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OFAC sanctions Iranian leaders
On October 26, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13553 against 10 Iranian officials related to the ongoing crackdown on nationwide protests in Iran and internet censorship, as well as two Iranian intelligence actors and two Iranian entities involved in the Iranian government’s efforts to disrupt digital freedom. As previously covered by InfoBytes, on October 6, OFAC sanctioned seven senior leaders within Iran’s government and security apparatus for the shutdown of Iran’s internet access. OFAC also sanctioned Iran’s Morality Police along with seven senior leaders who oversee Iran’s security organizations (covered by InfoBytes here). According to OFAC, the recently announced sanctions “coupled with additional initiatives such as the release of Iran General License D-2, which expands and clarifies the range of U.S. software and internet services available to Iranians under OFAC’s sanctions program, demonstrate the United States’ commitment to support the Iranian people’s call for accountability and justice, as well as their right to freely exchange information, including online.” As a result of the sanctions, all property and interests in property belonging to the sanctioned persons that are in the U.S. or in the possession or control of U.S. persons must be blocked and reported to OFAC. U.S. persons are also prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons, and “persons that engage in certain transactions with the individuals or entities designated today may themselves be exposed to sanctions,” OFAC said. Additionally, OFAC warned that “any foreign financial institution that knowingly facilitates a significant transaction or provides significant financial services for any of the individuals or entities designated today could be subject to U.S. correspondent or payable-through account sanctions.”
Dems ask regulators to address crypto’s “revolving door”
On October 24, Democratic lawmakers sent letters to the leaders of the SEC, CFTC, Treasury Department, Federal Reserve, FDIC, OCC and CFPB regarding concerns about “the revolving door between [] financial regulatory agencies and the cryptocurrency (crypto) industry.” In the letters, the lawmakers argued “that the crypto revolving door risks corrupting the policymaking process and undermining the public’s trust in our financial regulators.” The letters also noted that Treasury saw the most movement from the Treasury Department, with 31 former employees joining the crypto industry. The SEC was second with 28 former employees, according to Tech Transparency Project. The lawmakers argued that “Americans should be able to trust that financial rules are crafted to reduce risk, improve security, and ensure the fair and efficient functioning of the market,” and that “Americans should be confident that regulators are working on behalf of the public, rather than auditioning for a high-paid lobbying job upon leaving government service.” The letters requested that the agencies provide information by November 7, including answers to inquiries about each agency’s ethics guidelines and polices in place to protect the agency from being influenced by current or former employees’ potential conflicts of interest.
FAFT restricts Russia’s membership, takes action on corruption and drug trafficking
On October 20, the U.S. Treasury Department announced that the Financial Action Task Force (FATF) concluded its first plenary of the Singaporean presidency, in which it, among other things, took steps to combat corruption and illegal fentanyl trafficking and enhance financial transparency. During the meeting, FATF agreed to seek public input on draft guidance for implementing the FATF standard on beneficial ownership transparency for legal persons. The efforts to improve transparency in beneficial ownership “seek to improve the ability of law enforcement to trace, report, and seize illicit proceeds, and to make it harder for criminals and others to exploit opaque legal structures such as shell companies to hide and launder the proceeds of their crimes.” FATF also adopted a U.S.-led report on money laundering related to the illicit trafficking of synthetic opioids, including fentanyl, which provides information and best practices so that law enforcement and financial investigators around the world can expand their work on complex, cross-border money laundering investigations involving the proceeds of drug trafficking. The FATF also agreed to additional restrictions on the membership rights of the Russian Federation due to its war against Ukraine, including by barring them from participating in current and future FATF project teams.
OFAC sanctions Nicaraguan mining authority; Biden issues new E.O. expanding Treasury’s authority to hold Nicaraguan regime accountable
On October 24, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order (E.O.) 13851 against the Nicaraguan mining authority General Directorate of Mines and a Government of Nicaragua official. OFAC stated that the mining authority is “being designated for being owned or controlled by, or having acted or purported to act for or on behalf of, directly or indirectly,” the Nicaraguan Minister of Energy and Mines whose property and interests in property were blocked in 2021. As a result of the sanctions, all property and interests in property belonging to the sanctioned persons in the U.S. are blocked and must be reported to OFAC. Additionally, “any entities that are owned, directly or indirectly, 50 percent or more in the aggregate by one or more of such persons are also blocked.” U.S. persons are prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons, unless exempt or authorized by a general or specific OFAC license.
The same day, President Biden signed a new E.O., Taking Additional Steps to Address the National Emergency With Respect to the Situation in Nicaragua, to amend E.O. 13851 and, according to the announcement, expand Treasury’s “authority to hold the Ortega-Murillo regime accountable for its continued attacks on Nicaraguans’ freedom of expression and assembly.” The new E.O. grants Treasury authority to target certain persons operating or that have operated in Nicaragua’s gold sector, as well as other sectors identified by Treasury in consultation with the State Department. According to OFAC’s announcement, the E.O. “provides expanded sanctions authorities that could be used to prohibit new U.S. investment in certain identified sectors in Nicaragua, the importation of certain products of Nicaraguan origin into the United States, or the exportation, from the United States, or by a United States person, wherever located, of certain items to Nicaragua.” In conjunction with the E.O., OFAC issued Nicaragua-related General License 4, which authorizes the wind down of transactions involving the Directorate General of Mines of the Nicaraguan Ministry of Energy and Mines that are otherwise normally prohibited by the Nicaragua Sanctions Regulations, and issued one related frequently asked question regarding that General License.
OFAC sanctions drug network
On October 19, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 14059 against an individual and a drug trafficking organization, two Mexican nationals and members of the designated drug trafficking organization, and three Mexico-based transportation companies. According to OFAC, the designated network evolved into a sophisticated network that is involved in the importation and transport of multi-ton quantities of illicit drugs from Mexico to the U.S. OFAC noted that the designations are the result of OFAC’s ongoing collaboration with Homeland Security Investigations San Diego Strike Force Group, U.S. Customs and Border Protection’s National Targeting Center, and the Government of Mexico. As a result of the sanctions, all property and interests in property belonging to the sanctioned entities in the U.S. are blocked and must be reported to OFAC. Additionally, “any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons are also blocked.” OFAC also noted that “persons that engage in certain transactions with the individuals and entities designated today may themselves be exposed to sanctions or subject to an enforcement action.”
OFAC sanctions Russian military technology procurement network
On October 19, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 14024 against a Russian military technology procurement network for allegedly procuring military and sensitive dual-use technologies from U.S. manufacturers and supplying them to Russian end-users. The individual and his two companies are designated as part of a joint action with the DOJ and FBI and highlights the U.S. government’s on-going “efforts to hinder Russia’s ability to wage its war of aggression in Ukraine, including by holding accountable those who support Russia’s military by disrupting its illicit defense and technology procurement networks around the world.” The action builds upon an October 14 alert issued by OFAC and the Department of Commerce’s Bureau of Industry and Security and the Department of State, which details the impact of international sanctions and export controls (covered by InfoBytes here). The alert followed the convergence of top officials representing ministries of finance and other government agencies from 33 countries who met to discuss the effects of international sanctions and export controls on Russia’s military-industrial complex and critical defense supply chains.
As a result of the sanctions, all property and interests in property belonging to the sanctioned persons that are in the U.S. or in the possession or control of U.S. persons are blocked and must be reported to OFAC. Further, “any entities that are owned, directly or indirectly, 50 percent or more in the aggregate by one or more of such persons are also blocked.” U.S. persons are prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons, unless exempt or authorized by a general or specific OFAC license.
The same day, the DOJ (with the support of the Department’s Task Force KleptoCapture) unsealed indictments against nearly a dozen individuals and several entities, including the sanctioned Russian national and his two companies, accused of scheming to export military technologies to Russia.
Treasury releases CFIUS Enforcement and Penalty Guidelines
On October 20, the U.S. Treasury Department released CFIUS Enforcement and Penalty Guidelines to provide the public with information on how the Committee on Foreign Investments in the United States (CFIUS) assesses violations of laws and regulations on transaction parties. The guidelines inform the public about how CFIUS—which is tasked with identifying and mitigating certain national security risks related to foreign investments—assesses whether to impose a penalty or take other enforcement action for a violation of a party’s obligation, as well as factors that CFIUS considers when making such a determination. “The vast majority of those who come before CFIUS abide by their legal obligations and work collaboratively with the Committee to mitigate any national security risks arising from the transaction; however, those who fail to comply with CFIUS mitigation agreements or other legal obligations will be held accountable,” Assistant Secretary of the Treasury for Investment Security Paul Rosen stressed. “Today’s announcement sends a clear message: Compliance with CFIUS mitigation agreements is not optional, and the Committee will not hesitate to use all of its tools and take enforcement action to ensure prompt compliance and remediation, including through the use of civil monetary penalties and other remedies.”
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.
U.S.-UK sanctions partnership to exchange best practices
On October 17, Andrea Gacki, Director of the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), and Giles Thomson, Director of the Office of Financial Sanctions Implementation (OFSI), HM Treasury, announced that in the upcoming months, officials will exchange best practices for enhancing and strengthening the U.S.-UK sanctions partnership. Among other things, OFAC and OFSI officials plan to identify opportunities for pooling expertise, and will explore ways to align the way sanctions are implemented and develop joint products and collaborative guidance to assist stakeholders. Gacki and Thomson noted that work is already underway on developing approaches for addressing shared priorities related to cyber threats, virtual asset misuse, information sharing, and making sure sanctions do not impede humanitarian trade and assistance. Recognizing that financial sanctions are most effective when implemented multilaterally, Gacki and Thomson discussed efforts taken by their respective countries to coordinate and implement sanctions programs, including measures designed to tackle corruption, kleptocracy, and other forms of economic crime. They recognized, however, “that the growing scale of sanctions has increased the complexities of their implementation,” and reiterated their commitment to engage with stakeholders and provide useful sanctions-related information and guidance.
OFAC updates Russia-related general license
On October 17, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued Russia-related General License (GL) 28A, which authorizes certain transactions through January 18, 2023, involving a public joint stock company that are “ultimately destined for or originating from Afghanistan” and that are normally prohibited by Executive Order 14024. OFAC explained that U.S. financial institutions are authorized to operate correspondent accounts on behalf of the company, “or any entity in which [the company] owns, directly or indirectly, a 50 percent or greater interest, provided such accounts are used solely to effect transactions” as authorized by GLA 28A’s specifications. GL 28A replaces and supersedes GL 28 (covered by InfoBytes here).