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  • FinCEN comments on Russia’s suspended FATF membership; issues statements on jurisdictions with AML/CFT/CPF deficiencies

    Financial Crimes

    On March 9, FinCEN informed U.S. financial institutions that last month the Financial Action Task Force (FATF) suspended the Russian Federation’s membership after determining that the country’s “actions unacceptably run counter to the FATF core principles aiming to promote security, safety, and the integrity of the global financial system.” (Covered by InfoBytes here.) FATF also urged jurisdictions to monitor for and mitigate emerging risks resulting “from the circumvention of measures taken in order to protect the international financial system.”

    Additionally, FinCEN noted that at the end of February, FATF issued public statements updating its lists of jurisdictions with strategic deficiencies in anti-money laundering (AML), countering the financing of terrorism (CFT), and countering the financing of proliferation of weapons of mass destructions (CPF) regimes. These include (i) Jurisdictions under Increased Monitoring, “which publicly identifies jurisdictions with strategic deficiencies in their AML/CFT/CPF regimes that have committed to, or are actively working with, the FATF to address those deficiencies in accordance with an agreed upon timeline,” and (ii) High-Risk Jurisdictions Subject to a Call for Action, “which publicly identifies jurisdictions with significant strategic deficiencies in their AML/CFT/CPF regimes and calls on all FATF members to apply enhanced due diligence, and, in the most serious cases, apply counter-measures to protect the international financial system from the money laundering, terrorist financing, and proliferation financing risks emanating from the identified countries.”

    With respect to jurisdictions under increased monitoring, FinCEN’s announcement reminded U.S. covered financial institutions of their due diligence obligations for foreign financial institutions (including correspondent accounts maintained for foreign banks), and instructed them to ensure that they implement “appropriate, specific, risk-based, and, where necessary, enhanced policies, procedures, and controls that are reasonably designed to detect and report known or suspected money laundering activity conducted through or involving any correspondent account established, maintained, administered, or managed in the United States.” Money services business are reminded of parallel requirements with respect to foreign agents or counterparties. Members were informed that FATF removed Cambodia and Morocco from its list of Jurisdictions under Increased Monitoring but added Nigeria and South Africa to the list.

    FinCEN’s announcement also informed members that Burma remains on the list of High-Risk Jurisdictions Subject to a Call for Action, and advised U.S. financial institutions to apply enhanced due diligence. Moreover, U.S. financial institutions should continue to refer to existing FinCEN and OFAC guidance on engaging in financial transactions with Burma. With respect to the Democratic People’s Republic of Korea and Iran, “financial 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,” FinCEN said, adding that “[e]xisting U.S. sanctions and FinCEN regulations already prohibit any such correspondent account relationships.”

    Financial Crimes Of Interest to Non-US Persons FATF Russia Anti-Money Laundering Combating the Financing of Terrorism FinCEN OFAC

  • OFAC sanctions “shadow banking” network responsible for moving billions for Iranian regime

    Financial Crimes

    On March 9, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against “39 entities constituting a significant ‘shadow banking’ network,” pursuant to Executive Order 13846. OFAC explained that this network is “one of several multi-jurisdictional illicit finance systems,” which grants sanctioned Iranian entities access to the international financial system and obfuscates sanctioned entities’ trade with foreign customers. “Iran cultivates complex sanctions evasion networks where foreign buyers, exchange houses, and dozens of front companies cooperatively help sanctioned Iranian companies to continue to trade,” Deputy Secretary of the Treasury Wally Adeyemo said in the announcement. “Today’s action demonstrates the United States’ commitment to enforcing our sanctions and our ability to disrupt Iran’s foreign financial networks, which it uses to launder funds.” The action follows previous designations of six Iran-based petrochemical manufacturers or their subsidiaries, as well as three firms located in Malaysia and Singapore, for their involvement in the sale and shipment of petroleum and petrochemicals on behalf of a previously designated company (covered by InfoBytes here).

    As a result of the sanctions, all property interests belonging to the sanctioned targets subject to U.S. jurisdiction 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 also generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons. Persons that engage in certain transactions with the individuals or entities designated today may themselves be exposed to sanctions or subject to enforcement. Additionally, OFAC warned that “any foreign financial institution that knowingly facilitates a significant transaction for any of the individuals or entities designated today could be subject to U.S. sanctions” unless an exception applies.

    Financial Crimes Of Interest to Non-US Persons OFAC OFAC Designations OFAC Sanctions Iran SDN List

  • OFAC sanctions Iranian officials for serious human rights abuses

    Financial Crimes

    On March 8, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Orders 13553 and 13846, against several Iranian regime officials and entities for serious human rights abuses against women and girls. Included among the sanctioned individuals are “the top commander of the Iranian army and a high-ranking leader in the Islamic Revolutionary Guard Corps (IRGC), as well as an Iranian official who was central to the regime’s efforts to block internet access.” OFAC also imposed sanctions against three Iranian companies and their leadership for their role in enabling the violent repression by the Iranian Law Enforcement Forces of peaceful protestors. The actions, taken in coordination with the EU, UK, and Australia, mark the continued effort to impose sanctions on persons who engage in serious human rights abuse or censorship with respect to Iran.

    As a result of the sanctions, all property and interests in property belonging to the sanctioned persons subject to U.S. jurisdiction 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 further warned that “persons that engage in certain transactions with the persons designated today may themselves be exposed to sanctions or subject to an enforcement action,” and that “any foreign financial institution that knowingly facilitates a significant transaction or provides significant financial services for any of the persons designated today could be subject to U.S. sanctions.”

    Financial Crimes Of Interest to Non-US Persons Department of Treasury OFAC OFAC Designations OFAC Sanctions SDN List Iran

  • FATF suspends Russia’s task force membership

    Financial Crimes

    On February 24, the Financial Action Task Force (FATF), the international standard-setting body on illicit finance, suspended the Russian Federation’s membership, saying the country’s “actions unacceptably run counter to the FATF core principles aiming to promote security, safety, and the integrity of the global financial system.” This marks the first time the FATF has ever suspended a country from its membership. Despite the suspension, the FATF emphasized that Russia “remains accountable for its obligation to implement the FATF Standards” and “must continue to meet its financial obligations.” According to the statement, the FATF will continue to monitor the situation and will consider whether to lift or modify these restrictions during each of its plenary meetings.

    Treasury Secretary Janet Yellen issued a statement following the suspension. Explaining that “FATF members lead the global effort on combatting money laundering and the financing of terrorism and proliferation and members are expected to uphold and promote core principles that safeguard the global financial system,” Yellen stressed that “Russia’s ongoing war undermines the principles of international cooperation and mutual respect that underpin the mandate of the FATF.” She further commented that the “United States commends the FATF’s historic decision to suspend Russia’s membership in the body,” and added that “Russia’s disregard for the sovereignty and territorial integrity of Ukraine is at odds with the FATF’s foundational values of international cooperation and the rule of law. Further, Russia’s dealings with suppliers of last resort such as Iran and North Korea, its government-driven efforts to evade international sanctions and export controls, and other activities … make it a haven for illicit finance—the very thing the FATF works to combat.”

    Financial Crimes Of Interest to Non-US Persons Russia Department of Treasury FATF Illicit Finance

  • OFAC sanctions 9 companies for involvement in Iranian petrochemicals and petroleum

    Financial Crimes

    On February 9, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Order 13846, against six Iran-based petrochemical manufacturers or their subsidiaries, as well as three firms located in Malaysia and Singapore, for their involvement in the sale and shipment of petroleum and petrochemicals on behalf of a previously designated company. According to the announcement, the designations follow sanctions imposed by OFAC last November against 13 companies in multiple jurisdictions for their involvement in the sale of Iranian petrochemicals and petroleum products to buyers in East Asia on behalf of sanctioned Iranian petrochemical brokers (covered by InfoBytes here). As a result of the sanctions, all property and interests in property belonging to the sanctioned persons subject to U.S. jurisdiction 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 also generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons. Persons that engage in certain transactions with the individuals or entities designated today may themselves be exposed to sanctions or subject to enforcement. Additionally, OFAC warned that “any foreign financial institution that knowingly facilitates a significant transaction or provides significant financial services for any of the individuals designated today could be subject to U.S. sanctions.”

    Financial Crimes Of Interest to Non-US Persons OFAC Department of Treasury OFAC Designations OFAC Sanctions SDN List Iran

  • OFAC sanctions senior executives of Iranian UAV manufacturer

    Financial Crimes

    On February 3, the U.S. Treasury Department’s Office of Foreign Assets Control announced sanctions pursuant to Executive Order 13382 against eight senior executives of an Iran-based firm that was previously sanctioned by the U.S. and EU for manufacturing unmanned aerial vehicles (UAVs) for Iran’s Islamic Revolutionary Guard Corps (IRGC) Aerospace Force. OFAC also designated two Islamic Republic of Iran Navy vessels as property in which the Government of Iran has an interest. “Iranian entities continue to produce UAVs for Iran’s IRGC and military. More broadly, Iran is supplying UAVs for Russia’s combat operations to target critical infrastructure in Ukraine,” Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson said in the announcement. “The United States will continue to aggressively target all elements of Iran’s UAV program.”

    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. Further, “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. Persons that engage in certain transactions with the designated individuals or entities may themselves be exposed to sanctions, and “any foreign financial institution that knowingly facilitates a significant transaction or provides significant financial services for any of the individuals or entities designated today pursuant to E.O. 13382 could be subject to U.S. sanctions.”

    Financial Crimes Of Interest to Non-US Persons OFAC OFAC Designations OFAC Sanctions SDN List Iran Russia Ukraine Invasion

  • OFAC sanctions IRGC foundation and Iranian senior officials

    Financial Crimes

    On January 23, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13553 against Iran’s Islamic Revolutionary Guard Corps (IRGC) Cooperative Foundation, five of the foundation’s board members, the Deputy Minister of Intelligence and Security, and four senior IRGC commanders in Iran. According to OFAC, the sanctions—imposed in coordination with the UK and EU—target a key economic pillar of the IRGC.

    OFAC stressed that this “is the ninth round of OFAC designations targeting actors responsible for the crackdown on peaceful demonstrators and efforts to disrupt and cut Iran’s access to the global internet since nationwide protests began in 2022.” 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. Further, “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. Persons that engage in certain transactions with the designated persons may themselves be exposed to sanctions, and “any foreign financial institution that knowingly facilitates a significant transaction or provides significant financial services for any of the persons designated today could be subject to U.S. sanctions.”

    Financial Crimes Of Interest to Non-US Persons Department of Treasury OFAC OFAC Sanctions OFAC Designations Iran SDN List

  • OFAC issues and amends Iran-related FAQ

    Financial Crimes

    On January 11, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) published an Iran-related frequently asked question (FAQ) and amended several other Iran-related FAQs. New FAQ 1110 clarifies Iran General License (GL) D-1 and GL D-2. Specifically, OFAC noted that because GL D-1 was issued in 2014, the types of software and services that support communication over the internet have changed. Therefore, to reflect technological developments in communication-related software and services since the issuance of GL D-1 (including in cloud-based services), OFAC issued GL D-2 to expand and clarify the range of U.S. software and services available to Iranians under OFAC’s sanctions program.

    Financial Crimes Of Interest to Non-US Persons Department of Treasury OFAC OFAC Sanctions OFAC Designations Iran

  • OFAC sanctions suppliers of Iranian UAVs used in Russia’s war against Ukraine

    Financial Crimes

    On January 6, the U.S. Treasury Department’s Office of Foreign Assets Control announced sanctions pursuant to Executive Order 13382 against six executives and board members of a U.S.-designated Iranian defense manufacturer allegedly responsible for designing and producing unmanned aerial vehicles (UAVs) that are being transferred by Iran for use in Russia’s war against Ukraine. The director of a key organization responsible for overseeing Iran’s ballistic missile programs has also been sanctioned. OFAC further announced that it is updating the defense manufacturer’s entry on the Specially Designated Nationals and Blocked Persons List to include its new alias. As a result of the sanctions, all property and interests in property belonging to the sanctioned individuals and entities 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, 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. Persons that engage in certain transactions with the designated individuals or entities may themselves be exposed to sanctions, and “any foreign financial institution that knowingly facilitates a significant transaction or provides significant financial services for any of the individuals or entities designated today pursuant to E.O. 13382 could be subject to U.S. sanctions.”

    Financial Crimes Of Interest to Non-US Persons Department of Treasury OFAC OFAC Sanctions OFAC Designations SDN List Iran Russia Ukraine Ukraine Invasion

  • OFAC settles with Danish company for routing prohibited financial transactions though a U.S. bank

    Financial Crimes

    On December 30, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a more than $4.3 million settlement with a multinational Danish manufacturer to resolve allegations that its wholly owned United Arab Emirates (UAE)-based subsidiary directed customers in Iran, Syria, and Sudan to make payments to its bank account at the UAE branch of a U.S. financial institution. According to OFAC’s enforcement release, between November 2013 and August 2017, the subsidiary sold products to customers in Sudan, Syria, and Iran. Customers were instructed to remit payments to at least three accounts at banks located in the UAE, including the parent company’s U.S. branch account. OFAC further contended that the subsidiary used third-party payers to make five transfers (disguising the originator or beneficiary of the transactions) from its U.S. branch account to parties in Syria and Iran, which prevented the bank’s transactional screen filters from stopping the payments. The total value of all the transfers was roughly $16,959,683, OFAC said, claiming that by causing a U.S. financial institution to facilitate prohibited financial transactions and export financial services, the parent company violated the Iranian, Syrian, and Sudanese sanctions regulations.

    While OFAC found no evidence that the parent company willfully engaged third-party payers to evade sanctions, it determined that the subsidiary “was aware since at least 2011 that using a U.S. financial institution to send or receive payments related to sanctioned jurisdictions could be prohibited.” Moreover, the subsidiary allegedly received communications from the parent company and various financial institutions regarding concerns flagged in its banking activity but continued to use the U.S. branch account to collect payments from customers in sanctioned jurisdictions. These alleged violations, OFAC stated, occurred primarily due to deficiencies in the parent company’s global sanctions compliance program.

    OFAC noted that while the parent company disclosed the alleged violations, the agency was already in possession of the relevant information and therefore the submission did not qualify as a voluntary self-disclosure. However, OFAC considered various mitigating factors, including that the parent company had not received a penalty notice from OFAC in the preceding five years, and the parent company took quick action to determine the root causes of the alleged conduct and undertook significant remedial measures to prevent future violations.

    Providing context for the settlement, OFAC stated that the “enforcement action highlights the risks to multinational companies, including to non-U.S. entities, that involve the U.S. financial system in commercial activity involving an OFAC- sanctioned country, region, or person,” and emphasized that “[c]ommercial activity that might not otherwise violate OFAC regulations—such as the sale of non-U.S. goods by a non-U.S. person to an entity in an OFAC-sanctioned country—can nonetheless cause a violation when the financial transactions related to that activity are processed through or involve U.S. financial institutions.”

    Financial Crimes Of Interest to Non-US Persons Department of Treasury OFAC Settlement Enforcement OFAC Sanctions OFAC Designations

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