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  • OFAC sanctions ISIS facilitators

    Financial Crimes

    On May 9, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13224 against five Islamic State of Iraq and Syria (ISIS) financial facilitators operating across Indonesia, Syria, and Turkey for allegedly supporting financial transfers connected to ISIS efforts in Syria-based displaced persons camps by collecting funds in Indonesia and Turkey. As a result of the sanctions, all property and interests in property of the designated individuals within U.S. jurisdiction must be blocked and reported to OFAC. OFAC further noted that its regulations “generally prohibit” U.S. persons or persons within the United States from participating in transactions with the designated persons and warned foreign financial institutions that if they knowingly facilitate significant transactions for any of the designated individuals, OFAC may prohibit or impose strict conditions on the opening or maintaining of a U.S. correspondent account or payable-through account.

    Financial Crimes OFAC Department of Treasury SDN List Of Interest to Non-US Persons OFAC Sanctions OFAC Designations Syria

  • DOJ seizes $300 million yacht as part of Task Force KleptoCapture; OFAC issues Russia-related general licenses and updated FAQs

    Financial Crimes

    On May 5, the DOJ executed a seizure warrant freezing a $300 million yacht owned by a sanctioned Russian oligarch, following a determination that the yacht is subject to forfeiture based on probable cause of violations of U.S. law, including the International Emergency Economic Powers Act, money laundering and conspiracy. The Russian oligarch was designated in 2018 by the U.S. Treasury Department’s Office of Foreign Assets Control pursuant to the Countering America’s Adversaries Through Sanctions Act and Executive Order (E.O.) 13582 (covered by InfoBytes here). According to the DOJ’s announcement, the sanctioned oligarch owned the yacht after his designation and “caused U.S. dollar transactions to be routed through U.S. financial institutions for the support and maintenance of the [yacht].” The seizure was coordinated through the DOJ’s Task Force KleptoCapture, which is “an interagency law enforcement task force dedicated to enforcing the sweeping sanctions, export controls, and economic countermeasures that the United States, along with its foreign allies and partners, have imposed in response to Russia’s unprovoked military invasion of Ukraine” (covered by InfoBytes here.)

    The same day OFAC also issued several Russia-related general licenses (GL), including GL 7A, which authorizes “transactions ordinarily incident and necessary to the receipt of, and payment of charges for, services rendered in connection with overflights of the Russian Federation or emergency landings in the Russian Federation by aircraft registered in the United States or owned or controlled by, or chartered to, U.S. persons that are prohibited by the Russian Harmful Foreign Activities Sanctions Regulations”; GL 26A, which authorizes all transactions ordinarily incident and necessary to the wind down of transactions involving Joint Stock Company SB Sberbank Kazakhstan or Sberbank Europe AG, or any entity that Sberbank subsidiaries owns, through July 12, provided certain criteria are met; GL 31, which authorizes certain transactions related to patents, trademarks, copyrights, or other forms of intellectual property protections in the U.S. or Russia that would otherwise be prohibited; and GL 32, which authorizes the wind down of transactions involving Amsterdam Trade Bank NV that would ordinarily be prohibited by E.O. 14024 through July 12. Additionally, OFAC issued one new and one amended Russia-related frequently asked questions.

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

  • OFAC announces first-ever sanctions against virtual currency mixer

    Financial Crimes

    On May 6, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13722 against a virtual currency mixer used by the Democratic People’s Republic of Korea (DPRK) to support its cyber activities and money-laundering. According to OFAC, in March, a DPRK state-sponsored cyber-hacking group carried out the largest virtual currency heist to date, worth almost $620 million, from a blockchain project linked to an online game. The virtual currency mixer was used to process over $20.5 million of the illicit proceeds. OFAC noted that the sanctions are the first-ever sanctions on a virtual currency mixer. As a result of the sanctions, all property and interests in property belonging to the sanctioned entities subject to U.S. jurisdiction 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.” U.S. persons are generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons.

    Financial Crimes OFAC Department of Treasury North Korea SDN List Virtual Currency Digital Assets OFAC Sanctions OFAC Designations Of Interest to Non-US Persons

  • OFAC issues Russian sanctions, general licenses, and expanded E.O.s

    Financial Crimes

    On May 8, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced “sweeping” sanctions, which include the designations of board members from two of Russia’s most important banks, a Russian state-owned bank and 10 of its subsidiaries, a state-supported weapons manufacturer, and three of Russia’s state-controlled television stations that generate revenue for the state. OFAC also published a Determination Pursuant to Section 1(a)(i) of Executive Order (E.O.) 14024 and a Determination Pursuant To Section 1(a)(ii) Of E.O. 14071. According to OFAC's press release, the sanctions, issued pursuant to E.O. 14071, “cut off access to services that are used by the Russian Federation and Russian elites to evade sanctions.” OFAC identified accounting, trust and corporate formation, and management consulting as categories of services that are subject to a prohibition on the export, reexport, sale, or supply, directly or indirectly, from the U.S., or by a U.S. person, wherever located, to any person located in the Russian Federation. Additionally, OFAC determined that these same services sectors of the Russian Federation economy are subject to sanctions pursuant to E.O. 14024. OFAC also issued four Russia-related general licenses (GLs): (i) GL 25A authorizes transactions related to telecommunications and certain internet-based communications; GL 33 authorizes the wind down of operations or existing contracts involving certain blocked entities; GL 34 authorizes the wind down of accounting, trust and corporate formation, and management consulting services; and GL 35 authorizes transactions involving credit rating and auditing services. OFAC also issued a new frequently asked question clarifying transactions related to telecommunications and certain internet-based communications that involve Joint Stock Company Channel One Russia, Television Station Russia-1, or Joint Stock Company NTV Broadcasting Company authorized by Russia-related GL 25A.

    OFAC also recently published amended Russia-related frequently asked questions 1034, 1035, and 1038 clarifying, among other things, (i) terms related to Executive Order (E.O.) 14071’s prohibition on certain accounting, trust and corporate formation, and management consulting services; (ii) what “credit rating services” and “auditing services” mean under General License 35; and (iii) certain activities related to products and services in or involving the Russian Federation in relation to E.O. 14024.

    Find continuing InfoBytes coverage on the U.S. sanctions response to Russia’s invasion of Ukraine here.

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

  • Agencies instruct servicers to pause foreclosures while HAF assistance is available

    Federal Issues

    On May 6, the Secretaries of HUD, Department of Veterans Affairs, Department of Agriculture, and Treasury announced that servicers of federally-backed mortgages should pause pending foreclosure proceedings while assistance is available under the Homeowner Assistance Fund (HAF). President Biden’s American Rescue Plan established HAF to provide approximately $10 billion in financial support for families affected by the Covid-19 pandemic. According to the announcement, pausing pending proceedings is considered “a vital step towards keeping families in their homes as they receive assistance through the HAF program and is consistent with Congress’s intent in putting in place the HAF program to protect vulnerable homeowners.” The Secretaries encourage homeowners and servicers to continue collaborating on loss mitigation options so that homeowners eligible for assistance can choose “the best path to staying in their homes and fully utilize available resources.” They also “strongly encourage servicers to offer these loss mitigation options to borrowers who are struggling to make their mortgage payments, including those who are eligible for HAF funding.” The announcement further noted that, among other things, Treasury is urging HAF program administrators to ensure that their programs expedite handling of applications from homeowners with pending foreclosure proceedings, and to develop expedited procedures for handling homeowners with immediate threats to housing stability, in addition to supporting homeowners who may benefit from the agencies’ loss mitigation options.

    Federal Issues Covid-19 HUD Department of Veterans Affairs Department of Agriculture Department of Treasury Loss Mitigation Foreclosure Mortgages American Rescue Plan Act of 2021 Consumer Finance

  • Agencies overhaul CRA requirements

    On May 5, the Federal Reserve Board, FDIC, and OCC (collectively, “agencies”) issued a joint notice of proposed rulemaking (NPRM) on new regulations implementing the Community Reinvestment Act (CRA) to update how CRA activities qualify for consideration, where CRA activities are considered, and how CRA activities are evaluated. According to the NPRM, the “CRA encourages banks to help meet the credit needs of the local communities in which they are chartered, consistent with a bank’s safe and sound operations, by requiring the Federal banking regulatory agencies to examine banks’ records of meeting the credit needs of their entire community, including low- and moderate-income neighborhoods.” The agencies are, among other things, proposing to:

    • Expand access to credit, investment, and banking services in low- and moderate-income (LMI) communities to promote community engagement and financial inclusion. The proposal would also evaluate bank lending to small businesses and farms with gross annual revenues of $250,000 or less to maintain focus on the borrowers with the greatest need;
    • Adapt changes to update CRA assessment areas to include activities associated with online and mobile banking, branchless banking, and hybrid models;
    • Use a retail lending volume screen and metric-based performance ranges to evaluate a bank’s retail lending volumes. CRA evaluations of retail lending and community development financing will include public benchmarks for greater clarity and consistency. The proposal would also clarify eligible CRA activities, such as affordable housing, that are focused on LMI, underserved, and rural communities;
    • Tailor CRA evaluations and data collection to recognize differences in bank size and business models. Smaller banks would continue to be evaluated under the existing CRA framework with the option of being evaluated under aspects of the proposed framework; and
    • Maintain a unified approach across agencies and incorporate stakeholder feedback.

    The agencies also released a Fact Sheet describing key elements of the proposal. Acting Comptroller of the Currency, Michael J. Hsu, called the issuance of the joint NPRM an “important milestone” in bringing the three federal banking agencies back together to develop a uniform approach for addressing inequalities in credit access and other financial services. Fed Governor Lael Brainard pointed out that “[t]he last major revisions to the CRA regulations were made in 1995.” “The CRA is one of our most important tools to improve financial inclusion in communities across America, so it is critical to get reform right,” she stressed. CFPB Director Rohit Chopra, who voted in favor of the NPRM as an FDIC board member, said the proposal “better effectuates Congressional directives intended to ensure that the needs of historically underserved individuals and communities are adequately met,” but reminded policymakers that it is also important “to consider whether nonbank mortgage lenders should also be required to better meet the needs of the communities they serve.” Treasury Secretary Janet Yellen similarly applauded the release of the NPRM. Comments on the NPRM are due August 5.

    A Buckley Special Alert is forthcoming.

    Bank Regulatory Federal Issues Agency Rule-Making & Guidance Federal Reserve FDIC OCC Department of Treasury CFPB CRA Consumer Finance

  • DOJ to strengthen kleptocracy asset recovery

    Financial Crimes

    On April 28, the DOJ issued a fact sheet outlining legislative proposals to strengthen kleptocracy asset recovery as part of the Biden administration’s efforts “to isolate and target the crimes of Russian officials, government-aligned elites, and those who aid or conceal their unlawful conduct.” The proposed measures would “streamline asset forfeiture proceedings in certain circumstances” and also:

    • Enable the DOJ and Treasury and State Departments to work together to return forfeited kleptocrat funds to remediate harms caused to Ukraine;
    • Expand forfeiture authorities under the International Emergency Economic Powers Act (IEEPA) to include property used to facilitate the violations of sanctions and “amend IEEPA’s penalty provision to extend the existing forfeiture authorities to facilitating property, not just to proceeds of the offenses”;
    • Expand the definition of “racketeering activity” in the Racketeer Influenced and Corrupt Organizations Act to include criminal violations of IEEP and the Export Control Reform Act to improve the U.S.’s ability to investigate and prosecute sanctions evasion and export control violations;
    • Extend the statute of limitations for prosecuting sanctions violations and the statute of limitations for seeking forfeitures based on foreign offenses from five years to 10 years; and
    • Improve the U.S.’s ability to work with international partners to facilitate enforcement of foreign restraint and forfeiture orders for criminal property and improve the ability to take these actions in the U.S.

    As previously covered by InfoBytes, the DOJ launched “Task Force KleptoCapture,” an “interagency law enforcement task force dedicated to enforcing the sweeping sanctions, export restrictions, and economic countermeasures that the United States has imposed, along with allies and partners,” in order to “isolate Russia from global markets” in March. The task force has since engaged in numerous transatlantic efforts to sanction numerous Russian elites, Russia’s largest privately-owned aircraft, and one of the world’s largest superyachts (covered by InfoBytes here), and has “seized approximately $625,000 associated with sanctioned parties held at nine U.S. financial institutions.”

    Find continuing InfoBytes coverage on the U.S. sanctions response to Russia’s invasion of Ukraine here.

    Financial Crimes DOJ Digital Assets Russia Ukraine Ukraine Invasion Of Interest to Non-US Persons Biden RICO OFAC Sanctions Department of Treasury Department of State

  • OFAC amends and reissues the Ukraine-Related Sanctions Regulations

    Financial Crimes

    On April 29, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced that it amended and reissued the Ukraine-Related Sanctions Regulations, renaming them the Ukraine-/Russia-Related Sanctions Regulations. According to OFAC, this action replaces the regulations that were published in abbreviated form on May 8, 2014 with a more comprehensive set of regulations, including additional interpretive and definitional guidance, general licenses, and other regulatory provisions. OFAC also announced that it is revising several FAQs for the Ukraine-/Russia-Related Sanctions Regulations. OFAC also noted that “[t[he publication of this final rule has triggered an automatic administrative update to a number of sanctions entries. The unique identifier numbers (UIDs) for the affected entries are listed . . . as part of this administrative update.” The Ukraine-/Russia-Related Sanctions Regulations take effect May 2.

    The same week, OFAC published Russia-related General License 30, “Authorizing Transactions Involving Gazprom Germania GmbH Prohibited by Directive 3 under Executive Order 14024,” which authorizes all transactions involving Gazprom Germania GmbH, or any entity in which Gazprom Germania GmbH owns, under certain criteria.

    Find continuing InfoBytes coverage on the U.S. sanctions response to Russia’s invasion of Ukraine here.

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

  • OFAC reaches multiple settlements to resolve Cuban sanctions violations

    Financial Crimes

    On April 21, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $141,442 settlement with a Colorado-based multinational mining firm for allegedly violating the Cuban Assets Control Regulations (CACR). According to OFAC’s web notice, between June 2016 to November 2017, a wholly-owned subsidiary of the firm purchased Cuban-origin explosives and explosive accessories from a third-party vendor to be used in a mine construction. The distributor, on the subsidiary’s behalf, imported Cuban-origin explosives and explosive accessories for the mine on at least four separate occasions, despite the subsidiary being “generally prohibited from dealing in Cuban-origin goods.” According to OFAC, shipping documents clearly identified that the goods were sourced from Cuba. In addition, purchase orders failed to contain express statements that items provided to the subsidiary may not originate from embargoed jurisdictions, nor did the subsidiary ask for country-of-origin information for the goods acquired from its suppliers. Additionally, OFAC contended that the subsidiary’s failure to provide appropriate export and trade sanctions training led to the apparent violations.

    In arriving at the settlement amount, OFAC considered various aggravating factors, including that (i) the parent firm and subsidiary failed to exercise reasonable due diligence to ensure it complied with U.S. Cuba sanctions requirements; and (ii) the firm and its subsidiaries and affiliates are “a large and sophisticated organization operating globally as a leading gold producer with experience and expertise in international transactions.” OFAC also considered various mitigating factors, including that (i) the apparent violations were self-disclosed and constituted a non-egregious case; (ii) the firm and subsidiary have not received a penalty notice from OFAC in the preceding five years; (iii) the amount of payments were not significant compared to the total volume of transactions undertaken on an annual basis; and (iv) the firm and its subsidiary cooperated with the investigation, signed a tolling agreement, and are currently implementing remedial measures to prevent future violations.

    Separately, OFAC also announced a $45,908 settlement with a Florida-based company affiliated with a distributor of explosives and accessories for mining operations. According to the web notice issued in this action, on four occasions in 2016 and 2017, the company and certain affiliates procured Cuban-origin explosives and related accessories from a third-party vendor originating from Cuba on behalf of a U.S. company for the U.S. company’s mining project in Suriname in violation of the CACR. OFAC contended that the company was responsible for overseeing the processing of purchase orders and invoices for these transactions, and that in 2018, after the U.S. company customer learned of the goods’ Cuban origins, it was asked to no longer procure goods from Cuba. According to OFAC, the apparent violations occurred primarily because of the company’s failure “to understand U.S. prohibitions on dealings in Cuban property or engaging in transactions related to merchandise of Cuban origin outside the United States,” adding that the company did not have a compliance program in place when the four transactions occurred, nor did it realize the transactions were prohibited until they were flagged by the customer. The company immediately ceased all activities involving Cuba after learning of the sanctions implications but did not voluntarily self-disclose the violations, which OFAC deemed non-egregious.

    In arriving at the settlement amount, OFAC considered various aggravating factors, including that (i) the company failed to “exercise a minimal degree of caution or care” when procuring Cuban-origin goods from its supplier; (ii) the company “had actual knowledge that it was financing the provision of Cuban-origin goods for export to Suriname”; and (iii) the company’s actions harmed the U.S. sanctions program. Mitigating factors included that the company is (i) small and largely overseen by one individual; (ii) the company has not received a penalty notice from OFAC in the preceding five years; and (iii) the company provided timely information and entered into a tolling agreement. Providing context for the settlement, OFAC stated that “[t]his case illustrates the risks facing companies of any size operating internationally that do not develop or maintain basic awareness of sanctions risks and do not institute appropriate measures to identify and prevent potential violations.”

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

  • OFAC issues new Ukraine-/Russia-related general licenses and updated FAQs

    Financial Crimes

    On April 25, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued Ukraine-/Russia-related General License (GL) 13R, “Authorizing the Wind Down of Certain Transactions Necessary to Divest or Transfer Debt, Equity, or Other Holdings in GAZ Group,” which authorizes all transactions ordinarily incident and necessary to the wind down of certain transactions by a non-U.S. person to another non-U.S. person through May 25, provided certain criteria are met. OFAC also issued GL 15L, “Authorizing the Wind Down of Transactions Involving GAZ Group,” which also authorizes certain transactions ordinarily incident and necessary to the wind down of transactions involving the GAZ Group, or any entity in which the GAZ Group owns, directly or indirectly, a 50 percent or greater interest. This wind down period also goes through May 25. Additionally, OFAC updated several related frequently asked questions about Ukraine-/Russia-related sanctions.

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

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