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OFAC sanctions oil companies for supporting Maduro regime, blocks four vessels
On June 2, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) sanctioned four companies for operating in the oil sector of the Venezuelan economy (which provides “financial resources to the illegitimate regime of President Maduro”) and identified four vessels as blocked property, pursuant to Executive Order 13850. As a result, all property and interests in property belonging to the identified 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.
OFAC sanctions front company network for providing financial support to Islamic Revolutionary Guards
On March 26, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13224 against 20 Iran- and Iraq-based front companies and individuals for providing financial support to the Islamic Revolutionary Guards Corps-Qods Force, as well as certain Iranian-backed terrorist militias in Iraq. Among other activities, OFAC alleged that the designated companies and individuals laundered money through Iraqi front companies, sold Iranian oil to the Syrian regime, and smuggled weapons to Iraq and Yemen. Pursuant to the sanctions, “all property and interests in property of these persons that are in or come within 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 conduct or facilitate significant transactions for any of the designated persons, they may be “subject to U.S. correspondent account or payable-through account sanctions.”
DOJ unveils charges against Maduro, Venezuelan government officials
On March 26, the DOJ announced criminal charges against numerous current and former Venezuelan government officials, including “Former President” Nicolás Maduro Moros and two Fuerzas Armadas Revolucionarias de Colombia (FARC) leaders. The charges include allegedly engaging in drug trafficking, laundering drug proceeds using Florida real estate and luxury goods, corruption, and bribery. According to an unsealed four-count superseding indictment filed in the Southern District of New York, Maduro, along with five other high-ranking officials, participated in a “narco-terrorism conspiracy,” conspired to import large-scale cocaine shipments into the U.S., and used—or conspired to use—“machine guns and destructive devices” to further the narco-terrorism conspiracies. The charges also allege that Maduro and the officials negotiated and facilitated FARC-produced cocaine shipments, coordinated “foreign affairs with Honduras and other countries to facilitate large-scale drug trafficking,” and solicited assistance from FARC leadership with respect to militia training.
A separate indictment unsealed in the District of Columbia charges the current Venezuelan Minister of Defense with conspiracy to distribute cocaine on a U.S.-registered aircraft. That individual was previously sanctioned in 2018 by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC). (Covered by InfoBytes here.)
A criminal complaint was also filed in the Southern District of Florida charging the current Chief Justice of the Venezuelan Supreme Court with accepting “tens of millions of dollars and bribes to illegally fix dozens of civil and criminal cases,” including a case in which the defendant authorized the dismissal of charges brought against a Venezuelan who was “charged in a multibillion-dollar fraud scheme against the Venezuelan state-owned oil company.” According to the complaint, the defendant laundered the proceeds through U.S. bank accounts, and spent approximately $3 million in South Florida on a private aircraft and luxury goods.
Another unsealed indictment in the Southern District of New York charges three additional Venezuelans with evading OFAC sanctions by working “with U.S. persons and U.S.-based entities to provide private flight services for the benefit of Maduro’s 2018 presidential campaign.”
Additional separate indictments accuse various former Venezuelan officials of drug trafficking and military aircraft smuggling. In addition, several individuals were charged with FCPA violations, including: (i) two individuals for allegedly receiving bribes to award business to U.S.-based companies; and (ii) several individuals for allegedly participating in an international money laundering scheme and conspiring to solicit Petróleos de Venezuela, S.A. (PDVSA) vendors “for bribes and kickbacks in exchange for providing assistance to those vendors in connection with their PDVSA business.” According to the DOJ’s press release, the scheme involved “bribes paid by the owners of U.S.-based companies to Venezuelan government officials to corruptly secure energy contracts and payment priority on outstanding invoices.”
OFAC sanctions additional Russian oil brokerage firm for doing business with Venezuela
On March 12, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order (E.O.) 13850 against a Russian oil brokerage firm for operating in the oil sector of the Venezuelan economy. According to OFAC, following the February 18 designation of a Swiss-incorporated, Russian-controlled oil brokerage and its board chairman and president (covered by InfoBytes here), cargoes of Venezuelan oil allocated to the designated company were charged to the newly sanctioned brokerage firm in order to evade U.S. sanctions. In connection with the designation, OFAC issued Venezuela General License 36A, which authorizes certain transactions and activities otherwise prohibited under E.O.s 13850 and 13857 that are required in order to wind down business with the company. Concurrently, OFAC issued amended FAQ 817 and FAQ 818 to address the significance of OFAC’s designation of the company, and whether there is a wind-down period. OFAC reiterated that “all property and interests in property of [the brokerage firm] that are in the United States or in the possession or control of U.S. persons, and of any entities that are owned, directly or indirectly, 50 percent or more by the designated individual and entity, are blocked and must be reported to OFAC.”
New York announces postponement of collection efforts for certain debts
On March 17, the governor and the attorney general of New York announced that, effective immediately, New York will temporarily postpone collection efforts on certain debts. Consumers with student loan debt and medical debt owed to the state will be receive at least a 30-day hiatus on payments—including a freeze on the accrual of interest on the debts—in order to allow them to deal with the effects of Covid-19. Debts must fit certain criteria in order to qualify for the debt payment freeze. Among other things, the criteria include (i) “[p]atients that owe medical debt due to the five state hospitals and the five state veterans' home[s]”; (ii) “[s]tudents that owe student debt due to State University of New York campuses”; and (iii) “[i]ndividual debtors, sole-proprietors, small business owners, and certain homeowners that owe debt relating to oil spill cleanup and removal costs, property damage, and breach of contract, as well as other fees owed to state agencies.” New Yorkers who have other types of debt that are owed to the state and who are referred to the Office of the Attorney General may apply for a temporary freeze on collection by submitting an application which can be found here.
Treasury sanctions Russian company for doing business with Venezuela
On February 18, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order (E.O.) 13850, as amended, against a Swiss-incorporated, Russian-controlled oil brokerage and its board chairman and president for operating in the oil sector of the Venezuelan economy. According to the press release, the company assisted Venezuela state-owned Petroleos de Venezuela, S.A., in brokering, selling, and transporting Venezuelan petroleum products.
In connection with the designations, OFAC issued Venezuela General License (GL) 36, titled “Authorizing Certain Activities Necessary to the Wind Down of Transactions Involving [company].” GL 36, which expires on May 20, authorizes certain transactions and activities otherwise prohibited under E.O.s 13850 and 13857 that are required in order to wind down business with the company. Concurrently, OFAC issued a new Venezuela-related frequently asked question regarding GL 36, addressing the significance of OFAC’s designation of the company, and whether the E.O. 13850 blocking sanctions on the company apply to its corporate parent and affiliates. In its press release, OFAC added that “all property and interests in property of [the company] and [its president] that are in the United States or in the possession or control of U.S. persons, and of any entities that are owned, directly or indirectly, 50 percent or more by the designated individual and entity, are blocked and must be reported to OFAC.”
District Court voids OFAC fine of $2 million
On December 31, the U.S. District Court for the Northern District of Texas vacated a $2 million civil penalty imposed on a global petroleum company (company) by OFAC for the company’s purported violation of sanctions, ruling that the OFAC regulations did not provide “fair notice” to the company that its actions were prohibited. In May of 2014, OFAC issued sanctions regulations relating to Ukraine. Shortly afterwards, the company and a Russian oil company, with which it had a long-established business relationship, executed several contracts. Although the Russian company was not a blocked entity, its president, who signed the contracts, had been named a specially designated national (SDN). In July of 2014, OFAC issued a penalty notice with a $2 million penalty to the company, alleging that the contracts the company executed with the Russian company violated the Ukraine-related sanctions. The company immediately challenged the penalty notice and fine, asserting that at the time it entered into the subject transactions, the OFAC regulations on Ukraine were not clear, and it interpreted them to allow the transactions. The court agreed with the company, holding that the “text of the regulations does not provide fair notice of its interpretation” in accordance with the Due Process Clause, because “the text [of the regulation] does not ‘fairly address’ whether a U.S. entity receives a service from a SDN when that SDN performs a service enabling the U.S. person to contract with a non-blocked entity. Therefore, the court granted the company’s motion for summary judgment and vacated OFAC’s Penalty Notice.
OFAC identifies Venezuelan oil tankers as blocked property
On December 3, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced additions to the Specially Designated Nationals List (SDN List) pursuant to Executive Order 13884, which blocks the property of the Venezuelan government. OFAC identified six tankers of Venezuela’s state-owned oil company as property of the Venezuelan Government and therefore as blocked property, after all the vessels recently transported petroleum to Cuba. A seventh tanker also was identified as a blocked property, pursuant to Executive Order 13850 for operating in the oil sector of the Venezuelan economy, after delivering Venezuelan petroleum to Cuba. According to the press release, the vessel’s name had been changed to circumvent sanctions as it moved Venezuelan oil to Cuba. The SDN List was updated to link the new name of the vessel to its former name. OFAC 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 or designated persons.”
South Korean company agrees to pay $75 million to resolve FCPA claims
On November 22, the DOJ announced that it entered into a deferred prosecution agreement with a South Korean engineering company, in which the company agreed to pay more than $75 million in criminal penalties to resolve an investigation into alleged violations of the FCPA’s anti-bribery provisions. Half of the penalty amount will be paid to the DOJ, and the remaining half will be paid either to Brazilian authorities or also to the United States. According to the DOJ announcement, between 2007 and 2013, the company allegedly paid approximately $20 million in commissions to a Brazilian intermediary, “knowing that portions of the money would be paid as bribes to officials” at Brazil’s state-owned and controlled oil and energy firm. The bribes were allegedly intended to ensure that the state-owned entity entered into a contract to charter a drill ship from a separate Houston-based offshore oil drilling company, which would then be able to purchase that vessel from the Korean company.
As part of the deferred prosecution agreement, the company agreed to cooperate with the DOJ’s ongoing investigations and prosecutions, to improve its compliance program, and to report to the DOJ on those improvements. The company received partial credit for cooperating with the investigation and taking remedial measures, including (i) enhancing its compliance program; (ii) hiring additional compliance staff; (iii) “implementing enhanced anti-corruption policies and heightened due diligence controls over third party vendors”; (iv) instituting mandatory anti-corruption training; and (v) improving its whistleblower policies.
DOJ charges Turkish bank in Iran sanctions violation scheme
On October 15, the DOJ announced charges against a Turkish bank alleging fraud, money laundering, and sanctions offenses related to the bank’s alleged participation in a scheme to evade U.S. sanctions on Iran. According to the indictment, the bank used money service businesses and front companies to evade U.S. sanctions against Iran and “avoid prohibitions against Iran’s access to the U.S. financial system.” The bank allegedly lied to U.S. regulators and foreign banks about its participation in the fraudulent transactions. The concealed funds, the DOJ claimed, “were used to make international payments on behalf of the Government of Iran and Iranian banks, including transfers in U.S. dollars that passed through the U.S. financial system in violation of U.S. sanctions laws.” Additionally, the DOJ asserted that the conduct—which allowed Iran access to “billions of dollars’ worth of Iranian oil revenue”—was protected by high ranking government officials in Iran and Turkey, some of whom received millions of dollars in bribes to promote and protect the scheme from U.S. scrutiny.