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EU-U.S. release statement on Joint Financial Regulatory Forum
On July 20, participants in the U.S.-EU Joint Financial Regulatory Forum, including officials from the Treasury Department, Federal Reserve Board, CFTC, FDIC, SEC, and OCC, issued a joint statement regarding the ongoing dialogue that took place from June 27-28, noting that the matters discussed during the forum focused on six themes: “(1) market developments and financial stability risks; (2) regulatory developments in banking and insurance; (3) anti-money laundering and countering the financing of terrorism (AML/CFT); (4) sustainable finance and climate-related financial risks; (5) regulatory and supervisory cooperation in capital markets; and (6) operational resilience and digital finance.”
Participants acknowledged that the financial sector in both the EU and the U.S. is exposed to risk due to ongoing inflationary pressures, uncertainties in the global economic outlook, and geopolitical tensions as a result of Russia’s war on Ukraine. During discussions, participants emphasized the significance of strong bank prudential standards, effective resolution frameworks, and robust supervision practices. They also stressed the importance of international cooperation and continued dialogue to monitor vulnerabilities and strengthen the resilience of the financial system. Participants took note of recent developments relating to, among other things, recent bank failures, digital finance, the crypto-asset market, and the potential adoption of central bank digital currencies.
OFAC sanctions Russians for election influence
On June 23, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Order 14024, against two individuals for attempting to conduct “global malign influence operations,” including efforts to influence a U.S. local election. According to OFAC, the designated individuals are Russian Federal Security Service officers who operate as part of a mission that provokes anti-government and anti-democratic positions designed to undermine faith in democratic principles, weaken U.S. diplomatic connections, and exploits societal divisions in an effort to expand Russia’s influence. OFAC said one of the individuals directed more than six U.S. co-conspirators, including two who ran in local U.S. elections, to report on the activities of political groups. OFAC designated the two individuals “for having acted or purported to act for or on behalf of, directly or indirectly, the Government of the Russian Federation.” The designated individuals were also recently indicted by the DOJ as well as by the U.S. Attorney’s Office for the Middle District of Florida. In a parallel action announced the same day, the EU released its Eleventh Package of sanctions against Russia. The Eleventh Package added, among other things, over 100 individuals and entities subject to asset freezes, a new anti-circumvention tool to restrict the trade of sanctioned goods, and 87 new entities to the list of those directly supporting Russia’s military and industrial complex in the war against Ukraine.
As a result of these sanctions, all property and interests in property belonging to the sanctioned persons that are in the U.S. or in the possession or control of U.S. persons are blocked and must be reported to OFAC. Further, “any entities that are owned, directly or indirectly, individually or in the aggregate, 50 percent or more by one or more blocked persons are also blocked.” U.S. persons are prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons, unless exempt or authorized by a general or specific OFAC license. Additionally, OFAC warned that financial institutions and other persons that engage in certain transactions or activities with the sanctioned persons may themselves be exposed to sanctions or be subject to an enforcement action.
OFAC sanctions Russian paramilitary leader in Mali
Recently, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Order 14024, against a Mali-based principal administrator and head of a Russian private military company’s paramilitary units. Aside from acting as a key player in Russia’s war against Ukraine, the private military company “has meddled in and destabilized countries in Africa, committing widespread human rights abuses and appropriating natural resources,” OFAC said, noting that the sanctioned individual worked with the Malian government to support incoming paramilitary forces to Mali, including preparing living quarters and arranging meetings with officials from several African nations. The action follows previous sanctions issued against those working with or supporting the private military company’s destabilizing activities, involving human rights abuses, and appropriating natural resources.
As a result of the sanctions, all property and interests in property belonging to the sanctioned persons that are in the U.S. or in the possession or control of U.S. persons are blocked and must be reported to OFAC. Additionally, “any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons are also blocked.” U.S. persons are generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons, unless authorized by a general or specific OFAC license, or otherwise exempt.
OFAC expands Russian sanctions
The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) recently announced several actions targeting Russia’s attempts to circumvent or evade sanctions and implemented other economic measures to degrade the country’s capacity to wage its war against Ukraine. In coordination with the G7 and other international partners, OFAC implemented several new commitments to cut Russia off from revenue streams and key inputs needed to equip its military. The sanctions target 22 individuals and 104 entities with touchpoints in more than 20 countries or jurisdictions with involvement in the technology, energy, and financial services sectors. OFAC also expanded sanctions authorities to target new sectors of Russia’s economy and sever the country’s access to several new categories of services. Additional sanctions-related measures include the designation or identification as blocked property of nearly 200 individuals, entities, vessels, and aircraft by the State Department. Concurrently, the Commerce Department significantly expanded the territorial reach and categories covered by its export controls and added 71 entities to its Entity List to prevent Russia from accessing goods needed for its war.
OFAC noted that it also expanded its Russia-related sanctions authorities through the issuance of a determination that identifies the architecture, engineering, construction, manufacturing, and transportation sectors of the Russian economy pursuant to Executive Order (E.O.) 14024. The determination complements existing sanctions authorities and allows for additional economic costs to be imposed on Russia and for sanctions to be imposed on any person determined to operate of have operated in any of the sectors. OFAC issued a second determination pursuant to E.O. 14071 (effective June 18) to prohibit the “exportation, reexportation, sale, or supply, directly or indirectly, from the United States, or by a United States person, wherever located, of architecture services or engineering services to any person located in the Russian Federation.” (See new OFAC FAQs and general licenses here.)
Additionally, OFAC amended Directive 4 under E.O. 14024 “to require U.S. persons to report to OFAC any property in their possession or control in which the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation has an interest.”
Earlier in the month, OFAC also announced sanctions against a Russian ransomware actor for being complicit in cyberattacks against U.S. law enforcement, businesses, and critical infrastructure. OFAC commented that analysis conducted by FinCEN found that “75 percent of ransomware-related incidents reported between July and December 2021 were linked to Russia, its proxies, or persons acting on its behalf.”
As a result of the sanctions, all property and interests in property of the designated persons that are in the U.S. or in the possession or control of U.S. persons must be blocked and reported to OFAC. Additionally, “any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons are also blocked.” OFAC’s announcement further noted that its regulations “generally prohibit” U.S. persons from participating in transactions with designated persons unless exempt or otherwise authorized by a general or specific license.
FinCEN, Commerce urge monitoring of attempts to evade Russian export controls
On May 19, FinCEN and the Department of Commerce’s Bureau of Industry and Security (BIS) issued a supplemental joint alert urging continued vigilance for potential Russian export control evasion attempts. The alert reinforces ongoing initiatives to further constrain and prevent Russia from accessing critical technology and goods to support its war-making efforts against Ukraine. It follows a joint alert issued last June which urged financial institutions to take a “risk-based approach” for identifying potentially suspicious activity, such as end-use certificates, export documents, or letters of credit-based trade financing. (Covered by InfoBytes here.) The supplemental alert provides information on new export control restrictions implemented since the last joint alert was issued, including evasion typologies, new high priority Harmonized System codes to inform U.S. financial institutions’ customer due diligence, and additional transactional and behavioral red flags to help identify suspicious transactions relating to possible export control evasion.
OFAC sanctions target Russian financial facilitators
On April 12, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), in coordination with the United Kingdom, announced sanctions targeting Russian financial facilitators to curb the country’s access to the international financial system. The sanctions, issued pursuant to Executive Order 14024, target 25 individuals and 29 entities with touchpoints in 20 jurisdictions, and include the facilitation network of one of Russia’s wealthiest billionaires who is subject to sanctions in multiple jurisdictions, OFAC said. The designations also serve to reinforce existing measures and further disrupt Russia’s ability to import critical technologies for use in its war against Ukraine. Concurrently, the State Department designated several entities operating in Russia’s defense sector, as well as entities supporting Russia’s war efforts against Ukraine and entities associated with the country’s energy exports. (See also State Department’s fact sheet here.) The Commerce Department also added 28 entities to its entity list. “Today’s action underscores our dedication to implementing the G7 commitment to impose severe costs on third-country actors who support Russia’s war,” Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson said in the announcement.
As a result of the sanctions, all property and interests in property belonging to the sanctioned persons that are in the U.S. or in the possession or control of U.S. persons are blocked and must be reported to OFAC. Additionally, “any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons are also blocked.” U.S. persons are generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons, unless authorized by a general or specific OFAC license, or otherwise exempt.
In conjunction with the sanctions, OFAC issued several Russia-related general licenses (see GLs 62, 63, 64, and 65), revoked GL 15, and published new FAQ 1122.
Multinational tech company to pay $3.3 million for OFAC and BIS violations
On April 6, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), in consultation with the Department of Commerce’s Bureau of Industry and Security (BIS), announced a $3.3 million settlement with a multinational technology company to resolve potential civil liabilities stemming from the exportation of services or software from the United States to sanctioned jurisdictions and to Specially Designated Nationals (SDNs) or blocked persons. The settlement comprised an agreement with OFAC to pay a civil penalty of $2,980,264.86 and an administrative penalty of $624,013 with BIS. In light of the related OFAC action, the company was given a $276,382 credit by BIS contingent upon the company fulfilling its requirements under the OFAC settlement agreement, resulting in a combined overall penalty amount of $3,327,896.86.
According to OFAC’s web notice, the conduct underlying the administrative penalty imposed by BIS stemmed from certain conduct involving the company’s Russian subsidiary. The conduct underlying the settlement with OFAC took place between July 2012 and April 2019, when the company and certain subsidiaries allegedly “sold software licenses, activated software licenses, and/or provided related services from servers and systems located in the United States and Ireland to SDNs, blocked persons, and other end users located in Cuba, Iran, Syria, Russia, and the Crimea region of Ukraine.” The total value of the 1,339 apparent violations was more than $12 million. OFAC alleged that the causes of these apparent violations stemmed from a lack of complete or accurate information on end customers for the company’s products, and that during the relevant time period, there were shortcomings in the company’s restricted-party screening controls. Among other things, OFAC alleged that the company’s screening architecture did not aggregate identifying information across its various databases to identify SDNs or blocked persons, failed to screen and evaluate pre-existing customers in a timely fashion, and missed common variations of restricted party names.
In arriving at the $2,980,265.86 settlement amount, OFAC considered various mitigating factors, including that (i) evidence did not show that persons located in U.S. offices or management were aware of the alleged activity at the time (the apparent violations were revealed during a self-initiated look back); (ii) upon identifying the apparent violations, the company self-disclosed the matter to OFAC, conducted a retrospective review of thousands of past transactions, cooperated with OFAC throughout the investigation, terminated the accounts of the SDNs or blocked persons, and updated internal procedures to disable access to products or services upon discovery of a sanctioned party; and (iii) the company “undertook significant remedial measures and enhanced its sanctions compliance program through substantial investment and structural changes.” OFAC outlined several compliance considerations for companies conducting business through foreign-based subsidiaries, distributors, and resellers, and reminded businesses that OFAC’s SDN List is dynamic, and that when changes to the list are made, “companies should evaluate their pre-existing trade relationships to avoid dealings with prohibited parties.”
OFAC sanctions arms facilitator for attempted North Korea-Russia deals
On March 30, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Order 13551, against a Slovakian national for attempting to facilitate arms deals between Russia and the Democratic People’s Republic of Korea (DPRK) to aid Russia’s war against Ukraine. “Schemes like the arms deal pursued by this individual show that Putin is turning to suppliers of last resort like Iran and the DPRK,” Secretary of the Treasury Janet L. Yellen said. “We remain committed to degrading Russia’s military-industrial capabilities, as well as exposing and countering Russian attempts to evade sanctions and obtain military equipment from the DPRK or any other state that is prepared to support its war in Ukraine.”
As a result of the sanctions, all property and interests in property of the sanctioned individual that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC, as well as “any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons.” Persons that engage in certain transactions with the designated individual may themselves be exposed to sanctions, and “any foreign financial institution that knowingly facilitates a significant transaction or provides significant financial services for the individual designated today could be subject to U.S. correspondent or payable-through account sanctions.”
OFAC sanctions Belarusian state-owned enterprises and government officials; amends Belarus Sanctions Regulations
On March 24, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against Belarusian state-owned enterprises and government officials. In so doing, OFAC designated three entities and nine individuals, and identified one presidential aircraft as blocked property, pursuant to Executive Order 14038. The announcement noted that the designations build on previously issued sanctions taken against individuals and entities in Belarus in response to efforts by the Lukashenka regime to suppress democracy and support the Russian Federation’s war against Ukraine. “The authoritarian Lukashenka regime relies on state-owned enterprises and key officials to generate substantial revenue that enables oppressive acts against the Belarusian people,” Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian Nelson said in the announcement. Concurrently, the State Department imposed visa restrictions on 14 additional individuals, “including regime officials involved in policies to threaten and intimidate the Belarusian people, for their involvement in undermining democracy under Presidential Proclamation 8015.”
As a result of the sanctions, all property and interests in property belonging to the sanctioned persons that are in the U.S. or in the possession or control of U.S. persons are blocked and must be reported to OFAC. Additionally, “any entities that are owned, directly or indirectly, individually or in the aggregate, 50 percent or more by one or more blocked persons are also blocked.” U.S. persons are generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons, unless authorized by a general or specific OFAC license, or if otherwise exempt.
Additionally, OFAC published a final rule in the Federal Register amending and reissuing the Belarus Sanctions Regulations in their entirety in order to implement the August 2021 Belarus-related Executive Order 14038 (discussed above), “Blocking Property of Additional Persons Contributing to the Situation in Belarus,” and incorporate a directive regarding sovereign debt (covered by InfoBytes here and here). The final rule (effective March 27) also updates and adds new definitions, general licenses, and interpretive guidance, among other things.
REPO task force highlights efforts taken against sanctioned Russians
On March 9, the multilateral Russian Elites, Proxies, and Oligarchs (REPO) Task Force released a statement on the group’s continued work one year after Russia’s invasion of Ukraine. As previously covered by InfoBytes, the U.S. Treasury Department, along with representatives from Australia, Canada, Germany, France, Italy, Japan, the United Kingdom, and the European Commission, formed REPO last February to collect and share information among authorities in order “to take concrete actions, including sanctions, asset freezing, and civil and criminal asset seizure, and criminal prosecution.” REPO noted that it has, among other things, (i) blocked or frozen more than $58 billion in sanctioned Russian assets; (ii) taken collective measures to restrict sanctioned Russians’ access to the global financial system and “to investigate and counter Russian sanctions evasions, including attempts to hide or obfuscate assets, illicit cryptocurrency and money laundering schemes, illicit Russian defense procurement, and sanctioned Russians’ use of financial facilitators”; (iii) led international sanctions enforcement efforts; (iv) “[w]orked to update or expand and implement REPO members’ respective legal frameworks that enable the freezing, seizure, forfeiture and/or disposal of assets”; and (v) brought about the first forfeiture of assets of a sanction Russian as part of $5.4 million foreign assistance funds transfer to Ukraine. REPO also issued a joint Global Advisory on Russian Sanctions Evasion, intended to ensure effective sanctions implementation and compliance across member jurisdictions.