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  • OFAC sanctions Russian cybercriminals for $16.8 million crypto scam

    Financial Crimes

    On September 16, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) sanctioned two Russian nationals who were allegedly involved in phishing campaigns targeting virtual asset service providers in 2017 and 2018, resulting in losses of at least $16.8 million. Specifically, the Russian nationals spoofed web domains of legitimate virtual currency exchanges to steal customers’ login information and gain access to their real accounts. According to OFAC, they used a “variety of methods to exfiltrate their ill-gotten virtual currency” and subsequently laundered the money to a personal account, attempting to “conceal the nature and source of the funds by transferring them in a layered and sophisticated manner through multiple accounts and multiple virtual currency blockchains.” OFAC designated the individuals pursuant to Executive Order 13694, which targets “malicious cyber-enabled activities, including those related to the significant misappropriation of funds or personal identifiers for private financial gain.”

    OFAC emphasized that anti-money laundering and countering the financing of terrorism regimes “pose a critical chokepoint in countering and deterring” this type of cybercriminal activity. As a result, all property and interests in property belonging to the designated individuals subject to U.S. jurisdiction are blocked, and “U.S. persons generally are prohibited from dealing with them.”

    Financial Crimes OFAC Department of Treasury Sanctions Of Interest to Non-US Persons Virtual Currency Russia Anti-Money Laundering

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  • OFAC sanctions Russia-linked individuals for interfering in elections

    Financial Crimes

    On September 10, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced its decision to sanction four Russia-linked individuals for allegedly attempting to influence the U.S. electoral process. According to OFAC, these designations are intended to “promot[e] accountability for Kremlin-linked individuals seeking to undermine confidence in U.S. democratic processes.” Three of the designated individuals are employed by the Internet Research Agency (IRA), a Russian “troll factory,” which was previously designated by OFAC along with its Russian financier, for providing material support to IRA activities. The three designated individuals allegedly supported the IRA’s cryptocurrency accounts, which OFAC claimed are used to “fund activities in furtherance of their ongoing malign influence operations around the world.” As a result, all property and interests in property belonging to, or owned by, the identified individuals subject to U.S. jurisdiction are blocked, and “any entities 50 percent or more owned by one or more designated persons are also blocked.” U.S. persons are also generally prohibited from engaging in transactions with the designated individuals.

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

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  • Senate investigation finds that oligarchs use art industry to avoid sanctions

    Financial Crimes

    Last month, the U.S. Senate Permanent Subcommittee on Investigations issued a bipartisan report titled “The Art Industry and U.S. Policies that Undermine Sanctions,” which details findings from a two-year investigation related to how Russian oligarchs appear to have used the art industry to evade U.S. sanctions. According to the Subcommittee, the investigation—which focused on major auction houses, private New York art dealers, and seven financial institutions—revealed that the “secretive nature” of the art industry “allowed art intermediaries to purchase more than $18 million in high-value art in the United States through shell companies linked to Russian oligarchs after they were sanctioned by the United States in March 2014,” and that, moreover, “the shell companies linked to the Russian oligarchs were not limited to just art and engaged in a total of $91 million in post-sanctions transactions.” The report claims that the art industry is largely unregulated, and, unlike financial institutions, is not subject to the Bank Secrecy Act (BSA) and is not required to maintain anti-money laundering (AML) and anti-terrorism financing controls. However, the report notes that sanctions imposed by the U.S. Treasury’s Office of Foreign Assets Control (OFAC) do apply to the industry, emphasizing that U.S. persons are not allowed to conduct business with sanctioned individuals or entities.

    The Subcommittee’s key findings include that while four of the major auction houses have established voluntary AML controls, they treat an art agent or advisor as the principal purchaser of the art, which allows the auction house to perform due diligence on the art agent or advisor instead of identifying and evaluating a potentially undisclosed client. The auction houses also reportedly rely on financial institutions to identify the source of funds used to purchase the art. Because of these practices, the report concludes that these shell companies continue to have access to the U.S. financial system despite the imposition of sanctions.

    The report makes several recommendations including: (i) the BSA should be amended to include businesses that handle transactions involving high-value art; (ii) Treasury should be required to collect beneficial ownership information for companies formed or registered to do business in the U.S., making the information available to law enforcement; (iii) Treasury should consider imposing sanctions on a sanctioned individual’s immediate family members; (iv) Treasury should announce and implement sanctions concurrently “to avoid creating a window of opportunity for individuals to avoid sanctions”; (v) the ownership threshold for blocking companies owned by sanctioned individuals should be lowered or removed; (vi) Treasury should maximize its use of suspicious activity reports filed by financial institutions to, among other things, alert other financial institutions of the risks of transacting with sanctioned entities; (vii) OFAC should issue comprehensive guidance for auction houses and art dealers on steps for determining “whether a person is the principal seller or purchaser of art or is acting on behalf of an undisclosed client, and which person should be subject to a due diligence review”; and (viii) OFAC should issue guidance on “the informational exception to the International Emergency Economic Powers Act related to ‘artworks.’”

    Additionally, in June, a bipartisan group of senators introduced the Anti-Money Laundering Act of 2020 (AMLA) as an amendment (S.Amdt 2198 to S.4049) to the National Defense Authorization Act (NDAA), which would, among many other things, require federal agencies to study “the facilitation of money laundering and the financing of terrorism through the trade of works of art or antiquities” and, if appropriate, propose rulemaking to implement the study’s findings within 180 days of the AMLA’s enactment.

    Financial Crimes U.S. Senate Investigations Sanctions OFAC Anti-Money Laundering Bank Secrecy Act Federal Legislation Of Interest to Non-US Persons

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  • OFAC sanctions investors supporting Syrian government

    Financial Crimes

    On July 29, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against one individual and nine entities for providing significant investment support to the Syrian government. OFAC noted that, among other things, the designated individual and his companies knowingly provided “significant financial, material, or technological support to, or knowingly engag[ed] in a significant transaction with, the Government of Syria (including any entity owned or controlled by the Government of Syria) or a senior political figure of the Government of Syria.” As a result, all property and interests in property belonging to the designated persons and subject to U.S. jurisdiction are blocked and must be reported to OFAC. OFAC further noted that its regulations “generally prohibit all dealings by U.S. persons or within (or transiting) the United States that involve any property or interests in property of designated persons,” and warned that non-U.S. persons that engage in transactions with the designated persons may expose themselves to designation. OFAC also referenced a previously published Fact Sheet (covered by InfoBytes here), which highlights the most pertinent exemptions, exceptions, and authorizations for humanitarian assistance and trade under the Syria, Iran, Venezuela, North Korea, Cuba, and Ukraine/Russia-related​ sanctions programs to ensure humanitarian-related trade and assistance reaches at-risk populations through legitimate and transparent channels during the global Covid-19 pandemic.

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

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  • OFAC issues amended Ukraine-/Russia-related FAQs

    Financial Crimes

    On July 22, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) published nine amended Ukraine-/Russia-related Frequently Asked Questions in response to the issuance of Ukraine-related General Licenses (GL) 13O and 15I. As previously covered by InfoBytes, the newly issued GLs extend the expiration date to January 22, 2021 for the authorization of certain transactions necessary to divest or transfer debt, equity, or other holdings, or wind down operations or existing contracts with a Russian manufacturer previously sanctioned by OFAC in April 2018 (covered by InfoBytes here). Among other things, the FAQs discuss specific permitted activities, transactions, and uses of blocked funds. The FAQs also state that foreign persons will not be subject to sanctions for engaging in activity with the Russian manufacturer or any entities in which the manufacturer owns, directly or indirectly, a 50 percent or greater interest, provided the activity is authorized by GL 15I and occurs within the authorized time period.

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

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  • OFAC sanctions persons connected to Nicaragua President Ortega; amends Nicaragua sanctions regulations and Ukraine-related general licenses

    Financial Crimes

    On July 17, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13851 against one of Nicaraguan President Ortega’s sons, as well as a second individual and two companies used to allegedly “distribute regime propaganda and launder money.” According to OFAC, the second sanctioned individual created shell companies to launder money from businesses that he operated on behalf of another one of the president’s sons previously designated by OFAC. OFAC also cited to the individual’s alleged involvement on behalf of a chain of sanctioned gas stations controlled by the Ortega family, designating the individual “for being responsible for or complicit in, or for having directly or indirectly engaged or attempted to engage in, a transaction or series of transactions involving deceptive practices or corruption by, on behalf of, or otherwise related to the [Government of Nicaragua (GoN)] or a current or former official of the GoN.” As a result, all property and interests in property of the sanctioned individuals and entities, and of 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. 

    Separately, on July 16, OFAC announced amendments (effective July 17) to the Nicaragua Sanctions Regulations, which incorporate the Nicaragua Human Rights and Anticorruption Act of 2018, and, among other things, update the authority citation as well as the prohibited transactions and delegation sections. A general license previously posted on OFAC’s website authorizing certain U.S. government activities related to Nicaragua also has been incorporated. The final rule is effective July 17.

    The announcement also extends the expiration date of two Ukraine-related general licenses (GLs). Both GL 13O, which supersedes GL 13N, and GL 15I, which supersedes GL 15H, now expire January 22, 2021, and authorize certain transactions necessary to divest or transfer debt, equity, or other holdings, or wind down operations or existing contracts with a Russian manufacturer previously sanctioned by OFAC in April 2018 (covered by InfoBytes here).

    Financial Crimes OFAC Department of Treasury Sanctions DOJ Nicaragua Ukraine Of Interest to Non-US Persons

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  • OFAC issues sanctions for supporting Russian financier

    Financial Crimes

    On July 15, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Orders 13848, 13694, and 13661 against three individuals and five entities located in Sudan, Hong Kong, and Thailand, for allegedly enabling a Russian financier to evade U.S. sanctions. According to OFAC, the financier supported the Internet Research Agency (IRA), a Russian “troll farm” designated by OFAC in 2018, and is believed to be the financier behind Private Military Company, a “designated Russian Ministry of Defense proxy force.” OFAC alleged that this operation “advocated for the use of social media-enabled disinformation campaigns similar to those deployed by the IRA, and the staging of public executions to distract protestors seeking reforms.” Additionally, OFAC alleged that the individual and Thailand and Hong Kong-based entities “facilitated over 100 transactions exceeding $7.5 million that were sent in the interest of [the financier].” As a result, all property and interests in property belonging to, or owned by, 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.

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

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  • OFAC sanctions investors supporting Syrian government

    Financial Crimes

    On June 17, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against 24 individuals and entities for providing significant investment support to the Syrian government. According to OFAC, the designations include Treasury’s “first implementation of sanctions pursuant to the Caesar Syria Civilian Protection Act of 2019,” and involve actions taken against a holding company, a private sector investment venture, and luxury tourism developments. Concurrent with OFAC’s sanctions, the U.S. State Department also designated 15 persons, including President Bashar al-Assad and his wife, pursuant to Executive Order 13984, which focuses on persons identified as “obstructing, disrupting, or preventing a ceasefire or a political solution to the Syrian conflict.” As a result, all property and interests in property belonging to the designated persons and subject to U.S. jurisdiction are blocked and must be reported to OFAC. OFAC further noted that its regulations “generally prohibit all dealings by U.S. persons or those within (or transiting) the United States that involve any property or interests in property of designated persons,” and warned non-U.S. persons that engage in transactions with the designated persons may expose themselves to designation. OFAC also referenced a previously published Fact Sheet (covered by InfoBytes here), which 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 to ensure humanitarian-related trade and assistance reaches at-risk populations through legitimate and transparent channels during the global Covid-19 pandemic.

    Financial Crimes OFAC Department of Treasury Sanctions Syria Of Interest to Non-US Persons Covid-19

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  • Special Alert: OFAC encourages humanitarian aid, promises consideration of Covid-19 compliance challenges

    Federal Issues

    The Department of the Treasury’s Office of Foreign Assets Control recently took two actions to address the impact of Covid-19. First, OFAC issued a fact sheet that consolidates existing authorizations and guidance permitting humanitarian, agricultural, and medical aid to six jurisdictions subject to sanctions. Second, OFAC encouraged companies facing compliance challenges due to Covid-19 to shift resources to higher-risk areas, noting that it would take this move into consideration if it leads to a violation during the pandemic. Companies facing compliance challenges may wish to consider such a shift, while documenting their risk-based rationale for doing so.

    Humanitarian fact sheet

    Last week, OFAC issued a fact sheet regarding the provision of Covid-19-related assistance under its Iran, Cuba, North Korea, Syria, Ukraine/Russia, and Venezuela sanctions regimes. The fact sheet made no changes to existing laws and guidance, but consolidated existing licenses, exemptions, authorizations, and related FAQs relevant to humanitarian aid and medical equipment for these regimes. The fact sheet should prove to be a valuable resource for financial institutions and other organizations confronting a wave of transactions to provide personal protective equipment to sanctions-targeted jurisdictions wracked by Covid-19, while complying with OFAC regulations. 

    Federal Issues Department of Treasury OFAC Sanctions Covid-19

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  • OFAC guidance addresses Covid-19 humanitarian assistance and trade

    Federal Issues

    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 IranVenezuelaNorth KoreaSyriaCuba, 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.

    Federal Issues Financial Crimes Department of Treasury OFAC Covid-19 Of Interest to Non-US Persons Sanctions

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