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OFAC reaches $6 million settlement with logistics company
On April 25, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a roughly $6 million settlement with a freight forwarding and logistics company for allegedly processing transactions in violation of Iran-Related Sanctions Regulations, among others. According to OFAC’s web notice, between approximately January 2013 and February 2019, the company processed payments through the U.S. financial system in connection with sea, air, and rail shipments to the Democratic People’s Republic of Korea (DPRK), Iran, and Syria, involving the property or interests in property of an entity on OFAC’s Specially Designated Nationals and Blocked Persons List (SDN List) in apparent violation of OFAC sanctions. Specifically, in processing such payments, the company allegedly “failed to adopt or implement policies and controls that prevented it from conducting transactions that involved designated parties or persons in sanctioned jurisdictions.”
In arriving at the settlement amount, OFAC considered various aggravating factors, including, among other things, that (i) the company “acted with reckless disregard for U.S. economic sanctions laws when, over the period of six years, it caused at least 2,958 payments involving shipments from, to, or through sanctioned jurisdictions or the blocked property or an interest in blocked property of entities on the SDN List to be routed through U.S. financial institutions”; (ii) the company had knowledge “of the apparent violations”; and (iii) nearly “14 percent of the apparent violations were for transactions involving entities blocked by OFAC for terrorism or [weapons of mass destruction (WMD)] concerns.” OFAC also considered various mitigating factors, including that the company (i) has not received a penalty notice from OFAC in the preceding five years; (ii) “voluntarily self-disclosed the apparent violations to OFAC and cooperated with OFAC’s investigation”; and (iii) “ultimately took extensive actions to remedy its compliance gaps.”
Providing context for the settlement, OFAC stated that this “action highlights the importance of instituting strong internal controls and procedures to govern payments involving affiliates, subsidiaries, agents, or other counterparties when any of them conduct business with sanctioned jurisdictions or persons.”
OFAC sanctions facilitators of Russian sanctions evasion
On April 20, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 14024 against several entities and numerous individuals for attempting to evade sanctions imposed by the U.S. and its international partners on Russia. Included in the designations are a Russian commercial bank, a global network comprised of more than 40 individuals and entities led by a previously designated Russian oligarch (“including organizations whose primary mission is to facilitate sanctions evasion for Russian entities”), and several companies operating in Russia’s virtual currency mining industry. According to OFAC, this is the first time a virtual currency mining company has been sanctioned. In coordination with OFAC’s sanctions, the Department of State took further action by imposing visa restrictions on 635 Russian nationals and three Russian Federation officials for their involvement in human rights abuses, as well as 17 individuals responsible for undermining democracy in Belarus.
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 noted that U.S. persons are prohibited from participating in transactions with the sanctioned persons unless authorized by a general or specific license.
On the same day, OFAC issued new frequently asked question guidance clarifying obligations for credit card operators with regard to payment cards issued by sanctioned Russian financial institutions. OFAC also published two Russia-related general licenses: (i) General License 28 authorizes certain transactions involving a public joint stock company that are “ultimately destined for or originating from Afghanistan”; and (ii) General License 29 authorizes the wind down of transactions involving the same public joint stock company.
Find continuing InfoBytes coverage on the U.S. sanctions response to Russia’s invasion of Ukraine here.
Treasury releases fact sheet on providing food and humanitarian support to persons impacted by Russian invasion of Ukraine
On April 19, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued a Fact Sheet for “Preserving Agricultural Trade, Access to Communication, and Other Support to Those Impacted by Russia’s War Against Ukraine” following an event on the topic held by OFAC. The Fact Sheet, among other things, highlights Treasury’s humanitarian-related or other general licenses (GL) issued to support of the people impacted by Russia’s war related to: (i) telecommunications and internet-based communications; (ii) Covid-19 and clinical trials; (iii) NGO activities; (iv) personal remittances; (v) personal maintenance of U.S. individuals; (vi) emergency medical services; (vii) government and international organization official business; (viii) overflight payments, emergency landings, and air ambulance services; (ix) civil maritime services in the Donetsk and Luhansk regions; and (x) journalistic activities.
The same day, OFAC issued a new Russia-related GL 27, “Certain Transactions in Support of Nongovernmental Organizations’ Activities,” to authorize transactions related to certain activities of NGOs in Russia and Ukraine.
FinCEN advises banks to detect foreign corrupt activity
On April 14, FinCEN issued an advisory on kleptocracy and foreign public corruption, urging financial institutions to direct their efforts on detecting the proceeds of foreign public corruption. The advisory provides typologies and potential indicators of kleptocracy and other forms of foreign public corruption, including bribery, embezzlement, extortion, and the misappropriation of public assets, and highlights financial red-flag indications of kleptocracy and foreign public corruption to assist banks in preventing, detecting, and reporting suspicious transactions. The announcement also refers to the U.S. Treasury Department’s Kleptocracy Asset Recovery Rewards Program, which offers rewards for information leading to seizure, restraint, or forfeiture of assets linked to foreign government corruption, including the Government of the Russian Federation (covered by InfoBytes here).
OFAC issues Russian general license
On April 12, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued Russia-related General License (GL) 26, “Authorizing the Wind Down of Transactions Involving Joint Stock Company SB Sberbank Kazakhstan or Sberbank Europe AG,” 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. The GL was issued in the wake of Russia’s Sberbank being placed on the SDN list, which prohibits all transactions with Sberbank by U.S. persons, on April 6.
OFAC sanctions actors throughout the Western Balkans
On April 11, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order (E.O.) 14033 against seven individuals and one entity across four countries in the Western Balkans, which “is the second action OFAC has taken under E.O. 14033 targeting persons who threaten the stability of the region through corruption, criminal activity, and other destabilizing behavior.” OFAC also noted that the Department of State is designating individuals from North Macedonia and Bosnia and Herzegovina under Section 7031(c) of the Department of State, Foreign Operations, and Related Programs Appropriations Act, 2022, instituting what is commonly known as a visa ban. As a result of the sanctions, all assets belonging to the designated persons that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC. U.S. persons are generally prohibited from engaging in dealings involving any property or interests in property of the blocked or designated persons.
OFAC sanctions Ireland-based criminal organization and members
On April 11, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13581 against an Ireland-based crime group, which OFAC considers “a murderous organization involved in the international trafficking of drugs and firearms,” seven of its key members, and three companies controlled or owned by key members of the organization. According to OFAC, the sanctions were the result of a collaborated effort between OFAC, the Drug Enforcement Administration, the U.S. Department of State, U.S. Customs and Border Protection, Ireland’s national police force (An Garda Síochána), the United Kingdom’s National Crime Agency, and the European Union Agency for Law Enforcement Cooperation. As a result of the sanctions, all assets belonging to the designated 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 generally prohibited from engaging in dealings involving any property or interests in property of the blocked or designated persons.
OFAC sanctions Russian diamond mining and shipbuilding companies, and issues general licenses
On April 7, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Order 14024, against a Russian state-owned enterprise (SOE) and the world’s largest diamond mining company, which is also responsible for 90 percent of Russia’s diamond mining capacity. Additionally, the Department of State redesignated a Russian SOE open joint stock company, as well as its subsidiaries and board members. According to OFAC, the company develops and constructs most of the Russian military’s warships, likely including those used in Ukraine. OFAC further noted that it is “cutting off additional sources of support and revenue for the Government of the Russian Federation (GoR) to wage its unprovoked war against Ukraine.” 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 noted that U.S. persons are prohibited from participating in transactions with the sanctioned persons, which includes “the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any blocked person or the receipt of any contribution or provision of funds, goods or services from any such person.”
On the same day, OFAC issued several Russia-related general licenses: (i) General License 9C authorizes “transactions related to dealings in certain debt or equity”; (ii) General License 10C authorizes “certain transactions related to derivative contracts”; (iii) General License 21A authorizes “the wind down of Sberbank CIB USA, Inc. and Alrosa USA, Inc.”; (vi) General License 24 authorizes “the wind down of transactions involving public joint stock company Alrosa”; and (v) General License 25 authorizes “transactions related to telecommunications and certain internet-based communications.”
Find continuing InfoBytes coverage on the U.S. sanctions response to Russia’s invasion of Ukraine here.
Yellen sets out principles for regulating digital assets
On April 7, Treasury Secretary Janet Yellen outlined a broad set of principles for regulating digital assets during remarks delivered at American University’s Kogod School of Business Center for Innovation. Yellen said that the approach she described largely reflects priorities outlined in an Executive Order issued by President Biden last month, which presented a “whole-of-government” strategy to coordinate a comprehensive approach for ensuring responsible innovation in digital assets policy (covered by InfoBytes here). Emphasizing that “regulatory frameworks should be designed to support responsible innovation while managing risks—especially those that could disrupt the financial system and economy,” Yellen cautioned that regulatory frameworks must appropriately reflect these risks as banks and other traditional financial firms enter this space. Moreover, she added that “new types of intermediaries, such as digital asset exchanges and other digital native intermediaries, should be subject to appropriate forms of oversight.”
During her remarks, Yellen discussed the risks and benefits to consumer protection and financial stability associated with the growth in digital assets. While Yellen did not provide specific instructions, she outlined general principles that she believes should guide the creation of a new framework for regulating digital assets. Stressing that regulations should be “tech neutral” and “based on risks and activities, not specific technologies,” Yellen explained that consumers and businesses should be protected from fraud regardless of whether assets are stored on a balance sheet or a distributed ledger. She also stressed the importance of ensuring that the growth of digital assets does not disproportionately impact vulnerable communities or exacerbate social, racial, or economic inequities. Yellen stated that, over the next six months, Treasury will collaborate with the White House and other agencies to produce reports and recommendations addressing opportunities and challenges posed by these emerging technologies.
OFAC prohibits new investment in Russia and blocks Russia’s largest bank, executive order foreshadows more Russian export bans
On April 6, OFAC announced that President Biden issued a new E.O., Prohibiting New Investment in and Certain Services to the Russian Federation in Response to Continued Russian Federation Aggression, which bans “all new investment in the Russian Federation by U.S. persons, wherever located, as well as the exportation, reexportation, sale, or supply, directly or indirectly, from the U.S., or by a U.S. person, wherever located, of any category of services as may be determined by the Secretary of the Treasury, in consultation with the Secretary of State, to any person located in the Russian Federation.” According to OFAC, the prohibitions come after recently issued E.O. 14066 and 14068 that prohibit certain imports and exports involving Russia, and are consistent with commitments made by the G7 leaders to ensure that their citizens are not underwriting Putin’s war.
OFAC also announced full blocking sanctions, pursuant to Executive Order (E.O.) 14025, on Sberbank, Russia’s largest state-owned bank and Alfa-Bank, Russia’s largest private bank, in addition to targeting family members of President Vladimir Putin and Foreign Minster Sergey Lavrov, as well as Russian Security Council members who are complicit in the war against Ukraine.
Earlier this week, OFAC also announced sanctions, in collaboration with the DOJ, FBI, Drug Enforcement Administration, Internal Revenue Service Criminal Investigation, and Homeland Security Investigations, against the world’s largest and most prominent darknet market. According to OFAC, the designation was enhanced by international collaboration with the German Federal Criminal Police, who seized the designated entity’s servers in Germany and $25 million worth of bitcoin. Additionally, OFAC identified more than 100 virtual currency addresses connected to the entity’s operations that have been used to conduct illicit transactions. OFAC also noted that Treasury will publish an updated National Strategy to Combat Illicit Finance, which will highlight planned Treasury efforts to continue to combat the virtual currency misuse. 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 noted that U.S. persons are prohibited from participating in transactions with the sanctioned persons, which includes “the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any blocked person or the receipt of any contribution or provision of funds, goods or services from any such person.”
Additionally, OFAC issued several Russia-related general licenses: (i) General License 8B authorizes certain “transactions related to energy” through June 24; (ii) General License 9B authorizes “transactions related to dealings in certain debt or equity”; (iii) General License 10B authorizes “certain transactions related to derivative contract”; (iv) General License 21 authorizes “the wind down of Sberbank CIB USA, Inc”; (v) General License 22 authorizes “the wind down of transactions involving public joint stock company Sberbank of Russia”; and (vi) General License 23 authorizes the wind down of transactions involving joint stock company Alfa-Bank.”
Find continuing InfoBytes coverage on the U.S. sanctions response to Russia’s invasion of Ukraine here.