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Obama Administration Issues Executive Order Terminating Côte d'Ivoire Sanctions Programs
On September 14, the White House issued an Executive Order titled “Termination of Emergency with Respect to the Situation in or in Relation to Côte d’Ivoire.” The Executive Order terminates the Côte d’Ivoire-related sanctions program. Accordingly, OFAC updated its SDN List to indicate the removal of the sanctions against the country established under the United Nations Security Council’s Resolution 2284. The Executive Order is effective immediately.
OFAC Publishes Burma-Related FAQ
On September 14, President Obama announced his intent to lift certain sanctions against Burma and to designate it as a least-developed beneficiary developing country for the purposes of the Generalized System of Preferences program, a status that would allow imported products from Burma to enjoy lower tariffs and preferential treatment. Accordingly, OFAC published new FAQ 480 to address the President’s announcement regarding the policy change with respect to Burma. The policy change will take effect when the President issues a new Executive Order and, at that time, OFAC “will formally remove the Burmese Sanctions Regulations from the Code of Federal Regulations and take other administrative actions as necessary.”
OFAC Imposes Civil Penalty for the Export of Orthodontic Supplies to Iran
On September 7, OFAC announced a $43,200 settlement with an Oregon-based manufacturing company for alleged violations of the Iranian Transactions and Sanctions Regulations (ITSR), 31 C.F.R. part 560. Specifically, OFAC alleges that the company violated §§ 560.204 and 560.206 of the ITSR between April 2008 and July 2010 by exporting orthodontic supplies, with a collective value of $59,886, to Germany, United Arab Emirates, and/or Lebanon with the knowledge or reason to know that the supplies were ultimately destined for Iran. The settlement amount reflects OFAC’s consideration of the following aggravating factors: (i) the company acted willfully by exporting products it knew or had reason to know were ultimately destined for Iran; (ii) the company’s management knew or had reason to know that the products were destined for Iran; and (iii) the company failed to implement a compliance program until June 2008. Mitigating factors considered when determining the settlement amount include (i) the fact that alleged violations did not “result in great economic or other benefit conferred on Iran” because the transactions were generally consistent with OFAC’s licensing policy; (ii) the company’s lack of sanctions history with OFAC for five years before the first of the seven alleged violations; (iii) the company’s cooperation with OFAC by agreeing to toll the statute of limitations; (iv) the company’s development of an economic sanctions compliance procedure in June 2008 and the subsequent draft of a written compliance policy; and (v) the company’s lack of “commercial sophistication in conducting international sales at the time of the alleged violations.”
Treasury Issues Joint BSA/AML Fact Sheet
On August 30, the Department of the Treasury, along with the OCC, FDIC, Federal Reserve and NCUA, issued a joint fact sheet on foreign correspondent banking. The fact sheet provides a summary of the agencies’ (i) expectations for BSA/AML and OFAC risk management at U.S. depository institutions; (ii) risk-based approach to the supervisory examination process; and (iii) use of enforcement as an “extension of the supervisory process.” As highlighted in a corresponding blog post, the fact sheet explains that about “95% of BSA/OFAC compliance deficiencies identified by the [Federal Banking Agencies], FinCEN, and OFAC are corrected by the institution’s management without the need for any enforcement action or penalty.” The fact sheet notes that, under existing regulations there is no general requirement for depository institutions to conduct due diligence on an individual customer of a foreign financial institution (FFI). But it also notes that “[i]n determining the appropriate level of due diligence necessary for an FFI relationship, U.S. depository institutions should consider the extent to which information related to the FFI’s markets and types of customers is necessary to assess the risks posed by the relationship, satisfy the institution’s obligations to detect and report suspicious activity, and comply with U.S. economic sanctions. This may require U.S. depository institutions to request additional information concerning the activity underlying the FFI’s transactions in accordance with the suspicious activity reporting rules and sanctions compliance obligations.”
OFAC Issues Two Findings of Violation for Alleged Violations of Foreign Narcotics Kingpin Sanctions Regulations
On August 2, OFAC issued Findings of Violation (here and here) to two insurance companies for alleged violations of the Foreign Narcotics Kingpin Sanctions Regulations, 31 C.F.R. part 598. The findings of violation relate to a non-U.S. insurance company that issued insurance policies to persons subsequently designated as SDNs. The insurance policies were serviced by a U.S. insurance company, which collected insurance premiums from the SDNs and remitted the premiums to the non-U.S. company. Neither company identified the designations until a separate company assumed responsibilities for servicing the policies. OFAC asserted that as large and commercially sophisticated companies providing insurance products and services, they “failed to implement controls and measures to ensure [they] could identify, block and report insurance policies, premiums, or claims payments in which an OFAC sanctioned person(s) had an interest.”
NYDFS Adopts Final Anti-Terrorism and Anti-Money Laundering Regulation
On June 30, the NYDFS adopted a final rule that requires regulated financial institutions to maintain a transaction monitoring program for potential BSA/AML violations and a filtering program intended to ban transactions prohibited by federal economic and trade sanctions. Further, the Board of Directors or Senior Officer(s) are required to submit annually, by April 15, a Board Resolution or Compliance Officer Finding, confirming the steps taken to ascertain compliance with the regulation and stating that, “to the best of the [Board or Officer’s] knowledge, the Transaction Monitoring and Filtering Program complies with [the regulation].” The law applies to Regulated Institutions, which include banks, trust companies, private bankers, savings banks and savings and loan associations chartered pursuant to the New York Banking Law, and all branches and agencies of foreign banking corporations licensed under the Banking Law to conduct banking operations in New York; and non-banks, which include check cashers and money transmitters licensed under the Banking Law.
Each Regulated Institution’s transaction monitoring system must be designed, reviewed, updated, and tested in accordance with the detailed parameters of the Rule. The required Filtering Program may be manual or automated, and must be “reasonably designed for the purpose of interdicting transactions that are prohibited by OFAC.” Like the Transaction Monitoring Program, the Filtering Program must also be designed, reviewed, updated, and tested in accordance with the detailed parameters of the Rule.
OFAC Imposes Civil Penalty for Export of Medical Supplies to Iran
On June 23, OFAC announced a $107,691.30 settlement with a North Carolina-based medical device company for apparent violations of the Iranian Transactions and Sanctions Regulations, 31 C.F.R. part 560 (the Regulations). Specifically, the company violated § 560.204 of the Regulations by exporting a number of its medical products to its United Arab Emirates distributor throughout April and May 2011 with the knowledge or reason to know that the products were ultimately destined for Iran. The settlement amount reflects OFAC’s consideration of the following aggravating factors: (i) the company acted willfully by exporting products it knew or had reason to know were ultimately destined for Iran, editing its destination control statement at the request of its distributor and continuing to conduct business with its distributor after receiving confirmation that the distributor had reexported the company’s products to Iran; (ii) the company’s former CEO and International Sales Manager knew the products were ultimately destined for Iran; and (iii) the company did not have a sanctions compliance program at the time of the apparent violations. OFAC considered the following as mitigating factors when determining the settlement amount: (i) limited harm was inflicted on U.S. sanctions program objectives because OFAC likely would have granted the company a license to export the medical products to Iran, had the company sought permission to do so; (ii) the company had no prior OFAC sanctions history; (iii) the company took remedial steps, such as establishing an OFAC compliance program; and (iv) the company “cooperated with OFAC’s investigation and agreed to toll the statute of limitations for a total of 513 days.”
OFAC Updates Iran-Related FAQs
On June 8, OFAC updated its Frequently Asked Questions (FAQs) Relating to the Lifting of Certain U.S. Sanctions Under the Joint Comprehensive Plan of Action (JCPOA). In addition to adding nine FAQs related to Foreign Entities Owned or Controlled by U.S. Persons (see, K.14 through K.22), OFAC added two FAQs, C.15 and C.16, regarding Financial and Banking Measures. Specifically, C.15 clarifies that U.S. financial institutions “can transact with, including by opening or maintaining correspondent accounts for, non-U.S., non-Iranian financial institutions that maintain correspondent banking relationships or otherwise transact with Iranian financial institutions that are not on the SDN List.” Non-U.S. financial institutions remain prohibited from routing Iran-related transactions through U.S. financial institutions or involve U.S. persons in such transactions, unless the transactions are exempt from regulation or licensed by OFAC. FAQ C.16 addresses whether or not a non-U.S., non-Iranian entity may engage in transactions with Iranian persons not on the SDN List if one or more U.S. persons serve on the non-Iranian entity’s Board of Directors or senior managers. While the presence of one or more U.S. persons on the Board of Directors or serving as a senior manager does not, according to C.16, necessarily preclude the entity from transacting with Iranian persons not on the SDN List, OFAC stresses that “U.S. persons must be walled off or “ring-fenced” from Iran-related business.” OFAC recommended that non-U.S., non-Iranian entities consider implementing broad recusal policies to wall off U.S. persons for the institution’s Iran-related business.
OFAC Amends Burmese Sanctions Regulations
On May 17, OFAC amended the Burmese Sanctions Regulations, 31 C.F.R. part 537 by adding a general license to authorize most transactions related to U.S. persons residing in Burma that are otherwise prohibited by the Regulations, including paying rent and purchasing goods and services for personal use. In addition, the amendments add general licenses to (i) extend indefinitely General License 20, which authorizes transactions “ordinarily incident to exports to or from Burma that are otherwise prohibited involving an individual or company that is designated or otherwise blocked by OFAC’s sanctions”; and (ii) support trade-related transactions by permitting certain transactions incident to the movement of goods within Burma. OFAC also updated an existing general license to authorize most banking services involving Innwa Bank and Myawaddy Bank (two currently designated financial institutions in Burma) and terminated sanctions on Myanma Economic Bank, Myanmar Foreign Trade Bank, and Myanma Investment and Commercial Bank, which, taken together, authorizes “most transactions involving all Burmese financial institutions.”
OFAC Issues Hizballah Financial Sanctions Regulations
On April 15, OFAC issued new regulations to implement the Hizballah International Financing Prevention Act of 2015. The regulations authorize the Secretary of the Treasury to prohibit U.S. financial institutions from opening or maintaining correspondent or payable through accounts, or to impose strict conditions on the opening or maintenance of such accounts, for foreign financial institutions determined to knowingly: (i) facilitate significant transactions for or on behalf of Hizballah or any person whose property or interests in property are blocked due to a connection with Hizballah; (ii) engage in money laundering to carry out such transactions; or (iii) facilitate or provide significant financial services in relation to transactions described in (i) and (ii). OFAC will publish the names of foreign financial institutions sanctioned under the Hizballah Financial Sanctions Regulations in the Federal Register, and include them in the Hizballah Financial Sanctions Regulations List, a new list maintained on OFAC’s website. The regulations took effect immediately upon issuance.