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OFAC announces new Sudan E.O., issues and amends several sanctions general licenses and FAQs
The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) recently announced several sanctions-related actions, including President Biden’s new Executive Order (E.O.) Imposing Sanctions on Certain Persons Destabilizing Sudan and Undermining the Goal of a Democratic Transition. The E.O. expands the scope of a 2006 Executive Order following the determination that recent events in Sudan “constitute an unusual and extraordinary threat to the national security and foreign policy of the United States.” The E.O. outlines specific prohibitions and provides that all property and interests in property that are in the U.S. or that later come in the U.S., or that are in the possession or control of any of the identified U.S. persons must be blocked and may not be transferred, paid, exported, withdrawn, or otherwise dealt in. Concurrently, OFAC issued a new FAQ clarifying which sanctions authorities are applicable to Sudan and the Sudanese government.
OFAC also issued Venezuela-related General License (GL) 42, which authorizes certain transactions related to the negotiation of settlement agreements with the IV Venezuelan National Assembly and certain other entities. The authorized transactions must relate to debt owed by the Venezuelan government, Petróleos de Venezuela, S.A., or any entity owned, directly or indirectly, 50 percent or more. GL 42 does not authorizes transactions involving the Venezuelan National Constituent Assembly convened by Nicolas Maduro or the National Assembly seated on January 5, 2021. OFAC also released three new related FAQs and one amended FAQ.
Additionally, OFAC released cyber-related GL 1C, which authorizes certain transactions with Russia’s Federal Security Service that would normally be prohibited by the Weapons of Mass Destruction Proliferators Sanctions Regulations, and issued three amended cyber-related FAQs. A few days later, OFAC issued Russia-related GL 8G, which authorizes certain transactions related to energy that would otherwise be prohibited by E.O. 14024, involving certain entities, including Russia’s central bank. OFAC clarified that GL 8G does not authorize prohibited transactions related to (i) certain sovereign debt of the Russian Federation; (ii) the “opening or maintaining of a correspondent account or payable-through account for or on behalf of any entity subject to Directive 2 under E.O. 14024, Prohibitions Related to Correspondent or Payable-Through Accounts and Processing of Transactions Involving Certain Foreign Financial Institutions”; and (iii) or “[a]ny debit to an account on the books of a U.S. financial institution of the Central Bank of the Russian Federation,” among others.
OFAC settles with digital platform on sanctioned transactions
On March 31, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $72,230 settlement with a global digital trading platform to resolve allegations that it processed transactions for customers who self-identified as being located in Iran or Cuba, or were employees of the Government of Venezuela (GoV). OFAC’s web notice stated that between March 2017 and May 2022, the company, or certain of its non-U.S. affiliates, allegedly maintained accounts for customers who submitted information showing their locations were in a sanctioned jurisdiction. OFAC further maintained that the company violated the Venezuela Sanctions Regulations by processing transactions on behalf of two customers who self-identified as employees of the GoV. OFAC claimed, among other things, that the company implemented inadequate compliance processes to identify, analyze, and address risks.
In its web notice, OFAC stated that it determined that “the violations were voluntarily self-disclosed and were non-egregious.” OFAC also considered various mitigating factors, including that the company has not received a penalty notice from OFAC in the preceding five years. Additionally, the company undertook numerous remedial measures upon learning of the alleged violations, cooperated with OFAC throughout the investigation, and agreed to toll the statute of limitations, the notice said.
The company issued the following response: “We appreciate that OFAC recognized our full cooperation and remediation of the issues involved in this matter. These were self-identified and self-reported matters that reflect the rigor of our compliance review processes.”
Orrick represented the company in this matter.
OFAC issues amended Venezuela-related GL and FAQ
On January 17, the U.S. Treasury Department’s Office of Foreign Assets Control issued Venezuela-related General License (GL) 5J, which supersedes GL 5I and authorizes certain transactions otherwise prohibited under Executive Orders 13835 and 13857 related to, or that provide financing for, dealings in the Petróleos de Venezuela, S.A. 2020 8.5 Percent Bond on or after April 20, 2023. GL 5J does not authorize any transactions or activities otherwise prohibited by the Venezuela Sanctions Regulations. Concurrently, OFAC updated Venezuela-related FAQ 595 to provide clarification on authorized transactions as well as licensing requirements.
OFAC issues Venezuela-related general license for some transactions
On January 9, the U.S. Treasury Department’s Office of Foreign Assets Control issued Venezuela-related General License (GL) 31B, “Certain Transactions Involving the IV Venezuelan National Assembly and Certain Other Persons.” GL 31B authorizes certain transactions ordinarily prohibited by Executive Order (E.O.) 13884, as incorporated into the Venezuela Sanctions Regulations (VSR), involving the IV Venezuelan National Assembly, its Delegated Commission, any entity established by, or under the direction of, the IV National Assembly to exercise its mandate, or any person appointed or designated by, or whose appointment or designation is retained by, the IV National Assembly, its Delegated Commission, or a IV National Assembly Entity, including their respective members and staff. GL 31B also authorizes U.S. persons to engage in all transactions prohibited by E.O. 13850, as amended by E.O. 13857 (and incorporated into the VSR), involving “any person appointed or designated by, or whose appointment or designation is retained by, the IV National Assembly, its Delegated Commission, or a IV National Assembly Entity to the board of directors (including any ad hoc board of directors) or as an executive officer of a Government of Venezuela entity (including entities owned or controlled, directly or indirectly, by the Government of Venezuela).” OFAC noted that GL 31B does not authorize transactions involving the Venezuelan National Constituent Assembly convened by Nicolas Maduro or the National Assembly seated on January 5, 2021 (including their respective members and staff), or any transactions otherwise prohibited by the Venezuela Sanctions Regulations, including those involving blocked persons unless allowed by GL 31B or separately authorized. In conjunction with GL 31B, OFAC amended related FAQs 522, 547, 660, 679, and 680.
OFAC issues Venezuela-related general licenses
On November 26, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued Venezuela-related General License (GL) 41 following the resumption of talks in Mexico City to alleviate the suffering of Venezuelan people and restore democracy. GL 41 authorizes certain transactions related to the identified corporation and its subsidiaries’ joint ventures in Venezuela involving Petróleos de Venezuela, S.A (PdVSA) or any entity owned directly or indirectly, 50 percent or more, that would otherwise be prohibited by Executive Order (E.O.) 13850, as amended by E.O.s 13857 or 13884. OFAC noted that GL 41 prevents PdVSA from receiving profits from the oil sales by the identified corporation, and only authorizes certain specific activities. Other Venezuela-related sanctions and restrictions imposed by the U.S. remain in place. Concurrent with the issuance of GL 41, OFAC issued GL 8K, “Authorizing Transactions Involving Petróleos de Venezuela, S.A. (PdVSA) Necessary for the Limited Maintenance of Essential Operations in Venezuela or the Wind Down of Operations in Venezuela for Certain Entities,” as well as two new related FAQs. According to the announcement, “U.S. persons are authorized to provide goods and services for certain activities as specified in GL 41,” and “non-U.S. persons generally do not risk U.S. sanctions exposure for facilitating transactions that are authorized by GL 41.”
OFAC issues finding of violation to entity for sanctions violations
On October 14, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced the issuance of a Finding of Violation to an international financial entity in Puerto Rico, for violations of the Venezuelan Sanctions Regulations (VSR), and the Reporting, Penalties and Procedures Regulations (RPPR). According to the web notice, OFAC claimed that the entity engaged in three transactions totaling approximately $50,000 in violation of VSR, failed to maintain full and accurate records related to the handling of the blocked accounts in violation of RPPR, and failed to report the blocked accounts accurately. In determining the Finding of Violation, OFAC considered aggravating factors, including that the entity failed to exercise a minimal degree of caution or care when it (i) engaged in transactions involving blocked property without obtaining an OFAC license, even though senior managers at the bank were aware an OFAC license was needed; and (ii) failed to maintain relevant records associated with the bank’s handling of the blocked property, which may have impaired its ability to provide full and accurate information to OFAC. OFAC also considered various mitigating factors, including that the entity has not received a penalty notice from OFAC in the preceding five years, it voluntarily self-disclosed the alleged violations, and it has taken numerous remedial measures.
OFAC amends Venezuela-related general license
On July 7, the U.S. Treasury Department’s Office of Foreign Assets Control issued Venezuela-related General License (GL) 40A, which authorizes certain transactions involving the exportation or reexportation of liquefied petroleum gas to Venezuela that would otherwise be prohibited by Executive Order (E.O.) 13884, as incorporated into the Venezuela Sanctions Regulations. (Covered by InfoBytes here.) Effective July 7, G.L. 40A replaces G.L. 40, which was issued in July 2021.
OFAC issues Covid-related general licenses and FAQs
On June 10, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued Syria General License (GL) 21A, Venezuela GL 39A, and Iran GL N-1, “Authorizing Certain Activities to Respond to the Coronavirus Disease 2019 (COVID-19) Pandemic.” Each GL authorizes certain Covid-19-related transactions through June 17, 2023. Additionally, OFAC updated Frequently Asked Questions regarding the purposes of the GLs and provided clarifying information.
OFAC reaches settlement with Puerto Rican bank to resolve Venezuela sanctions violations
On May 27, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $225,937 settlement with a Puerto Rican bank for allegedly violating the Venezuela Sanctions Regulations. According to OFAC’s web notice, the bank allegedly processed 337 transactions totaling $853,126 on behalf of two low level employees of the Government of Venezuela (GoV). The apparent violations allegedly resulted from the bank’s maintenance of four personal accounts operated by these two employees that should have been blocked by Executive Order (E.O.) 13884 (which blocks property and interests in property of the GoV, including “‘any person owned or controlled, directly or indirectly,’ by the GoV, and ‘any person who has acted or purported to act directly or indirectly for or on behalf of’ any such entity”). OFAC stated that the two GoV individuals also did not meet the criteria for authorized transaction exemptions under General License 34A and found that the bank failed to identify the customers for 14 months following the issuance of E.O. 13884.
In arriving at the settlement amount, OFAC considered various aggravating factors, including, among other things, that (i) the bank maintained documentation showing that the two individuals were low-level GoV employees but delayed identifying them; and (ii) the bank has more than $61 billion in assets. OFAC also considered various mitigating factors, including that the bank (i) took remedial action to ensure compliance with OFAC sanctions; (ii) created more robust sanctions-related procedures; (iii) developed additional resources and guidance in connection to sanctions alert review and disposition; (iv) added staff to oversee OFAC sanctions matters; (v) reviewed policies and procedures for identifying, reviewing, and reporting transactions that violate OFAC’s regulations; and (vi) enhanced its sanctions screening trainings. The bank also voluntarily self-disclosed the apparent violations to OFAC and cooperated with OFAC’s investigation.
Providing context for the settlement, OFAC stated that this action “demonstrates the importance of financial institutions conducting timely due diligence…following the issuance of new sanctions prohibitions.”
OFAC sanctions North Koreans and issues Venezuela general license
On May 27, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order (E.O.) 13382 against one individual, two banks, and a trading company connected to the Democratic People’s Republic of Korea’s (DPRK) development of weapons of mass destruction (WMD) and ballistic missile programs and to the U.S.-designated DPRK national airline. According to OFAC, the U.S. is “committed to seeking dialogue and diplomacy with the DPRK but will continue to address the threat posed by the DPRK’s unlawful WMD and ballistic missile programs to the United States and the international community.” As a result of the sanctions, all property and interests in property of the sanctioned individuals and entities subject to U.S. jurisdiction are blocked and must be reported to OFAC. OFAC noted that its regulations generally prohibit U.S. persons from participating in transactions with the designated person, including transactions transiting the U.S. OFAC’s announcement further warned that any foreign financial institution that knowingly facilitates significant transactions or provides significant financial services for any of the designated individuals or entities may be subject to U.S. correspondent account or payable-through account sanctions.
The same day, OFAC issued Venezuela- related General License 8J, which authorizes certain transactions involving Petróleos de Venezuela, S.A. (PDVSA) that were previously prohibited under prior Executive Orders to the extent such transactions and activities are “necessary for the limited maintenance of essential operations in Venezuela or the wind down of operations in Venezuela for certain entities,” among other things.