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  • OFAC reaches multiple settlements with companies that exported goods to Russia and Sudan

    Financial Crimes

    On September 27, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a roughly $1.4 million settlement with a Texas-based supplier of goods and services for the oil and gas industries (a subsidiary of a Netherlands corporation) for allegedly approving contracts that allowed a foreign subsidiary to supply goods to a Russian energy firm blocked under Directive 4 of Executive Order (E.O.) 13662, “Blocking Property of Additional Persons Contributing to the Situation in Ukraine,” as implemented by the Ukraine-Related Sanctions Regulations. According to OFAC’s web notice, between July 2015 and November 2016, U.S.-senior managers at the company approved five contracts for its foreign subsidiary to supply oil and exploration goods to the blocked energy firm, thus constituting a “prohibited provision of services involving a person determined to be subject to Directive 4 ([the blocked energy firm]), its property, or its interests in property.”

    In arriving at the settlement amount, OFAC considered various aggravating factors, including, among other things, that (i) U.S. senior managers knew that their approvals were for contracts to supply goods to a blocked entity; (ii) the company “acted directly contrary to U.S. foreign policy objectives by approving the sale of oil production or exploration equipment to an entity subject to the restrictions of Directive 4”; and (iii) the company should have recognized the risk involved when the contracts were approved.

    OFAC also considered various mitigating factors, including, among other things, that the company took meaningful corrective actions upon discovering the alleged violations to ensure sanctions compliance, and cooperated with OFAC’s investigation and entered into tolling agreements.

    OFAC separately reached a $160,000 settlement with a subsidiary of a subsidiary of the same Netherlands corporation for its apparent violation of OFAC’s now-repealed Sudanese Sanctions Regulations. According to OFAC’s web notice, three of the subsidiary’s U.S. employees allegedly facilitated the sale and shipment of oilfield equipment intended for delivery to Sudan, which was, at the time of the transaction, an apparent violation.   

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

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  • OFAC reaches $1.4 million settlement with money transmitter

    Financial Crimes

    On July 23, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $1.4 million settlement with a New York-based online money transmitter for 2,260 apparent violations of multiple sanctions programs. According to OFAC’s web notice, between February 4, 2013 and February 20, 2018, the company allegedly processed 2,241 payments for parties located in sanctioned jurisdictions and regions, including the Crimea region of Ukraine, Iran, Sudan, and Syria, as well as 19 payments on behalf of sanctioned persons identified on OFAC’s List of Specially Designated Nationals and Blocked Persons. Identified deficiencies in the company’s sanctions compliance program related to screening, testing, auditing, and transaction review procedures allowed persons in these jurisdictions and regions and those on the SDN List to engage in roughly $802,117.36 worth of transactions, OFAC stated. The apparent violations—related to commercial transactions that the company processed on behalf of its corporate customers and card-issuing financial institutions—allegedly occurred as a result of weak algorithms, business identifier code screening failures, backlogs, and a failure to monitor IP addresses or flag addresses in sanctioned locations.

    In arriving at the settlement amount, OFAC considered various aggravating factors, including that (i) the company failed to exercise sufficient caution or care for its sanctions compliance obligations; (ii) the company had reason to know users were located in sanctioned jurisdictions and regions based on common indications it had within its possession; and (iii) the apparent violations harmed six different sanctions program.

    OFAC also considered various mitigating factors, including that (i) senior management quickly self-disclosed the apparent violations upon discovery and provided substantial cooperation during the investigation; (ii) the company has not received a penalty notice from OFAC in the preceding five years; and (iii) the company has taken remedial measures to minimize the risk of recurrence, including terminating the conduct leading to the apparent violations, retraining compliance employees, enhancing screening software, putting flagged transactions into a pending status rather than completing them, and conducting a daily review of customers’ and counter-parties’ identification documents.

    Financial Crimes OFAC Department of Treasury Enforcement Settlement Of Interest to Non-US Persons OFAC Sanctions Iran Ukraine Sudan Syria

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  • Biden order authorizes sanctions authority covering Russian activities

    Financial Crimes

    On April 15, the Biden administration announced several actions intended to block property with respect to specified harmful foreign activities by the Russian government, including the issuance of Executive Order (E.O.) Blocking Property With Respect To Specified Harmful Foreign Activities Of The Government Of The Russian Federation. Specifically Directive 1 to the E.O. provides that, at the determination of the acting director of the Office of Foreign Assets Control (OFAC) and in consultation with the State Department, U.S. financial institutions are prohibited from:

    • Participating “in the primary market for ruble or non-ruble denominated bonds issued after June 14, 2021 by the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation”; and
    • “Lending ruble or non-ruble denominated funds to the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation.”

    These actions are prohibited as of June 14, 2021, “except to the extent provided by law or unless licensed or otherwise authorized by [OFAC].” For purposes of the Directive, a “U.S. financial institution” is defined as “any U.S. entity (including its foreign branches) that is engaged in the business of accepting deposits, making, granting, transferring, holding, or brokering loans or other extensions of credit, or purchasing or selling foreign exchange, securities, commodity futures or options, or procuring purchasers and sellers thereof, as principal or agent.” This term also includes branches, offices, and agencies of foreign financial institutions located in the U.S., but does not include such institutions’ foreign branches, offices, or agencies.

    In conjunction with the issuance of the new E.O., OFAC also published several new and updated FAQs and added several individuals and entities to OFAC’s list of Specially Designated Nationals. The new additions include sanctions taken against (i) several Russian technology companies that support the Russian Intelligence Services, which OFAC stated are responsible for having “executed some of the most dangerous and disruptive cyber attacks in recent history”; (ii) five individuals and three entities related to Russia’s occupation of the Crimea region of Ukraine pursuant to E.O.s 13660 and 13685; and (iii) 16 entities and 16 individuals that attempted to influence the 2020 U.S. presidential election at the direction of Russian government leadership.

    As a result of the sanctions, all of the 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, as well as any entities that are owned 50 percent or more by the designated persons, are blocked and must be reported to OFAC. Additionally, OFAC regulations generally prohibit U.S. persons from participating in transactions with the designated persons unless exempt or otherwise authorized by an OFAC general or specific license. In its announcement, OFAC further warned that “foreign persons that knowingly engage in a significant transaction or transactions with the persons designated today may themselves face the risk of designation,” and emphasized that “financial institutions and other persons that engage in certain transactions or activities with the sanctioned entities and individuals may expose themselves to secondary sanctions or be subject to an enforcement action.”

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

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  • OFAC amends Venezuela and Ukraine-related general licenses

    Financial Crimes

    On December 23, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued General License (GL) 5F, “Authorizing Certain Transactions Related to the Petróleos de Venezuela, S.A. 2020 8.5 Percent Bond on or After July 21, 2021,” which replaces and supersedes GL 5E. OFAC also amended related FAQ 595, which reminds parties that, until July 21, 2021, transactions related to the sale or transfer of CITGO shares in connection with the PdVSA 2020 8.5 percent bond are prohibited, unless specifically authorized by OFAC.

    Additionally, OFAC concurrently announced the issuance of Ukraine-related GLs 13P and 15J. GL 13P, “Authorizing Certain Transactions Necessary to Divest or Transfer Debt, Equity, or Other Holdings in GAZ Group,” is effective December 23 and replaces and supersedes GL 13O. Additionally, GL 15J, “Authorizing Certain Activities Involving GAZ Group,” is also effective on December 23 and replaces and supersedes GL 15I.

    Financial Crimes OFAC Venezuela Ukraine Of Interest to Non-US Persons Sanctions

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  • OFAC settles with digital asset company over multiple sanctions violations

    Financial Crimes

    On December 30, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a nearly $100,000 settlement with a California-based digital asset security company for 183 apparent violations of multiple sanctions programs. According to OFAC, between March 2015 and December 2019, the company processed 183 digital currency transactions, totaling over $9,000, on behalf of individuals who were located in sanctioned jurisdictions, such as the Crimea region of Ukraine, Cuba, Iran, Sudan, and Syria. OFAC notes that, prior to April 2018, the company allowed users to open accounts by providing only a name and email address, and while it then amended its policies to require all new accountholders to verify the country in which they were located, it did not perform additional verification or diligence on their actual location.

    In arriving at the settlement amount, OFAC considered various aggravating factors, including that the company (i) failed to implement appropriate, risk-based sanctions compliance controls; and (ii) had reason to know that some of its users were located in sanctioned jurisdictions based on users’ IP address data.

    OFAC also considered various mitigating factors, such as (i) the company not having received a penalty notice from OFAC in the proceeding five years; (ii) the company cooperating with the investigation; and (iii) the company having undertaken remedial measures, including hiring a Chief Compliance Officer and implementing a new OFAC policy.

    Financial Crimes OFAC Sanctions OFAC Designations Settlement Enforcement Of Interest to Non-US Persons Cuba Iran Syria

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  • OFAC releases new Non-SDN sanctions reference tool

    Financial Crimes

    On December 14, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) published a new reference tool, the Non-SDN Menu Based Sanctions List (NS-MBS List), which “identities persons subject to certain non-blocking menu-based sanctions that have been imposed under statutory or other authorities, including certain sanctions described in Section 235 of the Countering America’s Adversaries Through Sanctions Act (CAATSA), as implemented by Executive Order 13849, and the Ukraine Freedom Support Act of 2014, as amended by CAATSA.” OFAC noted that the NS-MBS List is distinct from its List of Foreign Financial Institutions Subject to Correspondent Account or Payable-Through Account Sanctions, which identifies foreign financial institutions subject to correspondent or payable-through account sanctions.

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

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  • OFAC reaches $583,000 settlement to resolve Ukrainian sanctions violations

    Financial Crimes

    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.

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

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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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