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On July 12, the Financial Crimes Enforcement Network (FinCEN) issued an advisory reminding financial institutions that on June 21, the Financial Action Task Force (FATF) updated two documents that list jurisdictions identified as having “strategic deficiencies” in their anti-money laundering and combating the financing of terrorism (AML/CFT) regimes. The first document, the FATF Public Statement, identifies two jurisdictions, the Democratic People’s Republic of Korea and Iran, that are subject to countermeasures and/or enhanced due diligence due to their strategic AML/CFT deficiencies. The second document, Improving Global AML/CFT Compliance: On-going Process, identifies the following jurisdictions with strategic AML/CFT deficiencies that have developed an action plan with the FATF to address those deficiencies: the Bahamas, Botswana, Cambodia, Ethiopia, Ghana, Pakistan, Panama, Sri Lanka, Syria, Trinidad and Tobago, Tunisia, and Yemen. Notably, Serbia has been removed from the list and Panama has been added since the last update in March (covered by InfoBytes here). FATF further notes that several jurisdictions have not yet been reviewed, and that it “continues to identify additional jurisdictions, on an ongoing basis, that pose a risk to the international financial system.” Generally, financial institutions should consider both the FATF Public Statement and the Improving Global AML/CFT Compliance: On-going Process documents when reviewing due diligence obligations and risk-based policies, procedures, and practices.
On July 11, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Order 13850, against the Government of Venezuela’s General Directorate of Military Counterintelligence (DGCIM) for operating in the country’s defense and security sector. According to OFAC, the DGCIM has been involved in human rights abuses and the “politically motivated” arrest and death of a Venezuelan Navy captain. As a result of the sanctions, all property and interests in property of the sanctioned entity or of other entities “that are owned, directly or indirectly, 50 percent or more” by the sanctioned entity “that are in the United States or in the possession or control of U.S. persons are blocked and must be reported to OFAC.” U.S. persons are also generally prohibited from entering into transactions with these entities. Furthermore, OFAC also referred financial institutions to Financial Crimes Enforcement Network advisories FIN-2019-A002, FIN-2017-A006, and FIN-2018-A003 for further information concerning the efforts of Venezuelan government agencies and individuals to use the U.S. financial system and real estate market to launder corrupt proceeds, as well as human rights abuses connected to corrupt foreign political figures and their financial facilitators.
On July 9, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13224 against three Iranian-backed Hizballah political and security figures for “exploit[ing] Lebanon’s financial and security elements” in furtherance of Hizballah’s and Iran’s activities in support of terrorists and acts of terrorism. As a result of the sanctions, “all property and interests in property of these targets that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC.” OFAC notes that its regulations “generally prohibit” U.S. persons from participating in transactions with the designated individuals. The designated individuals are also subject to secondary sanctions pursuant to the Hizballah Financial Sanctions Regulations, which implement the Hizballah International Financing Prevention Act of 2015, and allow OFAC the authority to “prohibit or impose strict conditions on the opening or maintaining in the United States of a correspondent account or a payable-through account by a foreign financial institution that knowingly facilitates a significant transaction for Hizballah, or a person acting on behalf of or at the direction of, or owned or controlled by, Hizballah.”
On July 3, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against Cuban state-run oil import and export company for continuing to provide support to the Maduro regime by the importation of oil from Venezuela. The sanctions are pursuant to Executive Order 13850. OFAC alleges that the state-run company has been the recipient of oil from Venezuela and has expanded its operations to include non-traditionally traded oil products. As a result of the sanctions, “all property and interests in property of these individuals, and of any entities that are owned, directly or indirectly, 50 percent or more by such individuals, that are in the United States or in the possession or control of U.S. persons are blocked and must be reported to OFAC.” OFAC notes that its regulations “generally prohibit” U.S. persons from participating in transactions with these individuals and entities.
Additionally, the announcement notes that OFAC is delisting an oil tanking company in recognition of the company’s actions to ensure that its vessels are not complicit in supporting the Maduro regime. As a result of the delisting, all property and interest of the company is now unblocked and lawful transactions involving U.S. persons are no longer prohibited.
On June 27 and 28, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated two Maduro regime officials and the son of Maduro for engaging in significant corruption and fraud to the detriment of the people of Venezuela. Specifically, OFAC designated the two regime officials pursuant to Executive Order (E.O.) 13692, for having previously received bribes from two Venezuelan businessmen in exchange for awarding contracts for expensive equipment to maintain Venezuelan electrical infrastructure, which were incompatible with the Venezuelan electrical system. Continued corruption and mismanagement resulted in persistent countrywide blackouts, limiting the people’s access to basic goods, services, and potable water supplies, among other things.
Additionally, pursuant to E.O. 13692, OFAC designated the son of Maduro for being a current or former official of the Government of Venezuela and a member of Venezuela’s illegitimate National Constituent Assembly, “which seeks to rewrite the Venezuelan constitution and dissolve Venezuelan state institutions, [and] was created through an undemocratic process instigated by Maduro’s government to subvert the will of the Venezuelan people.”
Federal Judge denies Ukrainian billionaire’s motion to dismiss criminal charges, and Austrian Supreme Court grants U.S. extradition request
Judge Rebecca Pallmeyer of the United States District Court for the Eastern District of Illinois denied a motion to dismiss filed by Ukrainian billionaire Dmitry Firtash, allowing several criminal charges––including one count of aiding and abetting an FCPA violation––to proceed. Shortly thereafter, the Austrian Supreme Court reportedly agreed to extradite Firtash to the United States, subject to final review by Austria’s Justice Minister. For prior coverage of Firtash’s motion to dismiss, please see here.
Firtash’s motion argued, inter alia, that he could not be liable under the FCPA as a Ukrainian citizen who does not belong to any class of foreign nationals subject to that statute. Because the Seventh Circuit had not reached the precise question that Firtash raised, Firtash cited Second Circuit precedent holding that “foreign nationals may only violate the [FCPA] outside the United States if they are agents, employees, directors, or shareholders of an American issuer or domestic concern.” United States v. Hoskins, 902 F.3d 69, 97 (2d Cir. 2018). Because Firtash is none of these, he claimed to be exempt from FCPA liability.
Judge Pallmeyer disagreed. Putting aside Hoskins, the judge analyzed generally applicable Seventh Circuit and Supreme Court jurisprudence regarding secondary liability, and concluded that a defendant can be liable for aiding and abetting or conspiring to commit a crime even if he or she would be exempt from primary liability for that crime. Judge Pallmeyer acknowledged that the presumption against extraterritorial application “arguably undermined” the Seventh Circuit precedent upon which her opinion relied, but stated that she was “unwilling to disregard clear guidance from the Seventh Circuit” on the subject of secondary liability. In addition to conflicting with Hoskins, Judge Pallmeyer’s opinion supports the broader scope of FCPA liability for foreign nationals that the DOJ has been pushing for years, and marks the beginning of a potential circuit split on the issue of secondary liability under the FCPA.
After a two-week jury trial in the United States District Court for the District of Massachusetts, the CEO of an investment firm and one of its directors were convicted of conspiracy to violate the FCPA and the Travel Act. Joseph Baptiste, a retired U.S. Army Colonel, was also found guilty of violating the Travel Act and conspiracy to commit money laundering. For prior coverage of the charges against Baptiste and CEO Roger Richard Boncy, please see here.
The evidence that federal prosecutors presented against Boncy and Baptiste included intercepted phone calls in which they discussed their plan to bribe Haitian officials “at all levels of government” in order to obtain governmental approval of a proposed $84 million project to develop a port in northwestern Haiti. In a recorded conversation with undercover agents posing as investors, Boncy and Baptiste allegedly solicited funds and told agents that the funds would be used to bribe the aide of a high-level elected official in Haiti. To conceal the bribes, Boncy and Baptiste allegedly said that they would funnel the agents’ funds through a U.S.-based non-profit organization that Baptiste controlled, which purported to sponsor social programs for Haitian residents.
The case against Boncy and Baptiste began with a sting operation conducted by the FBI in 2017. Boncy and Baptiste are scheduled to be sentenced by Judge Allison D. Burroughs on September 12, 2019.
OFAC amends Venezuela-related general licenses; temporarily extends two Ukraine-related general licenses
On June 26, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced General License (GL) 13B, which supersedes and replaces GL 13A. GL 13B expires on October 25. Additionally, OFAC extended the expiration date to November 8 of two Ukraine-related GLs by issuing GL 13L, which supersedes GL 13K, and GL 15F, which supersedes GL 15 E. OFAC also noted that GL 15F includes a new authorization for certain safety-related activity.
On June 21, the Secretary of the U.S. Department of the Treasury issued a statement confirming that FATF members agreed to regulate and supervise virtual asset financial activities and related service providers. On the same day, FATF issued a statement noting that it “adopted and issued an Interpretive Note to Recommendation 15 on New Technologies (INR. 15) that further clarifies the FATF’s previous amendments to the international Standards relating to virtual assets and describes how countries and obliged entities must comply with the relevant FATF Recommendations to prevent the misuse of virtual assets for money laundering and terrorist financing and the financing of proliferation.” As previously covered by InfoBytes, in October 2018, FATF urged all countries to take measures to prevent virtual assets and cryptocurrencies from being used to finance crime and terrorism and updated The FATF Recommendations to add new definitions for “virtual assets” and “virtual asset service providers” and to clarify how the recommendations apply to financial activities involving virtual assets and cryptocurrencies.
According to FATF announcement, INR. 15 establishes “binding measures,” which require countries to, among other things, (i) assess and mitigate risks associated with virtual asset activities and service providers; (ii) license or register service providers and subject them to supervision; (iii) implement sanctions and other enforcement measures when service providers fail to comply with an anti-money laundering/combating the financing of terrorism (AML/CFT) obligation; and (iv) ensure that service providers implement the full range of AML/CFT preventive measures under the FATF Recommendations, including customer due diligence, record-keeping, suspicious transaction reporting, and screening all transactions for compliance with targeted financial sanctions.
On June 24, President Trump issued Executive Order (E.O.) 13876, “Imposing Sanctions with Respect to Iran,” which: (i) imposes sanctions on Iran’s Supreme Leader’s Office (SLO); and (ii) targets persons appointed to certain official or other positions by the Supreme Leader and/or his office for allegedly taking actions to “destabilize the Middle East, promote international terrorism, and advance Iran’s ballistic missile program, and Iran’s irresponsible and provocative actions in and over international waters.” Among other things, E.O. 13876 authorizes the Secretaries of Treasury and State to impose sanctions on a foreign financial institution if it is determined that it has knowingly conducted or facilitated any significant financial transactions in these sectors, or for or on behalf of a blocked person. These sanctions would prohibit the opening of, or impose strict conditions on maintaining, a correspondent account or payable-through account by such foreign financial institutions in the United States.
On the same day, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated eight senior commanders of the Islamic Revolutionary Guard Corps (IRGC) pursuant to E.O. 13224, which “provides a means by which to disrupt the financial support network for terrorists and terrorist organizations.” According to OFAC, the sanctions are meant to reinforce the President’s newly issued E.O. 13876. As a result of the designations, “all property and interests in property of these targets that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC.” OFAC noted that persons who engage in transactions with the designated individuals and entities may be exposed to sanctions themselves or subject to enforcement action.
- Amanda R. Lawrence to discuss "Navigating the challenges of the latest data protection regulations and proven protocols for breach prevention and response" at the ACI National Forum on Consumer Finance Class Actions and Government Enforcement
- Tim Lange to discuss "Ease your pain at the state level: Recommendations for navigating the licensing issues in the states" at the Online Lenders Alliance Compliance University
- Amanda R. Lawrence, Aaron C. Mahler, and Jonice Gray Tucker to discuss "Expanded role for the FTC ahead: Implications for bank and nonbank financial institutions" at an American Bar Association Banking Law Committee Webinar
- Buckley Webcast: Flirting with alternatives — Opportunities and challenges created by alternative data, modeling, and technology
- Daniel P. Stipano to discuss "Reporting requirements for credit unions: CTRs and SARs" at the National Association of Federally-Insured Credit Unions BSA Seminar
- Daniel P. Stipano and Moorari K. Shah to discuss "Vendor management: What is the NCUA looking for?" at the National Association of Federally-Insured Credit Unions BSA Seminar
- Sasha Leonhardt and John B. Williams to discuss "Privacy" at the National Association of Federally-Insured Credit Unions Summer Regulatory Compliance School
- Warren W. Traiger to discuss "CRA modernization" at the National Association of Industrial Bankers and the Utah Association of Financial Services Annual Convention
- Benjamin W. Hutten to discuss "Requirements for banking inherently high-risk relationships" at the Georgia Bankers Association BSA Experience Program
- Hank Asbill to discuss "Ethical guidance in conducting internal investigations – The intersection of Yates and Upjohn" at the American Bar Association Southeastern White Collar Crime Institute
- Brandy A. Hood to discuss "RESPA Section 8/referrals: How do you stay compliant?" at the New England Mortgage Bankers Conference
- Daniel P. Stipano to discuss "Risk management in enforcement actions: Managing risk or micromanaging it" at the American Bar Association Business Law Section Annual Meeting
- Daniel P. Stipano to discuss "Navigating the conflicting federal and state laws for doing business with cannabis companies" at the American Bar Association Business Law Section Annual Meeting
- Tim Lange to discuss "Services and value" at the North American Collection Agency Regulatory Association Annual Conference
- Amanda R. Lawrence to discuss "Data privacy litigation" at the Mortgage Bankers Association Regulatory Compliance Conference
- Jonice Gray Tucker to discuss "HMDA data is out, now what?" at the Mortgage Bankers Association Regulatory Compliance Conference
- Daniel P. Stipano to discuss "Assessing the CDD final rule: A year of transitions" at the ACAMS AML & Financial Crime Conference
- Daniel P. Stipano to discuss "Lessons learned from recent enforcement actions and CMPs" at the ACAMS AML & Financial Crime Conference
- Amanda R. Lawrence to discuss "How to balance a successful (and stressful) career with greater personal well-being" at the American Bar Association Women in Litigation Joint CLE Conference