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OFAC reaches settlement with U.S. company resolving Iranian sanctions violations
On February 21, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $506,250 settlement with a Connecticut-based company for five alleged violations of the Iranian Transactions and Sanctions Regulations (ITSR). The settlement resolves potential civil liability for the company’s alleged transactions valued at over $14 million involving the purchase of Iranian-origin cement clinker from a supplier in the United Arab Emirates who misrepresented to the company that the material was not subject to U.S. economic sanctions on Iran.
Visit here for additional InfoBytes coverage of actions related to Iran.
OFAC sanctions Iranian entities and individuals supporting intelligence gathering and cyber targeting of U.S. persons
On February 13, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against an Iran-based entity and four affiliated Iranian individuals for their alleged roles in providing support for the Islamic Revolutionary Guard Corps-Qods Force’s (IRGC-QF) efforts to recruit and collect intelligence from foreign attendees of international conferences, including facilitating contact between the IRGC-QF and U.S. persons. According to OFAC, the sanctions were issued pursuant to Executive Order 13224, which authorizes “the U.S. government to designate and block the assets of foreign individuals and entities that commit, or pose a significant risk of committing, acts of terrorism.” The same day, OFAC also sanctioned a separate Iran-based entity and six associated individuals, pursuant to Executive Order 13606, for their alleged involvement in the cyber targeting of current and former U.S. government and military personnel, in an effort to gain access to their computer systems and implant malware.
As a result of the OFAC sanctions, all property and interests in property belonging to the identified individuals and entities and subject to U.S. jurisdiction are blocked, and U.S. persons are generally prohibited from entering into transactions with the individuals and entities. Additionally, OFAC notes that “any foreign financial institution that knowingly facilitates a significant transaction or provides significant financial services for any of the persons designated today pursuant to E.O. 13224 or that are Iranian persons on OFAC’s list of Specially Designated Nationals and Blocked Persons . . . could be subject to U.S. correspondent account or payable-through sanctions.”
Visit here for additional recent InfoBytes coverage of actions related to Iran.
OFAC designates Turkish individual as “Foreign Sanctions Evader” in relation to settlement resolving alleged Iranian sanctions violations
On February 7, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $13,381 settlement with a Virginia-based corporation on behalf of its Turkish affiliate for six alleged violations of the Iranian Transactions and Sanctions Regulations (ITSR). The settlement resolves potential civil liability for the Turkish affiliate’s alleged practice of dispatching employees to Iran to fulfill service agreements and providing products, parts, and services while knowing that they were going to Iranian end-users. OFAC’s findings included that the Turkish affiliate willfully took steps to continue its Iranian business despite the Virginia corporation’s “extensive efforts to ensure [the affiliate] complied with the ITSR,” and “fraudulently certified” that no Iranian business was continuing. This settlement demonstrates the risks posed to U.S. companies by the Iran-related dealings of their foreign subsidiaries.
In a concurrent action the same day, OFAC sanctioned a Turkish individual as a “Foreign Sanctions Evader,” pursuant to Executive Order 13608, for allegedly instructing the Turkish affiliate to violate the Iranian sanctions. According to OFAC, the sanctioned individual “regularly and fraudulently” certified to the Virginia corporation that no products were being sent to Iran. Additionally, OFAC claims that upon learning of the corporation’s internal investigation, the individual and other members of the Turkish affiliate’s management team attempted to conceal the apparent violations. As a result, all direct and indirect transactions involving the individual intended for the U.S., or provided by or to U.S. persons, are prohibited. Moreover, U.S. financial institutions are instructed to reject payments involving the identified individual.
View here for additional InfoBytes coverage of actions related to Iran.
OFAC reaches settlement with Chinese company for alleged Iranian sanctions violations
On December 12, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $2,774,972 settlement with a Chinese oilfield services company and its affiliated companies and subsidiaries (collectively, the “group”) for 11 alleged violations of the Iranian Transactions and Sanctions Regulations. According to OFAC, the settlement resolves potential civil liability for the group’s alleged involvement in exporting or re-exporting, or attempts to export or re-export, U.S.-based goods to end-users in Iran through China.
In arriving at the settlement amount, OFAC considered the following as aggravating factors: (i) the group “willfully violated U.S. sanctions on Iran by engaging in and systematically obfuscating conduct it knew to be prohibited by company policy and economic sanctions, and continued to engage in such conduct even after the U.S. Government began to investigate the conduct”; (ii) employees, including management, were aware of the transactions and concealed the nature of the transactions from the U.S.; (iii) the group falsified information and provided false statements to the U.S. during the course of the investigation; (iv) the group’s conduct, which occurred over a period of years, provided economic benefits to Iran; and (v) the group is a commercially sophisticated international corporation.
OFAC also considered numerous mitigating factors, including (i) the group has no prior OFAC sanctions history and has not received a penalty or finding of a violation in the five years before the transactions at issue; (ii) the group has cooperated with OFAC and disclosed possible violations involving other sanctions programs; (iii) the group agreed to toll the statute of limitations; and (iv) the group implemented remedial measures and corrective actions to minimize the risk of reoccurring conduct.
Visit here for additional InfoBytes coverage on Iranian sanctions.
Agencies encourage financial institutions to explore innovative industry approaches to BSA/AML compliance
On December 3, the Financial Crimes Enforcement Network (FinCEN) released a joint statement along with federal banking agencies—the Federal Reserve Board, FDIC, NCUA, and OCC (together, the “agencies”)—to encourage banks and credit unions to explore innovative approaches such as artificial intelligence, digital identity technologies, and internal financial intelligence units to combat money laundering, terrorist financing, and other illicit financial threats when safeguarding the financial system. According to the agencies, private sector innovation and the adoption of new technologies can enhance the effectiveness and efficiency of Bank Secrecy Act/anti-money laundering (BSA/AML) compliance programs. Moreover, new innovations and technologies can also enhance transaction monitoring systems. Specifically, the agencies urged banks to test innovative programs to explore the use of artificial intelligence. However, the agencies emphasized that while feedback on innovative programs may be provided, the “pilot programs in and of themselves should not subject banks to supervisory criticism even if the pilot programs ultimately prove unsuccessful. Likewise, pilot programs that expose gaps in a BSA/AML compliance program will not necessarily result in supervisory action with respect to that program.” The joint statement further specifies that the agencies will be willing to grant exceptive relief from BSA regulatory requirements to facilitate pilot programs, “provided that banks maintain the overall effectiveness of their BSA/AML compliance programs.” However, banks that maintain effective compliance programs but choose not to innovate will not be penalized or criticized.
According to Treasury Under Secretary for Terrorism and Financial Intelligence Sigal Mandelker, “[a]s money launderers and other illicit actors constantly evolve their tactics, we want the compliance community to likewise adapt their efforts to counter these threats,” pointing to the recent use of innovative technologies to identify and report illicit financial activity related to both Iran and North Korea.
As previously covered by InfoBytes, earlier in October the agencies provided guidance on resource sharing between banks and credit unions in order to more efficiently and effectively manage their BSA/AML obligations.
(See also Federal Reserve Board press release, FDIC press release and FIL-79-2018, NCUA press release, and OCC press release and Bulletin 2018-44.)
OFAC announces cyber-related designations, releases digital-currency addresses to identify illicit actors
On November 28, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13694 against two Iran-based individuals for allegedly helping to facilitate the exchange of ransom payments made in Bitcoin into local currency. For the first time, OFAC also identified two digital currency addresses associated with the identified financial facilitators who are designated “for having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of” ransomware attacks that threaten the “national security, foreign policy, or economic health or financial stability of the [U.S.]” According to OFAC, the provided digital currency addresses should be used to assist in identifying transactions and funds to be blocked as well as investigating potential connections.
Treasury Under Secretary for Terrorism and Financial Intelligence Sigal Mandelker stated, “We are publishing digital-currency addresses to identify illicit actors operating in the digital-currency space. Treasury will aggressively pursue Iran and other rogue regimes attempting to exploit digital currencies and weaknesses in cyber and [anti-money laundering/countering financing of terrorism] safeguards to further their nefarious objectives.” OFAC issued a warning that persons who engage in transactions with the identified individuals “could be subject to secondary sanctions” and that “[r]egardless of whether a transaction is denominated in a digital currency or traditional fiat currency, OFAC compliance obligations are the same.” As a result, all property and interests in property belonging to the identified individuals subject to U.S. jurisdiction “or within or transiting” the U.S. are blocked, and U.S. persons are generally prohibited from entering into transactions with them. OFAC also released new FAQs to provide guidance for financial institutions on digital currency.
View here for additional InfoBytes coverage on Iranian sanctions.
OFAC reaches settlement with company for alleged Ukrainian sanctions violations
On November 27, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $87,507 settlement with an aerospace and defense technology company for three alleged violations by a former subsidiary of the Ukraine-Related Sanctions Regulations (URSR). According to OFAC, the settlement resolves potential civil liability for the former subsidiary’s alleged involvement in the “indirect export of components to be incorporated into commercial air traffic control radar” through Canadian and Russian distributors “to a person owned 50 percent or more, directly or indirectly, by a person identified on OFAC’s List of Specially Designated Nationals and Blocked Persons.”
In arriving at the settlement amount, OFAC considered the following as aggravating factors: (i) the former subsidiary’s failure to recognize warning signs; (ii) the transactions, which constituted the apparent violations, were reviewed and approved by the Director of Global Trade Compliance, and “resulted in harm to the sanctions program objectives of the URSR”; (iii) the company and former subsidiary are large, sophisticated entities; and (iv) the company and its compliance personnel previously violated Iranian Transaction and Sanctions Regulations, while the former subsidiary was subject to a consent agreement as a result of recurring compliance failures.
However OFAC also considered mitigating factors, including (i) the former subsidiary has not received a penalty or finding of a violation in the five years prior to the transactions at issue; (ii) the company has cooperated with OFAC and implemented remedial measures, including terminating the violative conduct and implementing steps to minimize the risk of reoccurring conduct; and (iii) the company voluntarily disclosed the alleged violations on behalf of the former subsidiary.
Visit here for additional InfoBytes coverage on Ukraine sanctions.
French bank agrees to $1.3 billion settlement to resolve U.S. sanctions investigations
On November 19, the Federal Reserve Board, Office of Foreign Assets Control (OFAC), DOJ, Manhattan District Attorney’s Office, and NYDFS announced that a French bank agreed to pay approximately $1.34 billion in total penalties to resolve federal and state investigations into the bank’s allegedly intentional violation of U.S. sanctions laws and other federal and New York state laws from approximately 2003 to 2013.
The bank entered into a deferred prosecution agreement (DPA) with the U.S. Attorney’s Office for the Southern District of New York to settle charges of conspiring to violate U.S. sanctions against Cuba by “structuring, conducting, and concealing U.S. dollar transactions using the U.S. financial system.” The DPA requires the bank to forfeit more than $717 million. The bank also agreed to “accept responsibility for its conduct by stipulating to the accuracy of an extensive Statement of Facts, pay penalties totaling [$1.34 billion] to federal and state prosecutors and regulators, refrain from all future criminal conduct, and implement remedial measures as required by its regulators.” According to the DOJ, the bank “admitted its willful violations of U.S. sanctions laws—and longtime concealment of those violations—which resulted in billions of dollars of illicit funds flowing through the U.S. financial system.” As factors mitigating the penalty, the DPA acknowledges the bank’s efforts to collect and produce “voluminous evidence located in other countries to the full extent permitted under applicable laws and regulations, and its enhancement of its compliance program and sanctions-related internal controls both before and after it became the subject of a U.S. law enforcement investigation.” Among other factors, the bank’s willingness to enter into the terms of the DPA, outweighed its “failure to self-report all of its violations of [U.S.] sanctions laws in a timely manner.”
The bank also entered into agreements to pay almost $163 million to the New York County District Attorney’s Office, nearly $54 million to OFAC, approximately $81 million to the Federal Reserve Board, and $325 million to NYDFS. Among other things, NYDFS noted that branch employees “responsible for originating USD transactions outside of the U.S. had a minimal understanding of U.S. sanctions laws and regulations as they related to Sudan, Iran, Cuba, North Korea, or other U.S. sanctions targets.”
Separate from the resolution of alleged sanctions violations, NYDFS imposed an additional $95 million penalty to resolve findings that the bank’s New York branch allegedly failed to “implement and maintain an effective Bank Secrecy Act/Anti-Money Laundering Law compliance program and transaction monitoring system.”
According to a bank statement issued the same day, the bank acknowledges and regrets the identified shortcomings, and “has already taken a number of significant steps in recent years and dedicated substantial resources to enhance its sanctions and AML compliance programs.”
OFAC sanctions individuals connected to Hizballah, IRGC-QF networks in Iraq
On November 13, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against four Hizballah-affiliated individuals for their alleged leadership roles in the group’s terrorist financial activities in Iraq, including providing support for the Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF). According to OFAC, the sanctions were issued pursuant to Executive Order 13224, which “targets terrorists and those providing support to terrorists or acts of terrorism.” OFAC’s designations follow the Hizballah International Financing Prevention Amendments Act of 2018—signed into law October 25—along with the reimposition of Iran-related sanctions on November 5 (see previous InfoBytes coverage here), and reinforces U.S. efforts to “protect the international financial system by targeting Hizballah’s supporters, financial networks, and those that facilitate and enable its destabilizing activities worldwide.” Furthermore, OFAC states that the four Specially Designated Global Terrorists are also subject to secondary sanctions under the Hizballah Financial Sanctions Regulations, which implement the Hizballah International Financing Prevention Act of 2015, and allows OFAC to “prohibit or impose strict conditions on the opening or maintaining in the [U.S.] of a correspondent account or a payable-through account by a foreign financial institution that knowingly facilitates a significant transaction for Hizballah.” As a result, all property and interests in property belonging to the identified individuals subject to U.S. jurisdiction are blocked, and U.S. persons are generally prohibited from entering into transactions with them.
Visit here for additional InfoBytes coverage on sanctions involving Hizballah networks.
OFAC announces several actions related to the “snap-back” of sanctions on Iran, effective November 5
On November 5, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced several actions in conjunction with the full re-imposition of sanctions on Iran effective immediately. As previously covered by InfoBytes, President Trump announced his decision to withdraw from the Joint Comprehensive Plan of Action (JCPOA) on May 8. Following the end of the wind-down period, which authorized certain activities through November 4, OFAC issued FAQs related to the “snap-back” of Iranian sanctions. OFAC also updated its Specially Designated Nationals (SDN) list to add over 700 persons, including persons previously removed from the SDN list during the U.S.’s participation in the JCPOA and persons previously identified on the Executive Order 13599 list. OFAC additionally provided a technical notice containing details related to the SDN list changes.
OFAC’s announcement also refers to an amendment effective November 5 to the Iranian Transactions and Sanctions Regulations (ITSR), in connection with President Trump’s decision to cease U.S. participation in the JCPOA. The newly issued amendment reflects sanctions re-imposed by Executive Order 13846, as covered by InfoBytes here, in addition to changes to certain sanctions lists maintained by OFAC. OFAC also announced it is “amending an existing general license in the ITSR to authorize U.S. persons to sell personal property in Iran and transfer the proceeds to the [U.S.],” if the personal property was either: (i) acquired before the individual became a U.S. person; or (ii) inherited from persons in Iran.
See here for continuing InfoBytes coverage on Iranian sanctions.