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OFAC settles with money services business for Cuba sanctions violations
On January 3, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $91,172 settlement against a registered money services business for allegedly processing payment transactions for guests traveling to Cuba "for reasons outside of OFAC’s authorized categories” and failing to maintain certain required records associated with Cuba-related transactions. These actions, OFAC, stated, allegedly violated the Cuban Assets Control Regulations (CACR). According to OFAC’s web notice, as the company scaled up its traveler services in Cuba, its technology platforms were allegedly unable to manage the associated sanctions risks, which led to the alleged violations. Among other things, OFAC maintained that the company used a manual process to screen hosts and guests for potential sanctions issues until it began using a customized IP blocking system. Additionally, the company’s alleged recordkeeping violations were primarily attributed to technical defects involving an older version of the company’s mobile application that could be used for Cuba-related travel without “maintain[ing] complete functionality for [g]uests to make an attestation regarding their reason for travel to Cuba.”
In arriving at the settlement amount, OFAC considered various aggravating factors, including, among other things, that the company is a large, sophisticated U.S.-based technology company, and that its alleged violations followed a 2015 foreign policy change with respect to Cuba, as well as associated changes to the CACR, which maintained certain specified restrictions. OFAC also considered various mitigating factors, including that the company (i) did not receive a penalty notice or finding of violation in the past five years preceding the earliest transaction giving rise to this settlement; (ii) conducted a comprehensive review of its sanctions compliance program, voluntarily reported its findings to OFAC, and substantially cooperated with the investigation; and (iii) undertook significant remedial measures to ensure sanctions compliance.
OFAC sanctions Cuban officials
On August 20, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13818 against three Cuban individuals under the Global Magnitsky Human Rights Accountability Act. According to OFAC, this is the fourth round of sanctions since protests started in Cuba in July, as OFAC continues to impose sanctions on individuals and entities connected with actions to suppress peaceful, pro-democratic protests in Cuba (covered by InfoBytes here and 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 Cuban officials
On August 13, 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, this is the third round of sanctions since protests started in Cuba in July, as the Department continues to impose sanctions on individuals and entities connected with actions to suppress peaceful, pro-democratic protests in Cuba (covered by InfoBytes here and 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.”
Treasury issues Cuba joint fact sheet
On August 11, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) and Department of Commerce’s Bureau of Industry and Security (BIS) released a fact sheet to emphasize the U.S. government’s commitment to promoting the ability of the Cuban people “to seek, receive, and impart information” through access to the internet. According to OFAC, “[t]he fact sheet highlights the most relevant exemptions and authorizations pertinent to supporting the Cuban people through the provision of certain internet and related telecommunications services.” The fact sheet also notes that though most transactions between persons subject to U.S. jurisdiction and Cuba are prohibited under the current embargo, the U.S. government permits certain activities to support the Cuban people’s access to information on the internet. The relevant OFAC regulations can be found in the Cuban Assets Control Regulations, 31 C.F.R. part 515 and the relevant BIS regulations can be found in the Export Administration Regulations, 15 C.F.R. parts 730-774.
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.”
Digital payment solutions company settles with OFAC for $500k
On February 18, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $507,375 settlement with a Georgia-based payment processing solutions company for 2,102 apparent violations of multiple sanctions programs. According to OFAC’s web notice, between 2013 and 2018, the company—which offers solutions for merchants to accept digital currency as payment for goods and services—allegedly processed thousands of transactions on behalf of individuals located in sanctioned jurisdictions based on IP addresses and invoice information. Specifically, OFAC alleged that the company “received digital currency payments on behalf of its merchant customers from those merchants’ buyers who were located in sanctioned jurisdictions, converted the digital currency to fiat currency, and then related that currency to its merchants.” While OFAC noted that the company screened its direct merchants against its List of Specially Designated Nationals and Blocked Persons and conducted due diligence to ensure merchants were not located in a sanctioned jurisdiction, the company’s transaction review process allegedly failed to screen identification and location data for its merchants’ buyers, many of whom were located in Crimea, Cuba, North Korea, Iran, Sudan, and Syria. As a result, these buyers, OFAC claimed, were able to make purchases from merchants located in the U.S. and elsewhere using digital currency on the company’s platform in violation of an executive order and multiple sanctions regulations.
In arriving at the settlement amount, OFAC considered various aggravating factors, including that the company (i) “failed to exercise due caution or care for its sanctions compliance obligations” by allowing buyers in sanctioned jurisdictions to transact with merchants despite having “sufficient information to screen those customers”; and (ii) conveyed more than $128,000 in economic benefit to individuals in OFAC sanctioned jurisdictions.
OFAC also considered various mitigating factors, including that the company (i) had implemented certain sanctions compliance controls, including due diligence and sanctions screening; (ii) trained employees—including senior management—that signing up merchants from sanctioned jurisdictions or trading with sanctioned persons is prohibited; (iii) cooperated with OFAC’s investigation; and (iv) terminated the conduct leading to the apparent violations and undertook remedial measures to minimize the risk of similar violations from occurring in the future. The base civil monetary penalty applicable in this action is $2,255,000; however, the lower settlement amount reflects OFAC’s consideration of the general factors under the Economic Sanctions Enforcement Guidelines.
OFAC sanctions Cuban Ministry of the Interior for human rights abuse
On January 15, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against the Cuban Ministry of Interior and the Minister of Interior for his alleged connection to serious human rights abuses. According to OFAC, the sanctions are taken pursuant to Executive Order 13818, which implements the Global Magnitsky Human Rights Accountability Act and “targets perpetrators of serious human rights abuse and corruption.” As a result of the sanctions, all of the individual’s property and interests in property that are blocked pursuant to the Cuban Assets Control Regulations continue to be blocked, as well as any of the individual’s property and interests in property in the United States or possessed or controlled by U.S. persons. Additionally, OFAC regulations prohibit U.S. persons from participating in transactions with the individual unless exempt or otherwise authorized by an OFAC general or specific license.
OFAC settles with digital asset company over multiple sanctions violations
On December 30, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a nearly $100,000 settlement with a California-based digital asset security company for 183 apparent violations of multiple sanctions programs. According to OFAC, between March 2015 and December 2019, the company processed 183 digital currency transactions, totaling over $9,000, on behalf of individuals who were located in sanctioned jurisdictions, such as the Crimea region of Ukraine, Cuba, Iran, Sudan, and Syria. OFAC notes that, prior to April 2018, the company allowed users to open accounts by providing only a name and email address, and while it then amended its policies to require all new accountholders to verify the country in which they were located, it did not perform additional verification or diligence on their actual location.
In arriving at the settlement amount, OFAC considered various aggravating factors, including that the company (i) failed to implement appropriate, risk-based sanctions compliance controls; and (ii) had reason to know that some of its users were located in sanctioned jurisdictions based on users’ IP address data.
OFAC also considered various mitigating factors, such as (i) the company not having received a penalty notice from OFAC in the proceeding five years; (ii) the company cooperating with the investigation; and (iii) the company having undertaken remedial measures, including hiring a Chief Compliance Officer and implementing a new OFAC policy.
OFAC designates Cuban state-owned businesses for evading U.S. sanctions
On December 21, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to the Cuban Assets Control Regulations against three state-owned entities “controlled by the Cuban military with strategic roles in the Cuban economy.” According to OFAC, the entities are identified on OFAC’s List of Specially Designated Nationals and Blocked Persons, with two of the entities being designated for, among other things, using “their Panamanian incorporation to subvert international trade restrictions.” One of the sanctioned entities, OFAC notes, is a financial investment and remittance company “authorized by the Central Bank of Cuba to finance export operations, conduct financial leasing operations, and handle commercial distribution of remittance cards.” Find continuing InfoBytes coverage on the Cuban Assets Control Regulations here.
OFAC amends CACR to remove certain remittance-related general authorizations
On October 26, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a final rule amending the Cuban Assets Control Regulations (CACR) “to further implement portions of the President’s foreign policy toward Cuba to deny the Cuban government access to funds in connection with remittances to Cuba.” Among other things, the final rule amends several general licenses to remove any transactions that involve entities or subentities identified on the State Department’s Cuba Restricted List (CRL) from the scope of certain remittance-related general authorizations. According to OFAC, the CRL is a list of “entities and subentities under the control of, or acting for or on behalf of, the Cuban military, intelligence, or security services or personnel with which direct financial transactions would disproportionately benefit such services or personnel at the expense of the Cuban people or private enterprise in Cuba.” Additionally, the final rule also clarifies that transactions that relate to the collection, receipt or forwarding of remittances involving an identified entity or subentity are “not authorized as an ordinarily incident transaction where the terms of the general or specific license expressly exclude any such transactions.” In conjunction with the announcement of the final rule, OFAC also updated and issued several new Frequently Asked Questions. The final rule takes effect November 26, allowing for a 30-day implementation period in order to allow for technical implementation of the additional restrictions.