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  • Korean bank settles investigation into Iran transfers; resolves BSA/AML violations allegations

    Financial Crimes

    On April 20, the U.S. Attorney for the Southern District of New York and the New York attorney general announced that a Korean bank will pay $51 million in penalties to resolve a six-year investigation into the bank’s transfer of more than $1 billion to Iranian entities in violation of U.S. economic sanctions. According to the U.S. Attorney’s press release and deferred prosecution agreement and statement of facts (as well as a press release from the state attorney general), the bank violated the Bank Secrecy Act (BSA) by “willfully failing to establish, implement, and maintain an adequate anti-money laundering (‘AML’) program” at its New York branch—even though its compliance officer repeatedly asked it to do so—which led to the illegal transfer of approximately $1 billion in transactions to Iran in violation of the International Emergency Economic Powers Act. According to the government, the bank’s lack of an effective AML program resulted in its failure to detect and report $10 million in payments through the bank and other U.S. financial institutions from Korean entities to Iranian entities, as well as its failure to “report the balance of the $1 billion of such sanctioned transactions” between the parties. Furthermore, the bank also failed to self-report to the U.S. Treasury Department’s Office of Foreign Assets Control its wrongdoing in a timely manner or its willful violations of the BSA prior to the investigation. Under the terms of the deferred prosecution agreement, the bank will pay $51 million through a civil forfeiture action, half of which will go to the United States Victims of State Sponsored Terrorism Fund, and will undergo regular reviews of its AML and sanctions compliance programs.

    The bank also reached a separate agreement with NYDFS for violating state regulations, under which it will pay an additional $35 million penalty for violations of BSA/AML laws. Among other things, NYDFS found that the compliance program of the bank’s New York branch failed to achieve satisfactory levels until its 2019 examination. “While the department applauds the bank for its ultimate efforts after eight examination cycles of noncompliance, one positive examination report does not equate to a sustainable, safe and sound financial institution,” NYDFS said in its consent order. Under the terms of the order, the bank is required to revise its BSA/AML compliance program and enhance its customer due diligence program to ensure compliance with relevant state laws and regulations. NYDFS acknowledged the bank’s substantial cooperation in the matter, including remediating identified shortcomings.

    Financial Crimes DOJ State Attorney General NYDFS OFAC Department of Treasury Settlement Of Interest to Non-US Persons Korea Anti-Money Laundering Bank Secrecy Act

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  • OFAC guidance addresses Covid-19 humanitarian assistance and trade

    Federal Issues

    On April 16, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) published a Fact Sheet providing guidance to ensure humanitarian-related trade and assistance reaches at-risk populations through legitimate and transparent channels during the global Covid-19 pandemic. Specifically, the Fact Sheet highlights the most pertinent exemptions, exceptions, and authorizations for humanitarian assistance and trade under the IranVenezuelaNorth KoreaSyriaCuba, and Ukraine/Russia-related​ sanctions programs. OFAC notes, however, that under certain sanctions program, entities may be required to obtain separate authorization from other U.S. government agencies. The Fact Sheet also provides guidance for persons seeking to export personal protective equipment from the U.S. Additional questions regarding the scope or applicability of any humanitarian-related authorizations can be directed to OFAC’s Sanction Compliance and Evaluation Division.

    Federal Issues Financial Crimes Department of Treasury OFAC Covid-19 Of Interest to Non-US Persons Sanctions

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  • District court denies request to lift OFAC sanctions despite EU decision

    Courts

    On March 31, the U.S. District Court for the District of Columbia granted the Treasury Department’s Office of Foreign Assets Control’s (OFAC) motion to dismiss and denied two Iranian corporations’ (plaintiffs) cross-motion for summary judgment. According to the opinion, the plaintiffs requested to be delisted from OFAC’s Specially Designated Nationals and Blocked Persons List (SDN List) following the Court of Justice of the European Union’s decision in 2013 to lift its own sanctions, which were, according to the plaintiffs, “the basis for OFAC including [the plaintiffs] in its SDN list in the first place.” The plaintiffs were added to the SDN List in 2011 after OFAC allegedly determined that they had assisted certain U.S. and United Nations-sanctioned Iranian companies in procuring goods for uranium enrichment activities. OFAC denied the plaintiffs’ request to be delisted in 2018, causing the plaintiffs to file a complaint seeking to remove the sanctions or “cause OFAC to request the information needed to remove [the plaintiffs] from the SDN List,” citing violations of their rights under the U.S. Constitution and the Administrative Procedure Act. Among other things, the plaintiffs argued that OFAC’s decision to reject the request for delisting was based on “undisclosed/secret information,” and further, OFAC “never provided any evidence to substantiate the[] allegations” that the plaintiffs had worked with other OFAC-sanctioned Iranian firms. Moreover, the plaintiffs contended that OFAC violated their “procedural and substantive due process rights because it failed to provide [the plaintiffs] notice and opportunity to be heard before designating [them] as an SDN.”

    The court, however, found among other things that OFAC’s actions were not “arbitrary or capricious,” stating that while OFAC considered classified evidence of the plaintiffs’ involvement, it also provided unclassified summaries to the plaintiffs. “In denying [the plaintiffs’] request for removal, OFAC requested and reviewed information provided by [the plaintiffs], and it responded to [the plaintiffs’] arguments for reconsideration,” the court stated, noting that OFAC ultimately concluded that the plaintiffs failed to submit credible arguments or evidence “establishing that an insufficient basis exists for the company’s designation.” In addition, the court rejected the plaintiffs’ Fifth Amendment argument, stating that the constitutional claims fail because the “Supreme Court has long held that non-resident aliens without substantial connections to the United States are not entitled to Fifth Amendment protections.”

    Courts OFAC Department of Treasury Sanctions Of Interest to Non-US Persons Iran Administrative Procedures Act Due Process

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  • OFAC sanctions front company network for providing financial support to Islamic Revolutionary Guards

    Financial Crimes

    On March 26, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13224 against 20 Iran- and Iraq-based front companies and individuals for providing financial support to the Islamic Revolutionary Guards Corps-Qods Force, as well as certain Iranian-backed terrorist militias in Iraq. Among other activities, OFAC alleged that the designated companies and individuals laundered money through Iraqi front companies, sold Iranian oil to the Syrian regime, and smuggled weapons to Iraq and Yemen. Pursuant to the sanctions, “all property and interests in property of these persons that are in or come within the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC.” OFAC noted that its regulations “generally prohibit” U.S. persons from participating in transactions with the designated persons and warned foreign financial institutions that if they knowingly conduct or facilitate significant transactions for any of the designated persons, they may be “subject to U.S. correspondent account or payable-through account sanctions.”

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

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  • OFAC targets companies for facilitating Iranian petroleum products

    Financial Crimes

    On March 19, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13382 against five United Arab Emirates-based companies for facilitating the Iranian regime’s petroleum and petrochemical sales, which helps to finance Iran’s Islamic Revolutionary Guard Corps-Qods Force. According to OFAC, the sanctions follow similar designations of key revenue sources (covered by InfoBytes here and here). As a result, all property and interests in property belonging to the identified entities subject to U.S. jurisdiction are blocked, and “U.S. persons are generally prohibited from transacting with them.” Moreover, OFAC warned that “foreign financial institutions that knowingly facilitate significant transactions for, or persons that provide material or certain other support to, the persons designated today risk exposure to sanctions that could sever their access to the U.S. financial system or block their property and interests in property under U.S. jurisdiction.”

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

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  • Foreign financial institutions should conduct enhanced due diligence when facilitating humanitarian trade with Iran

    Financial Crimes

    On February 27, the U.S. Treasury Department announced the finalization of terms to the Swiss Humanitarian Trade Arrangement (SHTA) between the U.S. and Swiss governments in order to increase the transparency of humanitarian trade with Iran and help safeguard against “the Iranian regime’s diversion of humanitarian trade for malign purposes.” According to Treasury, “the SHTA presents a voluntary option for facilitating payment for exports of agricultural commodities, food, medicine, and medical devices to Iran in a manner that ensures the utmost transparency. Under the SHTA, participating financial institutions commit to conducting enhanced due diligence to ensure that humanitarian goods reach the people of Iran and are not misused by the Iranian regime.” Foreign governments and foreign financial institutions interested in establishing humanitarian mechanisms consistent with guidance published last October (covered by InfoBytes here) are instructed to reach out to Treasury’s Office of Foreign Assets Control (OFAC) for additional information or to request evaluation of a proposed framework. Foreign governments and financial institutions are also reminded to carefully consider the due diligence and reporting expectations outlined in the guidance.

    In conjunction with the finalization of the SHTA, OFAC issued General License (GL) 8, titled “Authorizing Certain Humanitarian Trade Transactions Involving the Central bank of Iran,” as well as related FAQs. GL 8 authorizes certain transactions and activities otherwise prohibited under the Global Terrorism Sanctions Regulations or the Iranian Transactions and Sanctions Regulations.

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

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  • Venezuela’s state-owned airline subject to OFAC sanctions

    Financial Crimes

    On February 7, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced that it identified a previously blocked state-owned Venezuelan airline and its fleet of aircraft pursuant to Executive Order (E.O.) 13884. The entities—subject to sanctions under E.O. 13884, which blocks property of the Venezuelan government—have been added to OFAC’s Specially Designated Nationals (SDN) List. According to OFAC’s press release, the commercial airline and its fleet have been used by Venezuela’s illegitimate government “to promote its own political agenda, including shuttling regime officials to countries such as North Korea, Cuba, and Iran.” OFAC observed that Venezuelan citizens may still travel by air on a number of other airlines that provide domestic service as well as service to and from Venezuela. OFAC also reiterated that its “regulations generally prohibit all transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of blocked persons.”

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

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  • Iranian company employee charged in $115 million international bank fraud scheme

    Financial Crimes

    On January 31, the U.S. Attorney’s Office for the Southern District of New York announced charges against an employee (defendant) of an Iranian company for bank fraud, conspiracy to commit bank fraud, and for making false statements to federal agents regarding financial transactions made through U.S. banks to benefit Iranian entities and individuals. According to the indictment, an agreement between the Iranian government and the Venezuelan government resulted in a construction contract for housing units in Venezuela where an Iranian company would construct the units and be paid with money funneled through U.S. banks by a Venezuelan state-owned company subsidiary. The defendant was purportedly part of a committee formed to guide the project. In coordination with other individuals, the defendant allegedly directed money from the Venezuelan company to the Iranian company through bank accounts—set up to hide the transactions from U.S. banks—in Switzerland. The indictment charges that, among other things, the defendant “knowingly and willfully” conspired with others to commit bank fraud against an FDIC-insured institution by directing the Venezuelan company to route $115 million in payments for the Iranian company to the Swiss bank account through correspondent U.S. banks in New York. Additionally, when the defendant was interviewed by federal agents, he “knowingly and willfully” concealed the scheme and made materially false statements about his knowledge of the applicability of sanctions against Iran. The indictment seeks forfeiture of any proceeds or property obtained by the defendant in the course of the alleged offenses.

    Financial Crimes DOJ Iran Venezuela Combating the Financing of Terrorism Of Interest to Non-US Persons OFAC Sanctions Fraud FDIC

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  • OFAC sanctions network for purchasing Iranian petroleum products

    Financial Crimes

    On January 23, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced that it took action against four petroleum products companies (network) designated pursuant to Executive Order (E.O.) 13846 for making payments to “an entity instrumental in Iran’s petroleum and petrochemical industries, which helps to finance Iran’s Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF) and its terrorist proxies.” The Iranian entity is on the List of Specially Designated Nationals and Blocked Persons and its property is blocked in conformance with E.O. 13599. According to OFAC, the network transferred payments to the Iranian entity for petroleum exports and “worked to conceal the Iranian origin of these products.” Among other things, these sanctions prohibit foreign financial institutions from “knowingly facilitat[ing] transactions for, or persons that provide material or certain other support to,” the designated petroleum products broker. See the new Iran-related designations here.

    Financial Crimes Department of Treasury Iran Combating the Financing of Terrorism Of Interest to Non-US Persons OFAC Sanctions

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  • OFAC clarifies wind-down period for Iran transactions

    Financial Crimes

    On January 16, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced the issuance of Iran-related Frequently Asked Question (FAQ) 816, which addresses the question, “Is there a wind-down period for Executive Order [(E.O.)] 13902?” (previously covered in InfoBytes here). According to the FAQ, individuals and entities involved in activities that qualify as sanctionable under E.O. 13902, which include activities dealing with the mining, construction, manufacturing and textiles industries in Iran, should wind down those transactions within 90 days after the E.O. was issued. OFAC stresses that new engagements entered into with the specified Iranian sectors on or after January 10 will not be considered wind-down activities. These new engagements may be sanctionable during the wind-down period, even if the new engagements commence prior to the end of the 90-day wind-down period, which expires on April 9.

    Financial Crimes Department of Treasury Iran Combating the Financing of Terrorism Of Interest to Non-US Persons OFAC Sanctions

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