released amendments to its Global Terrorism Sanctions Regulations to include recently identified officials, agents, and affiliates connected to Iran’s Islamic Revolutionary Guard Corps. The amendments take effect upon publication in the Federal Register on October 31 and are issued pursuant to the Countering America's Adversaries Through Sanctions Act of 2017 (CAATSA). See previous InfoBytes coverage on CAATSA here.
Russia Weighs Risks of Cryptocurrencies; President Putin Seeks Regulations
On October 10, the First Deputy Governor of Russia’s Central Bank reportedly announced plans to block websites selling bitcoin and other forms of cryptocurrency. Citing unreasonably high risks and the need to protect investors from the “dubious” currencies, the Central Bank’s concerns were echoed by President Vladimir Putin who reportedly stressed that risks associated with the use of cryptocurrencies include money laundering, tax evasion and funding for terrorism. However, President Putin issued a call for cryptocurrency regulation rather than a broad ban and stressed the need to utilize international experience when establishing rules.
Last September, as previously reported in InfoBytes, several Chinese regulators reportedly announced plans to ban the commercial trading of bitcoin and other cryptocurrencies in the country.
OFAC Amends Sanctions on Russia’s Financial and Energy Sectors
On September 29, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) amended Directive 1 and Directive 2 of its Ukrainian-/Russian-related Sectoral Sanctions, as required by the Countering America’s Adversaries Through Sanctions Act of 2017 (H.R. 3364), which was signed into law by President Trump in August. (See previous InfoBytes summary here.) As amended, Directive 1 prohibits U.S. persons from all dealings in equity issued on or after July 16, 2014, of persons determined by OFAC to be part of the Russian financial services sector. Directive 1 also prohibits U.S. persons from dealing in the following debt of such persons: (i) debt of over 90 days maturity issued on or after July 16, 2014, but prior to September 12, 2014; (ii) debt of over 30 days maturity issued on or after September 12, 2014, but before November 28, 2017; and (iii) debt of over 14 days maturity issued on or after November 28, 2017. As amended, Directive 2 prohibits U.S. persons from all dealings in the following debt of persons identified by OFAC to be part of the Russian energy sector: (i) all debt of over 90 days maturity issued on or after July 16, , but before November 28, 2017; and (ii) all debt of over 60 days maturity issued on or after November 28, 2017. OFAC also released updated FAQs to answer questions related to the amended directives.
OFAC Imposes Additional North Korean Sanctions; Senate Banking Committee Hearing Discusses Multi-Department Efforts
On September 26, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced it was imposing sanctions on an additional eight North Korean banks and 26 individuals connected to North Korean financial networks across the globe. The individuals sanctioned are North Korean nationals who represent North Korean banks operating in China, Russia, Libya, and the UAE, and have been designated “in response to North Korea’s ongoing development of weapons of mass destruction and continued violations of United Nations Security Council Resolutions.” OFAC’s action complements the United Nations Security Council’s resolution UNSCR 2375, adopted September 11, 2017. As a result, property or interests in property of the designated persons within U.S. jurisdictions are blocked.
These actions closely follow President Trump’s recent issuance of sanctions targeting individuals, companies, and financial institutions that finance or facilitate trade with North Korea. (See previous InfoBytes coverage here.)
Additionally, the Senate Committee on Banking, Housing, and Urban Affairs (Committee) held an open session hearing on September 28 entitled “Evaluating Sanction Enforcement and Policy Options on North Korea: Administration Perspectives.” Committee Chairman Mike Crapo (R-Idaho) opened the hearing to stress that “[m]any Members of Congress, including on this committee, have a keen interest in knowing more about how and when enforcement of these new measures will occur, wondering if last week’s executive order and earlier UN sanctions will be sufficient to achieve U.S. policy goals.” Sen. Crapo also mentioned the Committee’s legislative efforts to “maximize pressure against North Korea.”
The September 28 hearing—a video of which can be accessed here—included testimony from the following witnesses concerning North Korea’s nuclear and ballistic missile program and the need to curtail the country’s access to revenue, trade, and financial systems.
President Trump’s Executive Order Imposes New Sanctions Against North Korea
On September 21, President Trump announced the issuance of new sanctions targeting individuals, companies, and financial institutions that finance or facilitate trade with North Korea, in addition to tightening trade restrictions. The Executive Order approves broad limitations on any foreign financial institution that knowingly conducts “significant” transactions involving North Korea. This includes transactions that “originate from, are destined for, or pass through a foreign bank account that has been determined by the Secretary of the Treasury to be owned or controlled by a North Korean person, or to have been used to transfer funds in which any North Korean person has an interest.” These funds “are blocked and may not be transferred, paid, exported, withdrawn, or otherwise dealt in.” The restrictions also prohibit dealing with persons involved in North Korea’s “construction, energy, financial services, fishing, information technology, manufacturing, medical, mining, textiles, or transportation industries,” and further authorizes the Secretary of the Treasury to restrict U.S.-based correspondent and payable-through accounts.
These sanctions are in addition to those previously passed by President Trump in August. (See previous InfoBytes coverage here.) Separately, as previously covered in InfoBytes, last month the Treasury Department’s Office of Foreign Assets Control (OFAC) imposed sanctions against certain Chinese and Russian entities and individuals, among others, for allegedly aiding North Korea’s efforts to develop weapons of mass destruction.
In response to President Trump’s latest sanctions, OFAC released updates to its FAQs concerning the additional sanctions. OFAC also issued General License 10 concerning the authorization restrictions to certain vessels and aircraft, and General License 3-A, which addresses permitted “normal service charges.”
Swedish Prosecutor Charges Russian Sales Executive with Bribery of Azerbaijan Officials
On Friday, August 18, a Russian employee of a Swedish branch of a Canadian producer of aircraft and train equipment, was charged by a Swedish prosecutor with aggravated bribery. The sales executive is alleged to have bribed a public official in Azerbaijan to win a contract valued over $300 million to supply Azerbaijan with a signaling system for its railways. The executive was first detained in March 2017 and has been held in custody since that time. If convicted, he faces six years imprisonment and deportation.
According to a March 2017 report by the Organized Crime and Corruption Reporting Project (OCCRP), an investigative reporting network spread across Europe, Africa, Asia, and Latin America established in 2006 to conduct transnational investigative reporting to expose global organized crime and corruption, the company was suspected of paying “millions of dollars in bribes to unidentified Azerbaijani officials through a shadowy company registered in the United Kingdom,” which the Swedish prosecutor has characterized as having “no employees or business” but which profited substantially in this deal by purchasing equipment from the company and selling the identical equipment to the company's Azerbaijan affiliate for a profit. According to export records reviewed by the OCCRP, the equipment was delivered directly from the company to Azerbaijan. The report identified the UK intermediary, which, according to an earlier OCCRP report is alleged to have ties to the former president of a russian railways company, and is alleged to have had similar involvement in a contract with the company and Russia.
OFAC Imposes Sanctions on Chinese and Russian Entities and Individuals for Aiding North Korea
On August 22, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced it was imposing sanctions on ten entities and six individuals from China, Russia, Singapore, and Namibia for their roles in supporting North Korea’s efforts to develop weapons of mass destruction, violations of United Nations Security Council Resolutions, and attempted evasion of U.S. sanctions. The sanctions prohibit any U.S. individual from dealing with the designated entities and individuals, and further states that “any property or interests in property of the designated persons in the possession or control of U.S. persons or within the United States must be blocked, and U.S. persons are generally prohibited from dealing with them.” OFAC’s notice identified entities and individuals that (i) assisted already-designated persons supporting North Korea’s nuclear and ballistic missile programs; (ii) dealt in the North Korean energy trade; (iii) facilitated overseas labor to North Korea; and (iv) enabled sanctioned North Korean entities to access the U.S. and international financial systems. Targets include three Chinese coal companies allegedly responsible for importing nearly half a billion dollars' worth of North Korean coal, as well as three Russians individuals and two Singapore-based companies OFAC claimed were involved in providing oil to North Korea.
President Trump Signs Into Law New Sanctions Against North Korea, Iran, and Russia
On August 2, President Trump signed into law a bipartisan bill placing new sanctions on Iran, Russia, and North Korea. The House passed the sanctions by a vote of 419-3, while the Senate cleared it 98-2. The Countering America's Adversaries Through Sanctions Act (H.R. 3364) is comprised of three bills:
- Korean Interdiction and Modernization of Sanctions Act. The sanctions modify and increase President Trump’s authority to impose sanctions on persons in violation of certain United Nations Security Council resolutions regarding North Korea. Specifically, U.S. financial institutions shall not “knowingly, directly or indirectly,” facilitate or maintain correspondent accounts with North Korean or other foreign financial institutions that provide services to North Korea, or execute a transfer of funds or property “that materially contributes to any violation of an applicable United National Security Council resolution.” A foreign government that provides to or receives from North Korea a defense article or service is prohibited from receiving certain types of U.S. foreign assistance. The sanctions concern: (i) shipping and cargo restrictions; (ii) cooperation between North Korea and Iran pertaining to the countries’ weapon programs; (iii) forced labor and trafficking victims, including goods produced by forced labor; and (iv) foreign persons that employ North Korean forced laborers. Furthermore, the Secretary of State is directed to submit a determination regarding whether North Korea meets the criteria for designation as a state sponsor of terrorism no later than 90 days after the Act has been enacted.
- Countering Iran's Destabilizing Activities Act of 2017. The sanctions—intended to deter Iranian activities and threats affecting the U.S. and key allies—include: (i) assessments of Iran’s conventional force capabilities such as its ballistic missile or weapons of mass destruction programs; (ii) prohibitions on the sale or transfer of military equipment and sanctions against Iran’s Islamic Revolutionary Guard Corps and any affiliated foreign persons; (iii) programs to be undertaken by the U.S. and other foreign governments to counter destabilizing activities; and (iv) prohibitions on any activity that provides “financial, material, technological, or other support for goods or services in support” of the identified programs or persons. The sanctions also block any property or interests in property of any designated person “if such property and interests in property are in the [U.S.], come within the [U.S.], or are or come within the possession or control of a [U.S.] person.” The law allows President Trump to impose sanctions against persons committing human rights violations against Iranian citizens, and also grants him the ability to “temporarily waive the imposition or continuation of sanctions under specified circumstances.”
- Countering Russian Influence in Europe and Eurasia Act of 2017. Under the new sanctions, notwithstanding sanctions passed under President Obama’s administration, Congress will review President Trump’s proposed actions to terminate or waive sanctions with respect to Russia and determine whether the actions will or will not “significantly alter [U.S.] foreign policy with regard to the Russian federation.” Additionally, the President may, at his discretion, waive specified cyber- and Ukraine-related sanctions if submitted to the appropriate congressional committees and “is in the vital national security interests of the [U.S.].” The sanctions concern the following: (i) cybersecurity; (ii) crude oil projects; (iii) Russian and foreign financial institutions; (iv) corruption; (v) human rights abuses; (vi) evasion of sanctions; (vii) transactions with Russian intelligence or defense sectors; (viii) pipeline developments; (ix) privatization of state-owned assets by the Russian federation; and (v) arms and related material transfers to Syria. The sanctions further detail financial transaction loan and credit restrictions between U.S. and international financial institutions and sanctioned persons—including directives related to financing new debt—and place prohibitions on sanctioned financial institutions. Among other things, the sanctions direct the development of a national strategy for combating the financing of terrorism and other types of illicit financing.
FinCEN, California U.S. Attorney Assess Civil Money Penalties Against Virtual Currency Transmitter and Operator for AML Violations
On July 27, the Financial Crimes Enforcement Network (FinCEN), in partnership with the U.S. Attorney’s Office for the Northern District of California, assessed a more than $110 million civil money penalty against an internet-based, foreign-located virtual currency transmitter for willfully violating the anti-money laundering (AML) provisions of the Bank Secrecy Act. A second, separate $12 million penalty was assessed against one of the company’s operators, a Russian national. Additionally, a California grand jury handed down a 21-count indictment against the currency transmitter and the Russian national. According to allegations, the company exchanged fiat currency in addition to virtual currencies such as bitcoin, and “facilitated transactions involving ransomware, computer hacking, identity theft, tax refund fraud schemes, public corruption, and drug trafficking.” The company also processed transactions using stolen funds.
Pursuant to the terms of the assessment, from November 2011 through the present, both the company and the operator allegedly failed to (i) meet money services business (MSB) registration requirements; (ii) implement an effective AML program; (iii) detect suspicious transactions or file suspicious activity reports; and (iv) obtain and retain records for transmitted funds of $3,000 or more. FinCEN warned that regardless of ownership or location, foreign-located MSBs are “required to comply with U.S. AML laws and regulations . . . including AML program, MSB registration, suspicious activity reporting, and recordkeeping requirements.”
This is the first action FinCEN has taken against a foreign-located MSB conducting business in the U.S.