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  • OFAC sanctions Iranian senior officials for wrongfully detaining U.S. nationals

    Financial Crimes

    On April 27, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Order 14078, against four senior officials of Iran’s Islamic Revolutionary Guard Corps Intelligence Organization (IRGC-IO). The IRGC-IO was concurrently designated by the State Department for its involvement in the hostage-taking or wrongful detention of U.S. nationals in Iran. OFAC also implemented the State Department’s designation of Russia’s Federal Security Service as well as the IRGC-IO for their role in wrongfully detaining U.S. nationals abroad. As a result of the sanctions, all property and interests in property of 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. Additionally, “any entities that are owned, directly or indirectly, individually or in the aggregate, 50 percent or more by one or more blocked persons are also blocked.” OFAC’s announcement further noted that its regulations “generally prohibit” U.S. persons from participating in transactions with designated persons unless exempt or otherwise authorized by a general or specific license. Financial institutions and persons that engage in certain transactions with the designated persons may themselves be exposed to sanctions or subject to enforcement.

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

  • OFAC adds more sanctions linked to timeshare fraud

    Financial Crimes

    On April 27, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Order 14059, against seven individuals and 19 Mexican companies connected to timeshare fraud on behalf of the Cartel de Jalisco Nueva Generacion (CJNG). The CJNG—a Mexico-based organization responsible for trafficking a significant proportion of illicit fentanyl and other drugs that enter the U.S.—is also designated under E.O. 14059. OFAC explained that timeshare fraud often targets older U.S. citizens to scam victims of their life savings and is an important revenue stream for the group’s criminal enterprise. The designations build on sanctions imposed on several other companies in April (covered by InfoBytes here) and continue OFAC’s efforts to disrupt CJNG’s timeshare fraud network.

    As a result of the sanctions, all property and interests in property of the designated persons located in the U.S. or held by U.S. persons are blocked and must be reported to OFAC. Further, “any entities that are owned, directly or indirectly, individually or in the aggregate, 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 unless authorized by an OFAC-issued general or specific license, or exempt. OFAC further warned that “U.S. persons may face civil or criminal penalties for violations of E.O. 14059 and the Kingpin Act.”

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

  • OFAC reaches $7.6 million settlement with online digital-asset trading platform

    Financial Crimes

    On May 1, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a roughly $7.6 million settlement with a Massachusetts-based online trading and settlement platform to resolve potential civil liability stemming from allegations that the platform allowed customers in sanctioned jurisdictions to engage in digital asset-related transactions. According to OFAC’s web notice, between January 2014 and November 2019, the platform allegedly permitted customers to make more than $15.3 million in trades, deposits, and withdrawals, despite having reason to know that the customers’ locations—based on both Know Your Customer (KYC) information and internet protocol address data—were in jurisdictions subject to comprehensive OFAC sanctions. OFAC noted that although the platform implemented a sanctions compliance program to screen new customers, it did not retroactively screen existing customers, thus allowing these customers to continue to conduct trading activity. While the platform made efforts to identify and restrict accounts with a nexus to certain sanctioned jurisdictions, compliance deficiencies resulted in the platform processing 65,942 online digital asset-related transactions for 232 customers apparently located predominantly in Crimea, but also in Cuba, Iran, Sudan, and Syria.

    In arriving at the settlement amount, OFAC considered, among other things, that the platform failed to exercise due caution or care for its sanctions compliance obligations and had reason to know that certain customers were located in sanctioned jurisdictions. Additionally, the settlement amount reflects that the platform did not voluntarily disclose the apparent violations. OFAC also considered several mitigating factors, including that: (i) the platform was a small start-up when most of the apparent violations occurred; (ii) the platform has not received a penalty notice from OFAC in the preceding five years; (iii) the platform cooperated with OFAC during the investigation and undertook numerous remedial measures; and (iv) the volume of apparent violations represented a very small percentage of the total volume of transactions conducted on the platform annually.

    Providing context for the settlement, OFAC said the “action highlights that online digital asset companies—like all financial service providers— are responsible for ensuring that they do not engage in transactions prohibited by OFAC sanctions, such as providing services to persons in comprehensively sanctioned jurisdictions. To mitigate such risks, online digital asset companies should develop a tailored, risk-based sanctions compliance program.”

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

  • OFAC reaches $508 million settlement with British tobacco company on North Korean transactions

    Financial Crimes

    On April 25, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $508 million settlement with one of the world’s largest tobacco companies to resolve potential civil liabilities stemming from allegations that the company sent more than $250 million in profits from a North Korean joint venture through U.S. financial institutions by relying on designated North Korean banks and several intermediaries. According to OFAC’s web notice, from 2007 to 2016, the London-headquartered company formed a conspiracy to export tobacco and related products to North Korea, and remitted approximately $250 million in payments from the North Korean joint venture. The payments were allegedly remitted through bank accounts controlled by sanctioned North Korean banks to the company’s Singaporean subsidiary via U.S. banks who cleared the transactions. By causing U.S. financial institutions to process wire transfers containing blocked property interests of sanctioned North Korean banks in order to export financial services and facilitate the export of tobacco, the company violated the Weapons of Mass Destruction Proliferators Sanctions Regulations and the North Korea Sanctions Regulations, OFAC said.

    According to OFAC, the settlement is the largest ever reached with a non-financial institution and reflects the statutory maximum penalty due to OFAC’s determination that the company’s conduct was egregious and not voluntarily self-disclosed. In arriving at the settlement amount, OFAC determined, among other things, that the company and its subsidiaries willfully conspired to transfer hundreds of millions of dollars related to North Korea through U.S. financial institutions while being aware that U.S. sanctions regulations prohibited this conduct. The company and its subsidiaries also allegedly “relied on an opaque series of front companies and intermediaries” to conceal their North-Korea-related business, with management having actual knowledge about the alleged conspiracy from the beginning. OFAC also considered various mitigating factors, including that the company has not received a penalty notice from OFAC in the preceding five years, and that the company cooperated with OFAC and agreed to toll the statute of limitations.

    Providing context for the settlement, OFAC said that this action demonstrates that “creating the illusion of distance between a firm and apparently violative conduct does not shield that firm from liability.” Moreover, “[s]enior management decisions to approve or otherwise support arrangements that obscure dealings with sanctioned countries and parties can be reflected throughout an organization, compounding sanctions risks and increasing the likelihood of committing potential violations.”

    Concurrently, the DOJ announced that the company and one of its subsidiaries have agreed to pay combined penalties of more than $629 million to resolve bank fraud and sanctions violations charges stemming from the aforementioned conduct. According to the DOJ, the subsidiary pleaded guilty to a criminal information charging both entities with conspiracy to commit bank fraud and conspiracy to violate the International Emergency Economic Powers Act. The company entered into a deferred prosecution agreement related to these charges.

    Financial Crimes Of Interest to Non-US Persons OFAC Department of Treasury OFAC Sanctions OFAC Designations Enforcement Settlement North Korea DOJ

  • OFAC sanctions senior Iranian officials for human rights abuses

    Financial Crimes

    On April 24, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Orders 13553 and 13846, against four senior Iranian security officials of the Law Enforcement Forces of Iran and the Islamic Revolutionary Guard Corps for aiding the Iranian regime’s crackdown on peaceful demonstrations. OFAC stressed that it has now “imposed 11 rounds of sanctions actions targeting the Iranian regime and its security elements and officials that are involved in brutal crackdown on peaceful demonstrations since nationwide protests began in September 2022.” Concurrently, the State Department imposed visa restrictions on 11 additional Iranian government officials for their alleged involvement in suppressing protestors. As a result of the sanctions, all property and interests in property belonging to the sanctioned persons 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.” OFAC further warned that “persons that engage in certain transactions with the persons designated today may themselves be exposed to sanctions or subject to an enforcement action,” and that, unless an exception applies, “any foreign financial institution that knowingly facilitates a significant transaction or provides significant financial services for any of the persons designated today could be subject to U.S. sanctions.”

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

  • OFAC sanctions facilitators of DPRK virtual currency laundering

    Financial Crimes

    On April 24, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Orders 13722 and 13382, against three individuals for providing material support to the Democratic People’s Republic of Korea (DPRK) through several previously designated entities. According to OFAC, the DPRK uses illicit facilitation networks to access the international financial system, launder stolen virtual currency, and generate revenue to support the regime’s weapons of mass destruction and ballistic missile programs. “The United States and our partners are committed to safeguarding the international financial system and preventing its use in the DPRK’s destabilizing activities, especially in light of the DPRK’s three launches of intercontinental ballistic missiles (ICBMs) this year alone,” Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson said in the announcement. OFAC explained that the DPRK deploys IT workers to fraudulently obtain employment to generate revenue in virtual currency, and said that in 2022 alone, DPRK cyber actors were able to steal an estimated $1.7 billion in virtual currency through various hacks. The stolen virtual currency was converted into fiat currency using a network of over-the-counter virtual currency traders (including traders based in China) to avoid detection by financial institutions or authorities, OFAC said.

    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.” OFAC further warned that “persons that engage in certain transactions with the individuals or entities designated today may themselves be exposed to designation,” and 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.”

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

  • OFAC sanctions Nicaraguan judicial officials

    Financial Crimes

    On April 19, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Order 13851, as amended, against three Nicaraguan judicial officials involved in human rights abuses intended to oppress citizens who oppose the current Nicaraguan president’s regime. The sanctions block all property and interests in property subject to U.S. jurisdiction belonging to the sanctioned persons and require such property, as well as “any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons,” to be reported to OFAC. U.S. persons are also generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons unless they are exempt from OFAC regulations or authorized by a general or specific license issued by OFAC, OFAC warned.

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

  • OFAC sanctions network supporting Iran’s military programs

    Financial Crimes

    On April 19, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Order 13382, against one individual and six entities involved in a sanctions evasion network responsible for procuring electronic components for Iran’s military programs, including goods and technology used in unmanned aerial vehicles. The sanctions target the head of a previously U.S.-designated Iranian company, as well as its Iran-, Malaysia-, Hong Kong-, and PRC-based front companies and suppliers. OFAC’s action also updates the Specially Designated Nationals and Blocked Persons List to include an alias and fictious company names used by the designated company in its procurement efforts. The sanctions block all property and interests in property subject to U.S. jurisdiction belonging to the sanctioned persons and require such property, as well as “any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons,” to be reported to OFAC. U.S. persons are also generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons, OFAC said, warning that persons that engage in certain transactions with the designated individuals or entities may themselves be exposed to sanctions. Moreover, “any foreign financial institution that knowingly facilitates a significant transaction or provides significant financial services for any of the individuals or entities designated today pursuant to E.O. 13382 could be subject to U.S. sanctions.”

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

  • OFAC designates evasion network supporting Hizballah financier

    Financial Crimes

    On April 18, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Order 13224, as amended, against a “vast international money laundering and sanctions evasion network” comprised of 52 individuals and entities in Lebanon, the United Arab Emirates, South Africa, Angola, Côte d’Ivoire, the Democratic Republic of the Congo, Belgium, the United Kingdom, and Hong Kong. The designated network assisted a Hizballah financier and Specially Designated Global Terrorist (previously sanctioned by OFAC in 2019) in evading U.S. sanctions by facilitating the payment, shipment, and delivery of goods and services, including cash, diamonds, art, and luxury goods, for the benefit of the sanctioned individual who used the funds to finance the Hizballah financier and his lifestyle, OFAC said, explaining that the network used shell companies and fraudulent schemes to disguise the Hizballah financier’s role in the financial transactions. Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson warned in the announcement that “[l]uxury good market participants should be attentive to these potential tactics and schemes, which allow terrorist financiers, money launderers, and sanctions evaders to launder illicit proceeds through the purchase and consignment of luxury goods.” Treasury has issued warnings on money laundering and terrorist financing risks associated with the trade of works of art in a February 2022 report and an October 2020 art advisory (covered by InfoBytes here and here).

    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. “[A]ny entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons are also blocked.” U.S. persons are also generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons. OFAC warned that “persons that engage in certain transactions with the persons designated today may themselves be exposed to sanctions or subject to an enforcement action.” Additionally, “any foreign financial institution that knowingly facilitates a significant transaction or provides significant financial services for any of the targets designated today pursuant to E.O. 13224, as amended, could be subject to U.S. sanctions.”

    The action by Treasury was taken in coordination with the Department of Homeland Security, the Department of State’s Rewards for Justice program, and the United Kingdom. The same day, the DOJ unsealed a nine-count indictment charging the Hizballah financier and eight co-defendants with conspiring to evade terrorism-related sanctions. According to the DOJ, despite being sanctioned and prohibited from engaging in transactions with U.S. persons, the Hizballah financier and the other co-defendants used a complex web of business entities to conduct money laundering transactions involving valuable artwork and diamond-grading services.

    Financial Crimes Of Interest to Non-US Persons OFAC Department of Treasury OFAC Sanctions OFAC Designations Hizballah DOJ UK Department of Homeland Security Department of State

  • OFAC warns of possible evasion of Russian oil price cap

    Financial Crimes

    On April 17, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued an alert warning U.S. persons regarding the possible evasion of the price cap set on crude oil of Russian origin, particularly oil exported through the Eastern Siberia Pacific Ocean pipeline and ports on the eastern coast of Russia. OFAC reminded U.S. persons providing covered services that they “are required to reject participating in an evasive transaction or a transaction that violates the price cap determinations” and must report such transactions to OFAC. In the alert, OFAC referenced recently issued guidance on the implementation of the price cap policy for Russian crude oil and petroleum products for additional information (covered by InfoBytes here).

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

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