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OFAC targets Venezuelan oil sector sanctions evasion network
On January 19, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13850 against three individuals, fourteen entities, and six vessels for allegedly engaging in activities tied to a Mexico-based network involved in the illicit sale of hundreds of millions of dollars of Venezuelan oil. The action builds on OFAC’s June 2020 sanctions against three individuals and eight foreign entities for allegedly engaging in activities in or associated with a network attempting to evade U.S. sanctions on Venezuela’s oil sector in order to benefit “the illegitimate Maduro regime” and Venezuela’s state-owned oil company, Petroleos de Venezuela, S.A. (covered by InfoBytes here). As a result, all property and interests in property belonging to the identified individuals and entities subject to U.S. jurisdiction are blocked, and “any entities that are owned, directly or indirectly, 50 percent or more by the designated entities, are also blocked.” U.S. persons are generally prohibited from dealing with any property or interests in property of blocked or designated persons.
Energy firm's U.S. affiliate agrees to pay $135 million to settle FCPA violations with CFTC and DOJ
On December 3, the DOJ announced it had entered into a deferred prosecution agreement with the U.S. affiliate of one of the largest energy trading firms in the world, in which the company agreed to pay a combined $135 million in criminal penalties related to two counts of conspiracy to violate the anti-bribery provisions of the FCPA. The agreement also resolves a parallel investigation in Brazil. According to the DOJ, between 2005 and 2014, the company paid millions of dollars in bribes to public officials in Brazil, Ecuador, and Mexico “‘to obtain improper competitive advantages that resulted in significant illicit profits for the company.’” Specifically, the company and its co-conspirators paid more than $8 million in bribes to at least four officials at Brazil’s state-owned and controlled oil company, Petróleo Brasileiro S.A. – Petrobras (Petrobras), “in exchange for receiving confidential Petrobras pricing and competitor information.” The company concealed the bribery scheme “through the use of intermediaries and a fictitious company that facilitated the payments to offshore accounts and, ultimately, to the Petrobras officials.” In another instance, the company bribed at least five additional Petrobras officials in order to receive confidential pricing information used to win fuel oil contracts, whereby “a consultant acting on behalf of [the company] engaged in back-channel negotiations with a Houston-based Petrobras official,” and “ultimately settl[ed] on the pre-arranged price that allowed for bribes to be paid from [the company] to the Petrobras officials.”
Between 2015 and July 2020, the company also engaged in a second bribery conspiracy by offering and paying government officials in Ecuador and Mexico more than $2 million in exchange for business opportunities connected to the purchase and sale of oil products. The company and its co-conspirators—who knew the funds, at least in part, were going towards the bribes—“entered into sham consulting agreements, set up shell companies, created fake invoices for purported consulting services and used alias email accounts to transfer funds to offshore companies involved in the conspiracy.”
DOJ is crediting $45 million of the total criminal penalty against the amount the company will pay to resolve the Brazilian Ministério Público Federal’s investigation into conduct related to the company’s bribery scheme in Brazil. The company and another entity within its group of energy trading firms have also agreed to continue to cooperate with the DOJ in ongoing criminal investigations and prosecutions, and will make enhancements to their compliance programs and report on their implementation for a three-year period.
In a related matter, the company also agreed to disgorge more than $12.7 million and pay an $83 million civil money penalty related to manipulative and deceptive trading activity not covered by the DOJ’s deferred prosecution agreement. Under the order, the civil money penalty will be recognized and offset up to $67 million by the amount paid to the DOJ as part of the deferred prosecution agreement. The CFTC noted that the company’s “fraudulent and manipulative conduct—including conduct relating to foreign corruption—defrauded its counterparties, harmed other market participants, and undermined the integrity of the U.S. and global physical and derivatives oil markets.” This case is the first foreign corruption action brought by the CFTC.
OFAC sanctions Iranian Ministry of Petroleum and others for IRGC-QF support
On October 26, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) designated the Iranian Ministry of Petroleum and two oil companies, as well as multiple entities and individuals, including front companies, subsidiaries, and senior executives, for allegedly providing financial support to Iran’s Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF), pursuant to Executive Order 13224. Additionally, OFAC designated four persons involved in the sale of Iranian gasoline to “the illegitimate Maduro regime in Venezuela.” As a result, all property and interests in property belonging to the identified individuals subject to U.S. jurisdiction are blocked, and “any entities that are owned, directly or indirectly, 50 percent or more by such persons, are also blocked.” U.S. persons are generally prohibited from dealing with any property or interests in property of blocked or designated persons, and OFAC warned foreign financial institutions that if they knowingly facilitate significant transactions for the designated persons they “risk exposure to sanctions that could sever their access to the U.S. financial system or block their property and interests in property under U.S. jurisdiction.”
Concurrently, OFAC issued amended General License 8A, “Authorizing Certain Humanitarian Trade Transactions Involving the Central Bank of Iran or the National Iranian Oil Company,” which replaces and supersedes GL 8 and allows certain humanitarian trade transactions involving one of the designated oil entities.
OFAC sanctions Nicaraguan bank and government officials
On October 9, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13851 against a Nicaraguan financial institution, as well as two government officials for supporting the Ortega regime, which “continue[s] to undermine Nicaragua’s democracy.” According to OFAC, the financial institution served as a tool for Ortega to “siphon money from [] $2.4 billion in oil trusts and credit portfolios…in order to remain in power and pay a network of patronage.” As a result, all property and interests in property of the sanctioned individuals and entities, and any entities owned 50 percent or more by such persons subject to U.S. jurisdiction, are blocked and must be reported to OFAC. U.S. persons are also generally prohibited from entering into transactions with the sanctioned persons.
Asphalt company agrees to pay over $16 million to settle FCPA charges
On September 22, the DOJ announced that a Florida-based asphalt company pleaded guilty to conspiracy to violate the anti-bribery provisions of the FCPA, agreeing to pay a $16.6 million criminal fine to resolve the charges. According to the information filed in the U.S. District Court for the Eastern District of New York, the company and its affiliates bribed foreign officials in Brazil, Venezuela, and Ecuador with millions of dollars in order to “obtain contracts to purchase or sell asphalt to the countries’ state-owned and state-controlled oil companies, in violation of the FCPA.” Between 2010 and 2015, to execute the bribery scheme in Brazil, the company entered into fake consulting agreements with intermediaries and sent international wires from company bank accounts to offshore bank accounts controlled by the bribe intermediaries. The intermediaries would then pay bribes to Brazilian government officials on the company’s behalf. In Venezuela, between 2012 and 2018, the company used similar fake consulting agreements to bribe Petróleos de Venezuela, S.A. (PDVSA) officials and used code names to hide the names of PDVSA officials in emails and texts. Lastly, in 2014, the company again used similar sham consulting arrangements to bribe Ecuador’s state-owned oil company to secure a contract to supply asphalt.
The announcement notes that the DOJ recently unsealed charges and guilty pleas of five individuals involved in the bribery scheme, including a company senior executive, a company trader, two bribe intermediaries, and a former PDVSA official. Additionally, the announcement states that a different company trader pleaded guilty in 2017 for his role in the scheme and a pending criminal complaint against a former PDVSA official was also recently unsealed in federal court.
OFAC reaches $583,000 settlement to resolve Ukrainian sanctions violations
On September 9, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced two settlements totaling $583,100 with the U.S.-based subsidiary of a global financial institution for apparent violations of the Ukraine-Related Sanctions Regulations. According to OFAC, the financial institution allegedly agreed to process a funds transfer exceeding $28 million through the U.S. related to a series of purchases of fuel oil involving a property interest of an oil company in Cyprus that was previously designated by OFAC. OFAC alleged that at the time the payment was processed, the bank “had reason to know of the designated oil company’s potential interest, but did not conduct sufficient due diligence to determine whether the designated oil company’s interest in the payment had been extinguished.” The bank agreed to pay $157,500 to resolve the apparent violation.
Additionally, OFAC stated the bank also agreed to separately remit $425,600 for apparent violations stemming from the processing of 61 transactions “destined for accounts at a designated financial institution.” The bank allegedly failed to stop these payments because its sanctions screening tool did not include a specific business identifier code assigned to the designated financial institution, OFAC claimed, and its screening tool “was calibrated so that only an exact match to a designated entity would trigger further manual review.”
In arriving at the settlement amount, OFAC considered various mitigating factors, including that (i) the apparent violations were non-egregious; (ii) the bank had in place “an OFAC compliance program at the time of the apparent violations”; and (iii) the bank has undertaken remedial efforts to address the deficiencies, including reviewing the circumstances of the apparent violations with its U.S. sanctions compliance unit, and agreeing to conduct additional training and implement changes to internal procedures as necessary.
OFAC also considered various aggravating factors, including that “several senior managers within the bank’s anti-financial crime division, as well as a representative from its counsel’s office, failed to exercise a minimal degree of caution or care in connection with the conduct that led to the apparent violation,” and had actual knowledge of the alleged conduct.
OFAC sanctions entities for providing support to Iranian petrochemical company
On September 3, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) designated six entities, pursuant to Executive Order 13846, for allegedly providing support to a petrochemical company previously designated for “transfer[ing] the equivalent of hundreds of millions of dollars’ worth of exports from the National Iranian Oil Company (NIOC), which helps to finance Iran’s Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF) and its terrorist proxies.” According to OFAC, the designated entities “materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of” the sanctioned petrochemical company by, among other things, (i) selling and purchasing thousands of tons of petrochemicals on behalf of the company; (ii) brokering the sales of petrochemicals for the company; (iii) facilitating the shipment and resale of petrochemical products for the company; and (iv) processing millions of dollars in proceeds of petrochemical sales.
As a result of the sanctions, all property and interests in property of the designated persons 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 warned foreign financial institutions that knowingly facilitating significant transactions or providing significant support to the designated entities may subject them to sanctions and could sever access to the U.S. financial system.
CFPB moves to enforce subpoena against telemarketer in alleged credit repair operation
On August 25, the CFPB filed a motion in the U.S. District Court for the District of Northern Florida to compel a telemarketing company (defendant) allegedly associated with a credit repair operation to comply with a subpoena and produce documents requested by the Bureau. According to the Bureau, the defendant has refused to comply with a subpoena in the ongoing litigation of a 2019 CFPB action against the credit repair operation (covered by InfoBytes here). The operation allegedly violated the Telemarketing Sales Rule and the Consumer Financial Protection Act by using “Hotswap Partners,” such as the defendant, who allegedly engaged in deceptive acts and practices when selling and marketing financial products and “live-transferr[ing]” consumers to the credit repair operation’s telemarketing call centers. The Bureau contends that the defendant transferred “thousands of consumers” to the operation each year for at least a decade, yet has only provided a minimal number of documents in response to the subpoena, which seeks records related to the defendant’s business activities and marketing relationship with the credit repair operation. According to the Bureau, the defendant has refused to produce additional materials based on “boilerplate and unsubstantiated objections.” The Bureau also argues that the defendant has failed to provide a basis for its objections, which include a “general privilege objection and a general objection that the requested format of certain unspecified documents would ‘impose an unreasonable burden on the Company,’” and has “rebuffed” every attempt made by the Bureau to discuss compliance with the subpoena.
9th Circuit: No bona fide error defense when relying on creditor to provide information
On August 17, the U.S. Court of Appeals for the Ninth Circuit reversed a summary judgment ruling in favor of a debt collector (defendant) accused of violating the FDCPA, determining the district court erred in concluding that the defendant qualified for the bona fide error defense. According to the opinion, the plaintiff incurred a debt to a medical provider (creditor), who eventually placed the debt with the defendant for collection. The plaintiff alleged that the defendant violated the FDCPA when it miscalculated the interest on the unpaid debt. While the parties did not dispute the issue of whether the defendant unintentionally violated the FDCPA when it miscalculated interest on the debt, the issue remained as to whether the defendant had reasonable procedures in place to qualify for the bona fide error defense. The defendant argued that it has reasonable procedures in place because its agreement with the creditor contained a requirement that the creditor supply it with accurate information for collection. The defendant argued “that this procedure was reasonably adapted to avoid violations of the FDCPA,” and that it should be entitled to the bona fide error defense. The district court agreed with the defendant and granted its request for summary judgment.
On appeal, the 9th Circuit determined that relying on creditor-clients to provide accurate information is insufficient to establish a bona fide error defense. Moreover, a “boilerplate agreement” between the creditor and the defendant “effectively outsourced the defendant’s statutory duty under the FDCPA,” the appellate court held, noting that defendants are not allowed to simply rely on the information they are being provided.
OFAC sanctions network for supporting Maduro regime, blocks two vessels
On June 18, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against three individuals and eight foreign entities for allegedly engaging in activities in or associated with a network attempting to evade U.S. sanctions on Venezuela’s oil sector. Two vessels owned by two of the designated entities were also identified as blocked property pursuant to Executive Order 13850. OFAC noted that the identified persons participated in a scheme involving involved Venezuela’s state-owned oil company, Petroleos de Venezuela, S.A. (PdVSA), in order to benefit “the illegitimate regime of President Maduro.” Both PdVSA and Maduro were previously designated by OFAC (covered by InfoBytes here and here), and OFAC warned that persons who facilitate activity with designated persons “risk losing access to the U.S. financial system.” As a result, all property and interests in property belonging to the identified individuals and entities subject to U.S. jurisdiction are blocked, and “any entities that are owned, directly or indirectly, 50 percent or more by the designated entities, are also blocked.” U.S. persons are generally prohibited from dealing with any property or interests in property of blocked or designated persons.