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Senate Democrats urge Treasury to assess climate change financial risk
On August 2, Senators Elizabeth Warren (D-MA), Kirsten Gillibrand (D-NY), and Chris Van Hollen (D-MD) wrote to John Morton, Climate Counselor of the Department of Treasury’s Climate Hub, urging the Department to address the threat to the country’s health, security, and financial system regarding the “climate crisis.” As previously covered by InfoBytes, Treasury announced a new coordinated climate policy strategy focusing on domestic and international policymaking to “leverag[e] finance and financial risk mitigation to confront the threat of climate change,” in addition to the formation of a new Climate Hub to coordinate existing climate-related efforts. The Senators’ letter seeks to gather information regarding the Climate Hub’s plan to fulfill its role, including coordinating a strategy in response to President Biden’s recent Executive Order (covered by InfoBytes here), which mandates financial regulators take steps to mitigate climate-related risk related to the financial system, including directing the Secretary of the Treasury to work with Financial Stability Oversight Council (FSOC) members to consider “assessing, in a detailed and comprehensive manner, the climate-related financial risk . . . to the financial stability of the federal government and the stability of the U.S. financial system,” and to facilitate climate-related risk information sharing between FSOC member agencies and other federal departments and agencies. The letter states that “it is imperative that you wield your leadership position in the Climate Hub to support FSOC’s efforts to align these financial regulators and implement strong guidelines to ensure that banks and financial institutions, which continue to finance risky fossil fuel investments, are adequately prepared for climate-related disruptions.”
OFAC sanctions Cuban officials
On July 30, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13818 against two Cuban individuals and one Cuban entity under the Global Magnitsky Human Rights Accountability Act. According to OFAC, the sanctions expand on Treasury’s July 22 designations by sanctioning additional persons in connection with actions to suppress peaceful, pro-democratic protests in that began on July 11 in Cuba (covered by InfoBytes here). As a result of the sanctions, all transactions by U.S. persons or in the U.S. that involve any property or interests in property of designated or otherwise blocked persons are generally prohibited. OFAC notes that its regulations generally prohibit U.S. persons from participating in transactions with these persons, which include “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.”
OFAC sanctions Syrian officials and entities
On July 28, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Orders 13894 and 13572 against eight Syrian prisons run by the Assad regime’s intelligence apparatus, as well as five senior security officials of regime entities that control these detention facilities. A Syrian armed group and two of the group’s leaders were also sanctioned. “Today’s designations promote accountability for abuses committed against the Syrian people and deny rogue actors access to the international financial system,” OFAC Director Andrea M. Gacki stated. “This action demonstrates the United States’ strong commitment to targeting human rights abuses in Syria, regardless of the perpetrator.” As a result of the sanctions, all property and interests in property belonging to the sanctioned persons are blocked, and “any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons are also blocked.” OFAC’s announcement further noted that OFAC regulations “generally prohibit” U.S. persons from participating in transactions with the designated persons unless exempt or otherwise authorized by a general or specific license.
OFAC sanctions al-Qa’ida-linked financial facilitators
On July 28, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13224 against one Turkey-based al-Qa’ida financial facilitator for providing material assistance to al-Qa’ida and one Syria-based terrorist fundraiser and recruiter for providing material support to Hay’et Tahrir Al-Sham (HTS). According to OFAC, the designations “expose the continued efforts by al-Qa’ida and HTS to use the global formal financial system and highlight the need for continued vigilance against terrorist fundraising and recruitment on the internet.” As a result of the sanctions, all property and interests in property belonging to the sanctioned individuals, and “any entities that are owned, directly or indirectly, 50 percent or more by them, individually, or with other blocked persons,” that are subject to U.S. jurisdiction must be blocked and reported to OFAC. OFAC noted that OFAC regulations “generally prohibit” U.S. persons from participating in transactions with the designated persons unless exempt or otherwise authorized by a general or specific license. Furthermore, OFAC cautioned that “engaging in certain transactions with the individuals designated today entails risk of secondary sanctions,” and warned foreign financial institutions that if they knowingly facilitate significant transactions on behalf of a Specially Designated Global Terrorist, OFAC may prohibit or impose strict conditions on their opening or maintaining of correspondent accounts or payable-through accounts in the U.S.
DoD releases MLA report
Recently, the Department of Defense (DoD), in consultation with the Treasury Department, released a report to the House Committee on Armed Services in response to Title V of House Report 116-442 on the National Defense Authorization Act (NDAA) for Fiscal Year 202. The House Report requested a report regarding the Military Annual Percentage Rate (MAPR), which cannot exceed 36 percent as established under the Military Lending Act (MLA) and what impact lowering the MAPR to 30 percent would have on military readiness and servicemember retention. Some highlights of the report include, among other things: (i) “the MLA, in combination with the Department’s ongoing financial literacy education and financial counseling efforts, appears to be effective in deterring unfair credit practices”; (ii) the DoD does not take a position regarding the merit of any change to decrease the maximum MAPR rate below 30 percent; (iii) credit cards, auto loans, and personal loans are generally available at risk-based rates below the MAPR; (iv) almost a quarter of all active duty servicemembers in the U.S. are stationed in states that limit a 24 month, $2,000 loan to less than 30 percent; and (v) “a MAPR limit as low as 28 percent would likely have no impact on [servicemembers]’ access to credit cards, assuming credit card issuers meet exemptions for eligible bona fide fees when calculating the MAPR.” The report notes that the DoD “is committed to continue working with Congress to support the financial readiness of [servicemembers] and their families and is willing to provide comment on any such proposal when appropriate.”
OFAC reaches $1.4 million settlement with money transmitter
On July 23, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $1.4 million settlement with a New York-based online money transmitter for 2,260 apparent violations of multiple sanctions programs. According to OFAC’s web notice, between February 4, 2013 and February 20, 2018, the company allegedly processed 2,241 payments for parties located in sanctioned jurisdictions and regions, including the Crimea region of Ukraine, Iran, Sudan, and Syria, as well as 19 payments on behalf of sanctioned persons identified on OFAC’s List of Specially Designated Nationals and Blocked Persons. Identified deficiencies in the company’s sanctions compliance program related to screening, testing, auditing, and transaction review procedures allowed persons in these jurisdictions and regions and those on the SDN List to engage in roughly $802,117.36 worth of transactions, OFAC stated. The apparent violations—related to commercial transactions that the company processed on behalf of its corporate customers and card-issuing financial institutions—allegedly occurred as a result of weak algorithms, business identifier code screening failures, backlogs, and a failure to monitor IP addresses or flag addresses in sanctioned locations.
In arriving at the settlement amount, OFAC considered various aggravating factors, including that (i) the company failed to exercise sufficient caution or care for its sanctions compliance obligations; (ii) the company had reason to know users were located in sanctioned jurisdictions and regions based on common indications it had within its possession; and (iii) the apparent violations harmed six different sanctions program.
OFAC also considered various mitigating factors, including that (i) senior management quickly self-disclosed the apparent violations upon discovery and provided substantial cooperation during the investigation; (ii) the company has not received a penalty notice from OFAC in the preceding five years; and (iii) the company has taken remedial measures to minimize the risk of recurrence, including terminating the conduct leading to the apparent violations, retraining compliance employees, enhancing screening software, putting flagged transactions into a pending status rather than completing them, and conducting a daily review of customers’ and counter-parties’ identification documents.
OFAC sanctions Cuban officials
On July 22, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13818 against one Cuban individual and one Cuban entity under the Global Magnitsky Human Rights Accountability Act. According to OFAC, the sanctioned parties are connected with the repression of peaceful, pro-democratic protests in Cuba that began on July 11. As a result of the sanctions, all transactions by U.S. persons or in the U.S. that involve any property or interests in property of designated or otherwise blocked persons are generally prohibited. OFAC notes that its regulations generally prohibit U.S. persons from participating in transactions with these persons, which include “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.”
Treasury commends UK’s anti-corruption sanctions efforts
On July 22, Treasury Secretary Janet L. Yellen and Secretary Antony J. Blinken issued a joint statement commending the UK’s decision to impose additional anti-corruption sanctions under its Global Anti-Corruption Sanctions (GACS) regime. Specifically, the secretaries applauded actions taken by the UK against four corrupt individuals who were previously designated by the U.S., as well as a fifth individual “whose U.S.-based assets purchased with corrupt proceeds were successfully forfeited in U.S. courts.” Yellen and Blinken emphasized that sanctions regimes such as GACS and the U.S. Global Magnitsky sanctions program limit corrupt actors’ access to the international financial system, and added that the U.S. will continue to work with the UK and other allies and partners “to impose tangible and significant consequences on those who engage in corruption, as well as to protect the global financial system.”
OFAC reaches multiple settlements with companies that conspired to export equipment to Iran
On July 19, OFAC announced a $415,695 settlement with the United Arab Emirates (UAE)-based head regional office of a Sweden-based equipment company for apparent violations of the Iranian Transactions and Sanctions Regulations (ITSR). According to OFAC’s website notice, between 2015 and 2016, the UAE company allegedly conspired with Dubai- and Iran-based companies to export equipment from the U.S. to Iran. As a result, the UAE company caused its U.S.-based affiliate to indirectly export goods to Iran by incorrectly listing a Dubai-based company on its export documentation as the end-user. The conspiracy also allegedly included the organization of additional sales of the equipment in the same manner as the initial sale, which ultimately ended when the U.S. Department of Commerce’s Bureau of Industry and Security requested post-shipment verification that showed certain products in question were reexported to Iran.
In arriving at the settlement amount, OFAC considered various aggravating factors, including that (i) the UAE company did not voluntarily self-disclose the apparent violations; (ii) the UAE company “willfully violated the ITSR” by conspiring to export goods from the U.S. to Iran by “obfuscating the end-user’s identity from its U.S. affiliate,” thus causing the U.S. affiliate to violate the ITSR; (iii) multiple managers had actual knowledge of the conduct giving rise to the apparent violations; and (iv) the UAE company “caused harm to the integrity of the ITSR by circumventing U.S. sanctions and conferring an economic benefit to Iran’s energy sector.”
OFAC also considered various mitigating factors, including that (i) none of the relevant subsidiaries, including the UAE company, have received a penalty notice from OFAC in the preceding five years; (ii) the UAE company, through the U.S. affiliate, conducted an internal investigation resulting in numerous remedial measures, including taking disciplinary actions against participating individuals, adopting an enhanced review and screening process for Iran-related transactions, and conducting additional in-person training; and (iii) the UAE company, through the U.S. affiliate, provided substantial cooperation to OFAC during the investigation.
OFAC separately reached a $16,875 settlement with a Virginia-based U.S. subsidiary for its apparent ITSR violations arising from this matter. The Virginia subsidiary did not voluntarily self-disclose the apparent violations, but agreed to the settlement on behalf of a former Pennsylvania-based subsidiary that allegedly referred a known Iranian business opportunity to its foreign affiliate in Dubai. This foreign affiliate, OFAC claimed, then “orchestrated a scheme to export goods” from the U.S. to Iran.
OFAC amends Venezuela-related general license
On July 20, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued Venezuela-related General License (GL) 5G, “Authorizing Certain Transactions Related to the Petróleos de Venezuela, S.A. 2020 8.5 Percent Bond on or After October 21, 2021,” which replaces and supersedes GL 5F. GL 5G, however, does not authorize any transactions or activities otherwise prohibited by the Venezuela Sanctions Regulations. OFAC also amended related FAQ 595, which reminds parties that, until October 21, 2021, “transactions related to the sale or transfer of CITGO shares in connection with the PdVSA 2020 8.5 percent bond are prohibited, unless specifically authorized by OFAC.”