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Fed updates Regulation O FAQs
On July 8, the Fed updated its frequently asked questions (FAQs) regarding Regulation O, Loans to Executive Officers, Directors, and Principal Shareholders of Member Banks (12 CFR Part 215). The Fed clarified that a bank’s payment of premiums as part of a split dollar life insurance arrangement does not constitute as an extension of credit to an insider, provided that certain conditions are met. The agency noted that, “under a split dollar life insurance arrangement, a bank pays the premiums on a policy insuring the life of an employee of the bank. Split dollar life insurance arrangements can take many forms. For example, the insurance policy can be owned by the bank, the employee, or a third party (typically a trust).” The Fed further explained that “[r]egardless of form, the bank is entitled to receive from the proceeds of the insurance policy a pre-negotiated amount upon the death of the insured or when the insured surrenders the policy.”
SBA says larger nonprofits eligible for PPP loan forgiveness
On July 8, the SBA added question #71 to its Paycheck Protection Program (PPP) frequently asked questions clarifying whether 501(c)(3) nonprofit organizations with more than 500 employees are eligible for PPP loan forgiveness. SBA explained that while the CARES Act generally provided that “501(c)(3) nonprofit organizations with a total of 500 or fewer employees were eligible to receive a First Draw PPP Loan,” the American Rescue Plan Act (ARPA) later “increased the size eligibility standard for 501(c)(3) nonprofit organizations for First Draw PPP Loans from a total of 500 or fewer employees to no more than 500 employees per physical location of the 501(c)(3) nonprofit organization.” On March 22, 2021, SBA published an interim final rule (IFR) implementing recent PPP changes that were included in the ARPA enacted on March 11, 2021 (covered by InfoBytes here).
Exercising her broad authority under the PPP, and in light of litigation earlier this year, on July 8 the SBA administrator announced that “any 501(c)(3) nonprofit organization that received a loan before March 11, 2021, but submits a forgiveness application on or after March 11, 2021, will not be ineligible for forgiveness on the basis that they have more than 500 employees in multiple physical locations” provided it has otherwise complied with all applicable PPP rules.
OFAC issues Notification of Blocked Property to sanctioned Russian oligarch’s trust
On June 30, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued a Notification of Blocked Property to a Delaware-based trust in which an OFAC-designated Russian oligarch holds a property interest. As previously covered by InfoBytes, in April 2018, OFAC sanctioned seven Russian oligarchs, including the Russian oligarch who holds a property interest, along with 12 companies they own or control, 17 senior Russian government officials, and a state-owned Russian weapons trading company and its Russian bank subsidiary pursuant to the Countering America’s Adversaries Through Sanctions Act of 2017 (CAATSA) and Executive Orders 13661, 13662, and 13582. According to OFAC, the trust holds assets valued at over $1 billion; therefore, this enforcement action ensures that those assets continue to be blocked and inaccessible to the OFAC-designated Russian oligarch. As a result of the Notification of Blocked Property, the trust is subject to the same prohibitions applicable to the OFAC-designated Russian oligarch. All transactions by U.S. persons or within (or transiting) the U.S. involving any property or interests in property of designated or otherwise blocked persons are prohibited, unless exempt or authorized by a general or specific license issued by OFAC. These prohibitions include the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any blocked person and the receipt of any contribution or provision of funds, goods, or services from any such person.
OFAC sanctions nearly 100 Russian targets; prohibits Russian gold imports
On June 28, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Orders (E.O.) 14024 and 14065 against 70 entities—many of which, according to OFAC, “are critical to the Russian Federation’s defense industrial base, including State Corporation Rostec, the cornerstone of Russia’s defense, industrial, technology, and manufacturing sector.” Twenty-nine Russian individuals were also designated. “We once again reaffirm our commitment to working alongside our partners and allies to impose additional severe sanctions in response to Russia’s war against Ukraine,” Treasury Secretary Janet L. Yellen said. OFAC’s designations occurred in tandem with actions taken by the U.S. State Department, which include sanctions against an additional 45 entities and 29 individuals as well as visa restrictions against “officials believed to have threatened or violated Ukraine’s sovereignty, territorial integrity, or political independence.” Additionally, OFAC immediately prohibited the importation of Russian gold into the U.S. (unless licensed or otherwise authorized by OFAC). As a result of the sanctions, all property and interests in property belonging to the designated persons in the U.S. 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.” OFAC noted that U.S. persons are prohibited from participating in transactions with the sanctioned persons unless authorized by a general or specific license.
A joint alert issued by FinCEN and the U.S. Department of Commerce’s Bureau of Industry and Security also urged financial institutions to remain vigilant against Russian and Belarusian export control evasion and 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. “Financial institutions and the private sector continue to play a key role in disrupting Russia’s efforts to acquire critical goods and technology to support its war-making efforts,” OFAC stated in its announcement.
On the same day, OFAC issued several new Russia-related general licenses (GL): (i) GL 39 authorizes the wind down of transactions ordinarily incident and necessary involving State Corporation Rostec that are normally prohibited by E.O. 14024; (ii) GL 40 authorizes “all transactions ordinarily incident and necessary to the provision, exportation, or reexportation of goods, technology, or services to ensure the safety of civil aviation involving one or more of” certain blocked entities; (iii) GL 41 authorizes certain transactions related to agricultural equipment that are normally prohibited by the Russian Harmful Foreign Activities Sanctions Regulations; (iv) GL 42 authorizes certain transactions with the Federal Security Services; and (v) GL 43 authorizes the divestment or transfer of debt or equity of, and wind down of derivative contracts involving the Public Joint Stock Company Severstal or Nord Gold PLC.
OFAC also published a Determination Pursuant to Section 1(a)(i) of Executive Order 14068 concerning prohibitions related to the importation of Russian gold and issued one new and one amended frequently asked question.
The Russian Elites, Proxies, and Oligarchs (REPO) Task Force also issued a joint statement summarizing actions taken by REPO members against sanctioned Russians. The efforts have led to more than $30 billion worth of sanctioned Russians’ assets being blocked or frozen and has heavily restricted sanctioned Russians’ access to the international financial system.
CFPB updates FAQs on civil money penalties
On June 6, the CFPB updated its Civil Penalty Fund Frequently Asked Questions (FAQs). The FAQs, among other things: (i) present the Civil Penalty Fund Allocation Schedule; (ii) clarify basic definitions related to CFPB civil money penalties; (iii) clarify when the Bureau will begin to distribute funds; and (iv) explain redress and its difference from payments to victims from the Civil Penalty Fund.
OFAC issues Russia-related general licenses and FAQs
On June 14, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued Russia-related General License (GL) 8C, which authorizes (with certain enumerated exceptions) transactions related to energy. According to the GL, all transactions prohibited by Executive Order (E.O.) 14024 involving entities that are related to energy are authorized, through December 5, 2022, under certain circumstances. OFAC also published amended FAQs, which provide further information on GL 8C, and clarify Russian sanction information under E.O. 14024, among other things.
OFAC clarifies certain Russia-related prohibitions
On June 9, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced the publication of new Russia-related FAQs. Among other things, the FAQs provide information on the previously issued Determination Pursuant To Section 1(a)(ii) of E.O. 14071, which prohibits “the exportation, reexportation, sale, or supply, directly or indirectly, from the United States, or by a United States person, wherever located, of accounting, trust and corporate formation, or management consulting services to any person located in the Russian Federation” unless licensed or otherwise authorized by OFAC (covered by InfoBytes here). Specifically, FAQ 1063 explains that “[t]he prohibitions imposed by the determination do not distinguish between new and existing trusts and companies.” Additionally, FAQ 1067 provides that “[t]he determination does not prohibit U.S. persons from exporting, reexporting, selling, or supplying, directly or indirectly, software to the Russian Federation.”
OFAC issues Covid-related general licenses and FAQs
On June 10, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued Syria General License (GL) 21A, Venezuela GL 39A, and Iran GL N-1, “Authorizing Certain Activities to Respond to the Coronavirus Disease 2019 (COVID-19) Pandemic.” Each GL authorizes certain Covid-19-related transactions through June 17, 2023. Additionally, OFAC updated Frequently Asked Questions regarding the purposes of the GLs and provided clarifying information.
OFAC amends Cuban Assets Control Regulations
On June 8, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a final rule amending the Cuban Assets Control Regulations, and further implementing portions of President Biden’s foreign policy to increase support for Cuban people. Specifically, the final rule “authorizes group people-to-people educational travel to Cuba and removes certain restrictions on authorized academic educational activities, authorizes travel to attend or organize professional meetings or conferences in Cuba, removes the $1,000 quarterly limit on family remittances, and authorizes donative remittances to Cuba.” The final rule is effective June 9.
In conjunction with the announcement, OFAC published a number of new and updated Cuba-related frequently asked questions addressing, among other things, remittance transactions, travel activities, and authorized imports.
OFAC sanctions additional networks used by Russian elites, issues new Russia-related General Licenses
On June 2, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced additional sanctions pursuant to Executive Orders (E.O.) 14024, 13685, and 13661, against key networks used by Russian elites, including President Putin, that target “a Kremlin-aligned yacht brokerage, several prominent Russian government officials, and a close Putin associate and money-manager [] who is a custodian of President Putin’s offshore wealth.” OFAC’s announcement also identified “yachts and aircraft in which sanctioned Russian elites maintain interests.” The designations were taken in tandem with the Department of State (which imposed sanctions on five Russian oligarchs and elites) as well as the Department of Commerce (which added 71 new parties located in Russia and Belarus to its Entity List, thus “further restricting the Russian military’s ability to obtain technologies and other items it needs to sustain aggression and project power”).
As a result of the sanctions, all property and interests in property belonging to the sanctioned persons in the U.S. 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.” OFAC noted that U.S. persons are prohibited from participating in transactions with the sanctioned persons unless authorized by a general or specific license.
On the same day, OFAC issued several new Russia-related general licenses (GL): (i) GL 25B authorizes transactions related to telecommunications and certain internet-based communications that are otherwise prohibited by Russian Harmful Foreign Activities Sanctions Regulations; (ii) GL 36 and GL 37 authorize the wind down of transactions normally prohibited by E.O. 14024 involving an identified public joint stock company and a gold mining company respectively; and (iii) GL 38 authorizes transactions related to pension payments to U.S. persons that are normally prohibited by E.O. 14024 “provided that the only involvement of blocked persons is the processing of funds by financial institutions blocked pursuant to E.O. 14024.” Additionally, OFAC issued several new and amended Russia-related frequently asked questions.