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  • OFAC settles with travel insurance companies

    Financial Crimes

    On December 9, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a settlement with a U.S.-based property and casualty company for 6,474 alleged violations of the Cuban Assets Control Regulations (CACR). According to OFAC, between August 2010 and January 2015, the company’s Canadian branch provided travel insurance policies to Canadian citizens traveling to Cuba, and continued to do so even though the company knew early on that that policies were being issued related to travel to Cuba but did not investigate it until 2014. In arriving at the settlement amount, OFAC considered various mitigating factors, including the fact that the company voluntarily self-disclosed the issue to OFAC, and that the company enhanced its OFAC compliance. OFAC also considered various aggravating factors, including that the company had knowledge of the violations as early as 2010, and that the travel policies “provided economic benefit to Cuba.”

    Also on December 9, OFAC announced another settlement, this time with a Swiss worldwide insurance and reinsurance company, which formerly was a subsidiary of a U.S. company. The settlement resolves potential civil liability for 20,291 alleged violations of the CACR between January 2010 and December 2014 for issuing insurance policies for Cuba-related travel, because the policies, though global in scope, did not include an exclusionary clause “for risks that would violate U.S. sanctions law.” OFAC considered a number of mitigating factors in determining the settlement amount, including the fact that the company voluntarily self-disclosed the alleged violations and represented that it conducted a risk assessment of its offices and developed compliance policies and procedures. Additionally, OFAC considered several aggravating factors, including that the company issued global policies that did not contain exclusionary clauses, the activity resulted from a pattern or practice spanning several years, and the company is a large and commercially sophisticated financial institution.

    Financial Crimes OFAC Department of Treasury Insurance Of Interest to Non-US Persons Cuba Sanctions

  • OFAC settles with multinational corporation for Cuban sanctions violations

    Financial Crimes

    On October 1, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a settlement of more than $2.7 million with a multinational corporation, on behalf of three subsidiaries, to resolve potential civil liability for 289 alleged violations of the Cuban Assets Control Regulations (CACR). The settlement resolves allegations that between December 2010 and February 2014, the subsidiaries accepted payments on 289 occasions from an entity identified on OFAC’s List of Specially Designated Nationals and Blocked Persons “for goods and services provided to a Canadian customer.” OFAC alleged that although the subsidiaries negotiated and entered into contracts with the Canadian customer—and invoices were sent to the customer—the designated entity was approved as a third-party payer and paid more than 65 percent of the total transactions. OFAC asserted that the subsidiaries failed to undertake sufficient diligence into the activities of the Canadian customer, and noted that the sanctions screening software used by the subsidiaries was set to screen for only one version of the designated entity’s name.

    In arriving at the settlement amount, OFAC considered various mitigating factors including that (i) OFAC has not issued a violation against the subsidiaries in the five years preceding the earliest date of the transactions at issue; (ii) the corporation identified the alleged violations by testing and auditing its compliance program, and implemented several remedial measures in response to the alleged violations, which included improvements to its compliance program; and (iii) the corporation entered into, and agreed to extend, multiple statute of limitations tolling agreements.

    OFAC also considered various aggravating factors, including that (i) the subsidiaries “failed to take proper or reasonable care with respect to their U.S. economic sanctions obligations”; (ii) the subsidiaries’ actions allowed a large volume of high-value transactions to be conducted with the designated entity, causing “substantial harm” to the CACR objectives; and (iii) the corporation’s submissions to OFAC “leave substantial uncertainty about the totality of the benefits conferred” to the designated entity through the Canadian customer.

    Financial Crimes OFAC Settlement Cuba Of Interest to Non-US Persons

  • OFAC strengthens Cuba sanctions, revokes “U-turn” authorization

    Financial Crimes

    On September 6, the U.S. Treasury Department's Office of Foreign Assets Control (OFAC) announced amendments effective October 9 to the Cuban Assets Control Regulations (CACR), which implement changes in accordance with President Trump’s 2017 National Security Presidential Memorandum “Strengthening the Policy of the United States Towards Cuba.” Key elements of the changes include:

    • Lowering the value of permitted remittances to Cuba. Family remittances will be capped at $1,000 U.S. dollars per quarter that a single remitter can send to an individual Cuban national. Remittances to close family members of prohibited Cuban officials and members of the Cuban Communist Party will be forbidden. While the amendments rescind the authorization for donative remittances, they add a new provision authorizing remittances to certain individuals and independent non-governmental organizations in Cuba “to support the operation of economic activity . . . independent of government control.”
    • “U-turn” transactions. The amended sanctions revoke what is commonly referred to as the Cuban “U-turn” authorization. Effective next month, financial institutions subject to U.S. jurisdiction will no longer be authorized to process Cuba-related payments that originate and terminate outside the United States. However, financial institutions subject to U.S. jurisdiction will be permitted to reject such transactions.

    An updated list of FAQs related to the CACR has also been published, as well as guidance on recent changes to the sanctions.

    The changes will have the greatest impact on U.S. banks offering foreign correspondent banking services and foreign banks utilizing those services, increasing compliance risks for both. They also shut a significant window to the U.S. financial system that foreign persons conducting international trade with Cuba previously enjoyed.

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

  • U.K. subsea services company and subsidiaries to pay $440,000 for Cuban and Iranian sanctions violations

    Financial Crimes

    On April 11, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced two settlements totaling more than $440,000 with a U.K. subsea services company and certain subsidiaries that operate in the oil and gas industry. The first settlement, for $227,500, resolves potential civil liability for seven alleged violations of the Cuban Assets Control Regulations (CACR). According to OFAC, two of the company's Malaysian affiliates produced analytical reports and conducted workshops for oil well drilling projects in Cuban territorial waters related to projects managed by companies including Venezuela’s state-owned oil company, which was previously designated by OFAC in January (see InfoBytes coverage here). OFAC considered various aggravating factors—including that the alleged violations constitute an egregious case—and noted that the company/subsidiaries “willfully violated U.S. sanctions laws and regulations when they knowingly dealt with Cuban interests despite prior notification of their unlawfulness.” OFAC also noted that senior managers “deliberately concealed their dealings with Cuba on multiple occasions.” OFAC considered numerous mitigating factors, including the company/subsidiaries’ voluntarily self-disclosure of the apparent violations and remedial efforts taken to avoid similar violations from occurring in the future.

    The same day OFAC announced a second settlement, this time for $213,866, which resolves potential civil liability for 13 alleged CACR violations. The settlement also resolves three alleged violations of the Iranian Transactions and Sanctions Regulations (ITSR) by the company’s U.S.-based parent company. According to OFAC, the company issued sanctions compliance guidance to all of its subsidiaries with instructions that transactions with Cuba and Iran (including indirect third parties) were prohibited. However, certain subsidiaries disregarded the guidance and allegedly engaged in transactions within Cuban and Iranian territorial waters. In reaching the settlement amount, OFAC determined, among other things, that (i) the company voluntarily self-disclosed the apparent violations; (ii) the alleged violations constitute a non-egregious case; (iii) the subsidiaries have confirmed the conduct has been terminated; and (iv) remedial efforts have been undertaken to minimize the risk of similar violations from occurring in the future.

    Financial Crimes Of Interest to Non-US Persons OFAC Department of Treasury Settlement Cuba Iran Sanctions

  • OFAC reaches settlement with non-U.S. chemical manufacturer resolving Cuban sanctions violations

    Financial Crimes

    On February 14, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $5.5 million settlement with a German chemical manufacturer for 304 alleged violations of the Cuban Assets Control Regulations (CACR). According to OFAC, the settlement resolves the manufacturer’s alleged involvement in fulfilling Cuban orders for chemical reagents on 304 invoices. Prior to and upon acquiring the manufacturer, an Illinois-based company sent warnings to the manufacturer that all Cuban transactions must be ceased, along with guidelines for complying with U.S. sanctions. OFAC noted, however, that the manufacturer designed and implemented a system to conceal its on-going transactions, engaged an external logistics company to handle shipping documents and declarations, and conducted training sessions for staff to ensure the system was concealed from the Illinois company.

    In arriving at the settlement amount, OFAC considered the following as aggravating factors: (i) the willful conduct of the manufacturer’s management; (ii) the utilization of written procedures to “engage in a pattern of conduct in violation of the CACR”; (iii) the number of transactions over an extended period of time “caused significant harm to the sanctions program objective of maintaining a comprehensive embargo on Cuba”; and (iv) the sophistication and revenue stream of the manufacturer, and the fact that it is a subsidiary of a large, international company.

    OFAC also considered several mitigating factors, including the Illinois company’s cooperation with OFAC, voluntary self-disclosure, and execution of a tolling agreement on behalf of the manufacturer. OFAC further stressed the importance of implementing risk-based controls and due-diligence procedures to ensure subsidiaries comply with OFAC sanction obligations.

    Visit here for additional InfoBytes coverage on Cuban sanctions.

    Financial Crimes OFAC Department of Treasury Cuba Sanctions Of Interest to Non-US Persons Settlement

  • OFAC reaches settlement with national bank to resolve alleged non-egregious sanctions violations

    Financial Crimes

    On October 5, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced an approximate $5.3 million settlement with a national bank for alleged violations of the Cuban Assets Control Regulations, the Iranian Transactions and Sanctions Regulations, and the Weapons of Mass Destruction Proliferators Sanctions Regulations. According to OFAC, the settlement resolves the bank’s potential civil liability for, among other things, allegedly processing net settlement payments for bank clients between January 2008 and February 2012, for which only 0.14 percent were attributable to interests of non-U.S. person entity members that were at various times identified on OFAC’s Specially Designated Nationals List, sanctioned, or located in countries subject to OFAC’s sanctions programs.

    In arriving at the settlement amount, OFAC considered factors such as (i) prior to January 2012, the bank did not appear to have in place a process to independently assess participating member entities of the non-U.S. person entity for OFAC sanctions risk, despite allegedly receiving red flag notifications regarding OFAC-sanctioned members; (ii) staff members processing the net settlement transactions may have had actual knowledge of the members; and (iii) the bank is a large, commercially sophisticated financial institution.

    OFAC also considered numerous mitigating factors, including (i) managers and supervisors were not aware of the conduct; (ii) the total harm caused was “significantly less than the total value of the transactions”; (iii) the bank cooperated with the investigation and entered into a retroactive agreement to toll the statutes of limitations; and (iv) the bank has implemented several steps as part of its risk-based compliance program to prevent future violations. OFAC also noted that the bank voluntary disclosed the violations, and that the violations constitute a non-egregious case.

    Financial Crimes OFAC Sanctions Iran Settlement Cuba

  • OFAC Penalizes Credit Card Issuer for Violations of Cuban Assets Control Regulations

    Financial Crimes

    On November 17, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced that it had reached a $204,277 settlement with a U.S. financial institution for alleged violations of the Cuban Assets Control Regulations (CACR). The settlement involves actions taken by an international credit card company which, at the time of the apparent violations, was a wholly owned subsidiary of an entity that was itself 50 percent owned by the U.S. financial institution. According to the announcement, between 2009 and 2014, credit cards that the company issued to over 100 corporate customers were used to make purchases in Cuba or otherwise involved Cuba. OFAC asserts that the company failed to implement controls to prevent this even though it had policies and procedures in place to review transactions for compliance with CACR.

    In determining the settlement amount, OFAC considered that (i) employees within the company had reason to know of the conduct that led to the alleged violations; (ii) none of the entities involved appeared to appreciate the risk that the credit cards might be used in Cuba; (iii) at the time they occurred, the actions resulted in harm to the US sanctions program objectives; (iv) the U.S. financial institution is a large and sophisticated financial entity; and (v) during the investigation, the entities provided “verifiably inaccurate or incomplete, including material omissions.” OFAC also considered the fact that the entities voluntarily self-disclosed the alleged violations and the U.S. financial institution took “swift and appropriate remedial action” upon discovery.

    OFAC recently announced updates to CACR, covered by InfoBytes here.

    Financial Crimes OFAC Department of Treasury Enforcement Settlement Credit Cards Cuba

  • OFAC Announces Cuban Assets Control Regulations Updates; Releases New FAQs

    Financial Crimes

    On November 8, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced amendments to the Cuban Assets Control Regulations to implement changes related to certain financial transaction restrictions and economic activities. In accordance with the National Security Presidential Memorandum issued by President Trump on June 16, the amendments will, among other things, prohibit “persons subject to U.S. jurisdictions” from engaging in financial transactions with entities and subentities identified on the State Department’s Cuba Restricted List. This effort is intended to “channel economic activities away from the Cuban military, intelligence, and security services, while maintaining opportunities for Americans to engage in authorized travel to Cuba and support the private, small business sector in Cuba.” The amendments will take effect November 9. OFAC also released updated FAQs and a fact sheet to answer questions related to the amended regulations.

    Refer here, here, and here for InfoBytes coverage on OFAC settlements of alleged violations of the Cuban Assets Control Regulations.

    Financial Crimes OFAC Department of State Settlement International Cuba

  • OFAC Settles with International Insurance Group over Charges of Violating Sanctions Programs

    Financial Crimes

    On June 26, the Treasury’s Office of Foreign Asset Control (OFAC) reached a settlement with an international financial services and insurance company based in New York for alleged violations of OFAC sanctions programs. OFAC claimed that the company “issued policies and insurance certificates, and/or processed claims and other insurance-related transactions that conferred economic benefit to sanctioned countries or persons and undermined the policy objectives of several U.S. economic sanctions programs.” Specifically, OFAC maintained the company violated the following sanctions programs: (i) Iranian Transactions and Sanctions Regulations, 31 C.F.R. Part 560 (ITSR); (ii) Weapons of Mass Destruction Proliferators Sanctions Regulations, 31 C.F.R. Part 544 (WMDPSR); (iii) Sudanese Sanctions Regulations, 31 C.F.R. Part 538 (SSR); and (iv) Cuban Assets Control Regulations, 31 C.F.R. Part 515 (CACR). The settlement requires the company to pay $148,698 to settle the claims, which the company voluntarily self-disclosed to OFAC.

    For others to avoid these issues, OFAC suggested that “the best and most reliable approach for insuring global risks without violating U.S. sanctions law is to insert in global insurance policies an explicit exclusion for risks that would violate U.S. sanctions laws.”

    Financial Crimes Federal Issues OFAC Insurance Sanctions Risk Management Cuba Iran Sudan

  • OFAC Updates: New Sanction Designations and Additions to Specially Designated Nationals List

    Financial Crimes

    Recently, OFAC announced implementation of sanctions against several entities and individuals designated for, among others, materially assisting, sponsoring, or providing financial support to certain foreign entities. In addition, OFAC updated its list of Specially Designed Nations (SDN) and announced a settlement agreement with a Canadian-based motor vehicle finance company.

    North Korea Suppliers of Weapons Proliferation Programs. On June 1, OFAC announced it was taking action against six entities and three individuals in response to their involvement in North Korea’s continued efforts to develop weapons of mass destruction (WMD). The announcement targets the country’s military, nuclear, and WMD programs, in addition to its overseas financial operations. The sanctions prohibit any U.S. individual from dealing with the designees, and further states that “any property or interests in property of the designated persons in the possession or control of U.S. persons or within the United States must be blocked.” John E. Smith, the Director of OFAC, stated, “Treasury is working with our allies to counter networks that enable North Korea’s destabilizing activities, and we urge our partners to take parallel steps to cut off their funding sources.” These sanctions are in addition to those imposed earlier in April on eleven North Koreans and one associated entity (see previous InfoBytes coverage here).

    Iraq-Based Chemical Weapons Developers. On June 12, OFAC announced, for the first time, designations against individuals involved in the development of ISIS’ chemical weapons. The sanctions were pursuant to Executive Order 13224, which “provides a means by which to disrupt the financial support network for terrorists and terrorist organizations by authorizing the U.S. government to designate and block the assets of foreign individuals and entities that commit, or pose a significant risk of committing, acts of terrorism.” The property and interests in property of the two individuals identified in the designations, subject to U.S. jurisdiction, are blocked, and “U.S. persons are generally prohibited from engaging in transactions with them.”

    Settlement Agreement with Motor Vehicle Finance Company. On June 8, OFAC announced it had reached a settlement with a motor vehicle finance company as a result of transactions by its Canadian based subsidiary. The enforcement action claims the majority-owned subsidiary, which “specializes in various forms of financing in the [U.S.] for purchasers, lessees, and authorized independent [auto] dealers,”—between 2011 and 2014—allegedly violated 13 Cuban Assets Control Regulations by leasing vehicles to the Cuban Embassy in violation of OFAC’s Blocked Persons and SDN list, which prohibited transactions with Cuban government entities. The company voluntarily self-disclosed the alleged violations and agreed to remit $87,255 to settle its potential civil liability.

    Foreign Narcotics Kingpin Sanctions. On May 24 and 25, OFAC made additions to the SDN list, which designates individuals and companies who are prohibited from dealing with the U.S. and whose assets are blocked. Transactions are prohibited if they involve transferring, paying, exporting, or otherwise dealing in the property or interest in property of an entity or individual on the SDN list. Additions to the list were made under the Foreign Narcotics Kingpin Sanctions Regulations against several Mexican and Colombian individuals and entities.

    Financial Crimes Sanctions OFAC Department of Treasury Enforcement Auto Finance North Korea Iraq Cuba

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