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OFAC guidance addresses Covid-19 humanitarian assistance and trade
On April 16, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) published a Fact Sheet providing guidance to ensure humanitarian-related trade and assistance reaches at-risk populations through legitimate and transparent channels during the global Covid-19 pandemic. Specifically, the Fact Sheet highlights the most pertinent exemptions, exceptions, and authorizations for humanitarian assistance and trade under the Iran, Venezuela, North Korea, Syria, Cuba, and Ukraine/Russia-related sanctions programs. OFAC notes, however, that under certain sanctions program, entities may be required to obtain separate authorization from other U.S. government agencies. The Fact Sheet also provides guidance for persons seeking to export personal protective equipment from the U.S. Additional questions regarding the scope or applicability of any humanitarian-related authorizations can be directed to OFAC’s Sanction Compliance and Evaluation Division.
OFAC amends North Korea Sanctions Regulations
On April 9, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced amendments to the North Korea Sanctions Regulations. The final rule amends the sanctions regulations to incorporate “Treasury-administered provisions of the North Korea Sanctions and Policy Enhancement Act of 2016 [(NKSPEA)], as amended by the Countering America’s Adversaries Through Sanctions Act of 2017 [(CAATSA)] and the National Defense Authorization Act for Fiscal Year 2020 [(NDAA)].”
Specifically, OFAC is incorporating into the amended regulations prohibitions with respect to the blocking, correspondent, or payable-through accounts sanctions contained within the NKSPEA, CAATSA, and NDAA. The final rule also adds a new section applicable to individuals and entities that are owned or controlled by a U.S. financial institution and established or maintained outside the U.S., which prohibits them from “knowingly engaging in any transaction, directly or indirectly, with the Government of North Korea or any person designated for the imposition of sanctions with respect to North Korea under NKSPEA. . ., an applicable Executive Order, or an applicable United Nations Security Council resolution.” In addition, the final rule amends the definition of luxury goods by creating “a regulatory exception to exclude items approved for import, export, or reexport to or into North Korea by the United Nations Security Council.” The final rule also incorporates new statutory exemptions, makes technical and conforming edits, revises an interpretive provision, and updates the authorities and delegation sections of the regulations, among other things. The amended North Korea Sanctions Regulations take effect April 10.
FinCEN updates FATF-identified jurisdictions with AML/CFT deficiencies
On March 26, the Financial Crimes Enforcement Network (FinCEN) issued an advisory on Financial Action Task Force (FATF)-identified jurisdictions with “strategic deficiencies” in their anti-money laundering and combating the financing of terrorism (AML/CFT) regimes. As previously covered by InfoBytes, in February the FATF updated the list of identified jurisdictions to include Albania, Barbados, Burma, Jamaica, Nicaragua, Mauritius, and Uganda, and removed Trinidad and Tobago from the list.
The FinCEN advisory reminds financial institutions of the February updates and emphasizes that financial institutions should consider both the High-Risk Jurisdictions Subject to a Call for Action and the Jurisdictions under Increased Monitoring documents when reviewing due diligence obligations and risk-based policies, procedures, and practices. Moreover, the advisory includes public statements on the status of, and obligations involving, the Democratic People’s Republic of Korea (DPRK) and Iran. The advisory reminds jurisdictions of the actions the United Nations and the U.S. have taken with respect to sanctioning the DPRK and Iran and emphasizes that “[f]inancial institutions must comply with the extensive U.S. restrictions and prohibitions against opening or maintaining any correspondent accounts, directly or indirectly, for North Korean or Iranian financial institutions.”
Chinese nationals sanctioned and charged with laundering over $100 million in cryptocurrency from hacked exchange
On March 2, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Orders 13694, 13757, and 13722 against two Chinese nationals for allegedly laundering over $100 million in stolen cryptocurrency connected to a North Korean state-sponsored cyber group that hacked cryptocurrency exchanges in 2018. According to OFAC, the two individuals “materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, a malicious cyber-enabled activity” or in support of the North Korean cyber group, which was designated by OFAC last September (covered by InfoBytes here). OFAC stated that it closely coordinated its action with the U.S. Attorney’s Office for the District of Columbia and the Internal Revenue Service’s Criminal Investigation Division. As a result of the sanctions, “all property and interests in property of these individuals 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 the United States (including transactions transiting the United States) that involve any property or interests in property of blocked or designated persons,” and warned foreign financial institutions that knowingly facilitating significant transactions or providing significant financial services to the designated individuals may subject them to U.S. correspondent account or payable-through sanctions.
On the same day, the DOJ unsealed a two-count indictment against the two individuals, charging them with money laundering conspiracy and operating an unlicensed money transmitting business. The indictment claims that the individuals converted virtual currency traceable to the hack of a cryptocurrency exchange into fiat currency or prepaid Apple iTunes gift cards through accounts in various exchanges linked to Chinese banks and then transferred the currency or gift cards to customers for a fee. According to the indictment, neither individual was registered as a money transmitting business with the Financial Crimes Enforcement Network, which is a federal felony offense. The complaint seeks forfeiture of 113 virtual currency accounts belonging to the individuals.
FATF calls for countermeasures on Iran; discusses global AML/CFT deficiencies
On February 21, the U.S. Treasury Department released a public statement issued by the Financial Action Task Force (FATF) following the conclusion of its plenary meeting held February 19-21, calling on its members and urging all jurisdictions to impose countermeasures on Iran for failing to address deficiencies in its anti-money laundering/combating the financing of terrorism (AML/CFT) regime. FATF provided specific examples of countermeasures within The Interpretive Note to Recommendation 19, which include, among other things, (i) “[p]rohibiting financial institutions from establishing branches or representative offices in” Iran; (ii) “[l]imiting business relationships or financial transactions with” Iran; and (iii) “[r]equiring financial institutions to review, amend, or if necessary, terminate correspondent relationships with [Iranian] banks.” According to Treasury, the “countermeasures should be developed and implemented to protect the international financial system from the ongoing money laundering, terrorist financing, and proliferation financing . . . risks emanating from Iran.”
Treasury also discussed recent FATF guidance on digital identity for customer identification and verification. According to FATF, the guidance “explains how digital ID systems can meet FATF customer due diligence requirements and will assist governments and financial institutions worldwide when applying a risk-based approach to using digital ID systems.”
FATF’s public statement also discussed progress made by the U.S. to strengthen its AML/CFT system, including Treasury’s customer due diligence rulemaking and beneficial ownership requirements that took effect in 2018. According to Treasury, the U.S. is also one of the first countries to voluntarily submit to an assessment of its compliance with new FATF standards regarding virtual assets.
Finally, Treasury reported that FATF is calling “on all countries to apply countermeasures on North Korea due to the ongoing money laundering, terrorist financing, and weapons of mass destruction proliferation financing risks to the international financial system.” On the same day as its public statement, Treasury released an updated list of jurisdictions under increased monitoring that are actively working with FATF to address strategic AML/CFT deficiencies.
Venezuela’s state-owned airline subject to OFAC sanctions
On February 7, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced that it identified a previously blocked state-owned Venezuelan airline and its fleet of aircraft pursuant to Executive Order (E.O.) 13884. The entities—subject to sanctions under E.O. 13884, which blocks property of the Venezuelan government—have been added to OFAC’s Specially Designated Nationals (SDN) List. According to OFAC’s press release, the commercial airline and its fleet have been used by Venezuela’s illegitimate government “to promote its own political agenda, including shuttling regime officials to countries such as North Korea, Cuba, and Iran.” OFAC observed that Venezuelan citizens may still travel by air on a number of other airlines that provide domestic service as well as service to and from Venezuela. OFAC also reiterated that its “regulations generally prohibit all transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of blocked persons.”
OFAC sanctions entities for aiding North Korea’s exportation of workers
On January 14, the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) announced it was imposing sanctions on a North Korean trading corporation and a China-based North Korean lodging facility for facilitating North Korea’s practice of sending laborers abroad. According to OFAC, North Korea’s continued practice of exporting North Koreans as illicit laborers is an ongoing attempt to undermine and evade United Nations Security Council Resolutions. The designated companies’ exportation of workers on behalf of the country, OFAC stated, has generated revenue for the North Korean government or the Workers’ Party of Korea. As a result of the sanctions, “all property and interests in property of these targets that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC.” OFAC noted that its regulations “generally prohibit” U.S. persons from participating in transactions with the designated persons, and warned foreign financial institutions that if they knowingly facilitate significant transactions for any of the designated individuals, they may be subject to U.S. secondary sanctions.
FATF discusses terror finance risks, virtual currency regulation, and global AML/CFT deficiencies
On October 18, the U.S. Treasury Department released a public statement issued by the Financial Action Task Force (FATF) following the conclusion of its plenary meeting held October 16-18. Topics discussed by attendees included Iranian terrorist financial risks, guidance related to “stablecoins” and virtual assets, and reports related to anti-money laundering/countering the financing of terrorism (AML/CFT). Specifically, the FATF discussed the re-imposition of countermeasures on Iran as well as enhanced due diligence strategies due to the country’s AML/CFT deficiencies. As previously covered by InfoBytes, the FATF issued a public statement last June that called upon members and urged all jurisdictions to require increased supervisory examination for branches and subsidiaries of financial institutions based in Iran. Assistant Secretary for Terrorist Financing and Financial Crimes Marshall Billingslea issued a statement in Treasury’s press release that “countries will be called upon to impose further financial restrictions to protect the international financial system if Iran hasn’t ratified and fully implemented the key treaties related to fighting money laundering and terrorist financing.”
The FATF also issued a public statement to clarify that standards adopted last June (InfoBytes coverage here) apply to “stablecoins” and their service providers. Additionally, the FATF adopted changes to its methodology on how it will assess whether countries are complying with the relevant requirements. Specifically, the FATF noted in the plenary meeting outcomes that “assessments will specifically look at how well countries have implemented these measures. Countries that have already undergone their mutual evaluation must report back during their follow-up process on the actions they have taken in this area.”
Additionally, the FATF (i) provided an updated report on measures for combating ISIL and Al-Qaeda financing; (ii) called upon all countries to apply countermeasures on North Korea due to ongoing AML/CFT and weapons of mass destruction proliferation financing risks to the international financial system; and (iii) noted it will publish reports by year end related to AML/CFT and counter-proliferation financing legal frameworks for both Russia and Turkey, along with a review of implementation measures undertaken by the countries.
OFAC sanctions North Korean cyber groups
On September 13, the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order (E.O.) 13722 against three North Korean state-sponsored cyber groups allegedly responsible for North Korea’s malicious cyber activity on critical infrastructure around the world. OFAC cited cyber attacks using phishing and backdoor intrusions, targeting a range of organizations that included financial institutions. In addition to malicious cyber activities on conventional financial institutions and major companies, North Korea’s cyber operations also targeted Virtual Asset Providers and cryptocurrency exchanges “to possibly assist in obfuscating revenue streams and cyber-enabled thefts that also potentially fund North Korea’s WMD and ballistic missile programs.” As a result of the sanctions, “all property and interests in property of these individuals and entities that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC.” OFAC noted that its regulations “generally prohibit” U.S. persons from participating in transactions with the designated persons, and warned foreign financial institutions that if they knowingly facilitate significant transactions for any of the designated individuals, they may be subject to U.S. correspondent account or payable-through account sanctions.
OFAC designates shipping network for aiding North Korea
On August 30, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced additions to the Specially Designated Nationals List pursuant to Executive Order 13810. The additions identify two Taiwanese individuals and three entities, as well as one Hong Kong-based vessel identified as blocked property, for allegedly facilitating the delivery of fuel originally intended for the Philippines to North Korean vessels via ship-to-ship transfers. According to OFAC, the additions highlight “North Korea’s continued use of illicit ship-to-ship (STS) transfers to circumvent United Nations . . . sanctions that restrict the import of petroleum products, as well as the U.S. Government’s commitment to implement existing UN Security Council Resolutions.” As a result of the sanctions, “all property and interests in property of these individuals and entities that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC.” OFAC noted that its regulations “generally prohibit” U.S. persons from participating in transactions with the designated persons, and warned foreign financial institutions that if they knowingly facilitate significant transactions for any of the designated individuals, they may be subject to U.S. correspondent account or payable-through account sanctions.