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OFAC sanctions individuals and entities connected to Russia’s corruption in Moldova
On October 26, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Orders 13818 and 14024 against nine individuals and 12 entities in an attempt to counter the Russian Federation’s “persistent malign influence campaigns and systemic corruption in Moldova.” Included among the sanctioned persons are “oligarchs widely recognized for capturing and corrupting Moldova’s political and economic institutions and those acting as instruments of Russia’s global influence campaign, which seeks to manipulate the United States and its allies and partners, including Moldova and Ukraine,” OFAC said in the announcement. Notably, the designations also include a former Moldovan government official “who engaged in state capture by exerting control over and manipulating key sectors of Moldova’s government, including the law enforcement, electoral, and judicial sectors.” As a result of the sanctions, all property and interests in property belonging to the sanctioned persons that are in the U.S. or in the possession or control of U.S. persons are blocked and must be reported to OFAC. Further, “any entities that are owned, directly or indirectly, individually or in the aggregate, 50 percent or more by one or more blocked persons are also blocked.” U.S. persons are prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons, unless exempt or authorized by a general or specific OFAC license. Additionally, OFAC warned that financial institutions and other persons that engage in certain transactions or activities with the sanctioned persons may themselves be exposed to sanctions or be subject to an enforcement action.
OFAC sanctions Russian military technology procurement network
On October 19, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 14024 against a Russian military technology procurement network for allegedly procuring military and sensitive dual-use technologies from U.S. manufacturers and supplying them to Russian end-users. The individual and his two companies are designated as part of a joint action with the DOJ and FBI and highlights the U.S. government’s on-going “efforts to hinder Russia’s ability to wage its war of aggression in Ukraine, including by holding accountable those who support Russia’s military by disrupting its illicit defense and technology procurement networks around the world.” The action builds upon an October 14 alert issued by OFAC and the Department of Commerce’s Bureau of Industry and Security and the Department of State, which details the impact of international sanctions and export controls (covered by InfoBytes here). The alert followed the convergence of top officials representing ministries of finance and other government agencies from 33 countries who met to discuss the effects of international sanctions and export controls on Russia’s military-industrial complex and critical defense supply chains.
As a result of the sanctions, all property and interests in property belonging to the sanctioned persons that are in the U.S. or in the possession or control of U.S. persons are blocked and must be reported to OFAC. Further, “any entities that are owned, directly or indirectly, 50 percent or more in the aggregate by one or more of such persons are also blocked.” U.S. persons are prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons, unless exempt or authorized by a general or specific OFAC license.
The same day, the DOJ (with the support of the Department’s Task Force KleptoCapture) unsealed indictments against nearly a dozen individuals and several entities, including the sanctioned Russian national and his two companies, accused of scheming to export military technologies to Russia.
OFAC issues Russian sanctions alert
On October 14, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) published a Russia-related alert, Impact of Sanctions and Export Controls on Russia’s Military-Industrial Complex. The alert, issued by OFAC, the Department of Commerce’s Bureau of Industry and Security, and the Department of State, is intended to inform the public of the impact of sanctions and export control restrictions targeting Russia’s defense capabilities and warn of the risks of supporting Russia’s military-industrial complex. The alert also, among other things, outlined efforts taken by OFAC and the State Department involving Russia since February 2022, such as issuing approximately 1,500 new and 750 amended sanctions listings. The alert also described the strategic intent and impact of actions, highlighting efforts “to degrade Russia’s ability to wage its unjust war against Ukraine and prevent Russia from projecting military force beyond its borders.” OFAC also published new Russia-related Frequently Asked Question (FAQ) 1092, which clarifies that “non-U.S. companies risk exposure to sanctions for providing ammunition or other military goods to Russia or for supporting Russia’s military-industrial complex.”
OFAC, FinCEN take action against virtual currency exchange
On October 11, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), together with the Financial Crimes Enforcement Network (FinCEN), announced two settlements for more than $24 million and $29 million, respectively, with a Washington state-based virtual currency exchange. According to OFAC’s announcement, this is the agency’s largest virtual currency enforcement action to date, and represent the first parallel actions taken by FinCEN and OFAC in this space.
OFAC settlement. OFAC’s web notice stated that between March 28, 2014 and December 31, 2017, the exchange operated 1,730 accounts that processed 116,421 virtual currency-related transactions totaling roughly $263,451,600.13, in apparent violation of OFAC sanctions against Cuba, Ukraine, Iran, Sudan, and Syria. Specifically, due to alleged deficiencies in the exchange’s sanctions compliance procedures, the exchange failed to prevent persons located in the sanctioned jurisdictions from using its platform to engage in more than $263,000,000 worth of virtual currency-related transactions. OFAC claimed that while the IP addresses and physical address information collected on each customer at onboarding should have given the exchange reason to know that the persons were located in jurisdictions subject to sanctions, the exchange did not “screen customers or transactions for a nexus to sanctioned jurisdictions.” Rather, the exchange only screened transactions for hits against lists including OFAC’s List of Specially Designated Nationals and Blocked Persons. In arriving at the settlement amount of $24,280,829.20, OFAC considered various aggravating factors, including that the exchange did not exercise due caution or care for its sanctions compliance obligations and conveyed economic benefit to persons located in jurisdictions subject to OFAC sanctions, thus causing harm to the integrity of multiple sanctions programs. OFAC also considered various mitigating factors, including that the exchange provided substantial cooperation throughout the investigation, most of the transactions were for a relatively small amount and represented a small percentage when compared to the exchange’s annual volume of transactions, and the exchange has undertaken remedial measures intended to minimize the risk of recurrence of similar conduct.
FinCEN settlement. According to FinCEN’s press release, an investigation found that from February 2014 through December 2018, the exchange failed to maintain an effective AML program, resulting in its inability to appropriately address risks associated with its products and services, including anonymity-enhanced cryptocurrencies. The exchange also failed to effectively monitor transactions on its trading platform, and relied “on as few as two employees with minimal anti-money laundering training and experience to manually review all of the transactions for suspicious activity, which at times were over 20,000 per day.” FinCEN claimed that the exchange conducted more than 116,000 transactions valued at over $260 million with persons located in jurisdictions subject to OFAC sanctions, including those operating in Iran, Cuba, Sudan, Syria, and the Crimea region of Ukraine, and failed to file suspicious activity reports (SARs) between February 2014 and May 2017. The exchange also “failed to file SARs on a significant number of transactions involving sanctioned jurisdictions, including the processing of over 200 transactions that involved $140,000 worth of virtual assets—nearly 100 times larger than the average withdrawal or deposit on the Bittrex platform—and 22 transactions involving over $1 million worth of virtual assets,” FinCEN said in its announcement. Under the terms of the consent order, the exchange—which admitted to willfully violating the Bank Secrecy Act (BSA) and its implementing regulations—will pay a $29,280,829.20 civil money penalty. FinCEN stated it will credit the $24,280,829.20 the exchange has agreed to pay for the OFAC violations.
During remarks delivered at the Association of Certified Anti-Money Laundering Specialists, Under Secretary for Terrorism and Financial Intelligence Brian Nelson discussed, among other topics, Treasury’s efforts to counter illicit finance. Nelson highlighted the aforementioned settlements, stressing that failing to comply with BSA/AML requirements and SARs filing obligations “are not something that companies focused on growth can simply put off to a later day.” He also emphasized that Treasury will continue to strengthen ties with interagency partners and international counterparts to identify and pursue potential violations.
OFAC announces Russian sanctions, REPO provides update
On September 30, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), together with the Departments of Commerce and State, announced sanctions against 14 persons in Russia’s military-industrial complex, including two international suppliers, three key leaders of Russia’s financial infrastructure, and immediate family members of certain senior Russian officials, as well as 278 members of Russia’s legislature, for enabling Russia’s referenda and effort to annex Ukraine. As a result of the sanctions, all property and interests in property belonging to the sanctioned targets that are in the U.S. or in the possession or control of U.S. persons are blocked and must be reported to OFAC. Further, “any entities that are owned 50 percent or more by one or more designated persons” are blocked. U.S. persons are prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons, unless exempt or authorized by a general or specific OFAC license. Additionally, OFAC issued FAQ 1091 to provide new guidance warning of the heightened sanctions risk that international actors outside of Russia would face for providing political or economic support to Russia as a result of its illegal attempts to change the status of Ukrainian territory. According to OFAC, the FAQ emphasizes that the U.S. “is prepared to more aggressively use its existing sanctions authorities, including E.O. 13660, E.O. 14024, and E.O. 14065, to target persons—inside or outside Russia—whose activities may constitute material assistance, sponsorship, or provision of financial, material, or technological support for, or goods or services (together ‘material support’) to or in support of persons sanctioned pursuant to those Executive orders, or sanctionable activity related to Russia’s sham referenda, purported annexation, and continued occupation of the Kherson, Zaporizhzhya, Donetsk, and Luhansk regions of Ukraine.” OFAC noted, however, that it “will generally not impose sanctions on non-U.S. persons that engage in transactions that would be authorized for U.S. persons, such as certain energy-related transactions.”
The same day, Treasury and the DOJ announced that the Russian Elites, Proxies, and Oligarchs (REPO) Task Force Deputies convened to accelerate oligarch asset forfeiture efforts in response to Russia’s war in Ukraine. As previously covered by InfoBytes, REPO is a multilateral task force that was formed in February 2022 and is “committed to using their respective authorities in concert with other appropriate ministries to collect and share information to take concrete actions, including sanctions, asset freezing, and civil and criminal asset seizure, and criminal prosecution.” Representatives from Australia, Canada, Germany, France, Italy, Japan, the UK, the European Commission, and the U.S. discussed continuing initiatives “to tailor already robust asset forfeiture tools and maximize the impact of our joint work on Russian elites and their cronies” for their involvement with the war in Ukraine. REPO further noted that their steps “immobilized Russian assets as one of several means to induce Russia to come into compliance with its international law obligations, including the obligation to pay reparations.”
OFAC announces settlement with electronic rewards company
On September 30, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $116,000 settlement with a Washington-based company that supplies and distributes electronic rewards, for allegedly processing transactions in violation of multiple U.S sanctions regulations. According to OFAC’s notice, the company allegedly “transmitted 27,720 merchant gift cards and promotional debit cards, totaling $386,828.65, to individuals with email or IP addresses associated with Cuba, Iran, Syria, North Korea, or the Crimea region of Ukraine.” In arriving at the settlement amount, OFAC considered various aggravating factors, including that the company (i) “failed to impose risk-based geolocation rules using tools at its disposal to identify the location of its reward recipients, despite having reason to know that it was transmitting rewards to recipients in sanctioned jurisdictions”; and (ii) “conferred up to $386,828.65 in economic benefit to jurisdictions and regions subject to sanctions.” OFAC also considered various mitigating factors, including that the company has not received a penalty notice from OFAC in the preceding five years, “represents that it undertook various measures to strengthen its OFAC compliance processes,” voluntarily self-disclosed the alleged violations, and substantially cooperated with the investigation.
OFAC settles with banks for multiple sanctions violations
On September 26, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $720,258 settlement with an indirect subsidiary of a Switzerland-based bank for allegedly processing transactions in violation of the Cuba, Ukraine-related, Iran, Sudan, and Syria sanctions programs. According to OFAC’s web notice, from April 2013 to April 2016, the bank processed 273 transactions totaling approximately $3,076,180 on behalf of individuals residing in Cuba, Crimea, Iran, Sudan, and Syria. Specifically, OFAC noted that customers in sanctioned jurisdictions were able to continue to purchase and sell securities through the U.S. financial system and to receive related dividend and interest payments until the bank took further steps to prevent such payments.
In arriving at the settlement amount of $720,258, OFAC considered various aggravating factors, including that bank personnel “had reason to know they were processing transactions through the U.S. financial system for individual customers located in comprehensively sanctioned jurisdictions based on the underlying [know-your-customer (KYC)] data obtained by [the bank], which included address information indicating the customers’ location,” and “conferred approximately $3,076,180 in economic benefit to persons in Cuba, Crimea, Iran, Sudan, and Syria,” which caused harm to multiple sanctions programs' integrity. OFAC also considered various mitigating factors, including that the bank cooperated with OFAC throughout the investigation, and has undertaken remedial measures intended to minimize the risk of recurrence of similar conduct.
Separately, the same day OFAC announced a $401,039 settlement with a different indirect subsidiary of the Switzerland-based bank for allegedly processing transactions in violation of the Cuba, Ukraine-related, Iran, Sudan, and Syria sanctions programs. According to OFAC’s web notice, from December 2011 until July 2016, the bank processed 426 transactions totaling approximately $1,233,967 on behalf of individuals ordinarily resident in Cuba, Iran, and Syria.
In arriving at the settlement amount of $401,039, OFAC considered various aggravating factors, including that bank personnel “had reason to know they were processing transactions through the U.S. financial system for individual customers located in comprehensively sanctioned jurisdictions based on the underlying KYC data [the bank had] obtained,” and the bank “conferred approximately $1,233,967 in economic benefit to persons in Cuba, Iran, and Syria,” which caused harm to multiple sanctions programs' integrity. OFAC also considered various mitigating factors, including that the bank cooperated with OFAC throughout the investigation, and has undertaken remedial measures intended to minimize the risk of recurrence of similar conduct.
Treasury official discusses U.S. efforts in response to Russian invasion of Ukraine
On September 20, Assistant Secretary for Terrorist Financing and Financial Crimes Elizabeth Rosenberg delivered prepared remarks before a Senate Committee on Banking, Housing, and Urban Affairs hearing, in which she provided an overview of recent efforts taken by the U.S. Treasury Department to hold Russia accountable for its invasion of Ukraine. Rosenberg explained that these measures are intended to “squeeze Russia’s access to finance and technology for strategic sectors of its economy and degrade its industrial capacity for years to come” and highlighted sanctions imposed against hundreds of Russian individuals and entities, including Russia’s largest financial institutions and key nodes in the country’s military-industrial supply chains, to cut them off from the U.S. financial system. She noted that Treasury has also implemented restrictions on dealings in Russian sovereign debt and has “prohibited economic dealings with the so-called Donetsk People’s Republic and Luhansk People’s Republic regions of Ukraine” as well as new investments in the Russian Federation. Rosenberg added that Treasury has “also imposed prohibitions on importing certain commodities from Russia into the United States, including oil and natural gas, and similarly imposed prohibitions on exporting certain items like luxury goods and dollar-denominated banknotes.” Additionally, Rosenberg discussed international efforts, including “implementing the largest sanctions regime in modern history[,]” and working with allies to facilitate information sharing, law enforcement data, and relevant financial records. She emphasized that “Treasury has mounted an aggressive campaign to close the global financial policy and regulatory loopholes across jurisdictions that Russian aiders and abettors of this war, and other criminals, use to perpetuate their illicit activity[,]” and stated that Treasury remains focused on denying funds to Russia through its oil exports.
Find continuing InfoBytes coverage on the U.S. sanctions response to Russia’s invasion of Ukraine here.
OFAC issues sanctions, general licenses, and FAQs on Russia’s invasion of Ukraine
On September 15, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), in coordination with the Departments of Commerce and State, announced sanctions against 22 individuals and two entities connected to Russia’s invasion of Ukraine. According to OFAC, the designated persons include multiple individuals who have furthered the Government of the Russian Federation’s objectives in Ukraine, both prior to and during Russia’s invasion of Ukraine in 2022. Also included among those designated is a neo-Nazi paramilitary group that has aided Russia’s military in Ukraine, and two of the group’s senior leaders. As a result of the sanctions, all property and interests in property belonging to the sanctioned individuals and entities subject to U.S. jurisdiction are blocked and must be reported to OFAC. Additionally, “any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons are also blocked.” OFAC further noted that “transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of designated or blocked persons are prohibited unless authorized by a general or specific license issued by OFAC, or exempt,” which “include the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any blocked person and the receipt of any contribution or provision of funds, goods, or services from any such person.”
The same day, OFAC issued Russia-related General License (GL) 51, authorizing the wind down of transactions involving the Limited Liability Company Group of Companies Akvarius, and GL 52, which relates to journalistic activities and the establishment of news bureaus. According to the GL 51, “all transactions ordinarily incident and necessary to the wind down of any transaction involving Limited Liability Company Group of Companies Akvarius (Aquarius), or any entity in which Aquarius owns, directly or indirectly, a 50 percent or greater interest, that are prohibited by Executive Order (E.O.) 14024,” are authorized as of October 15, subject to certain qualifications. According to GL 52, “news reporting organizations that are U.S. persons, and individual U.S. persons who are journalists or broadcast or technical personnel, are authorized to engage in certain transactions where such transactions are ordinarily incident and necessary to such U.S. persons’ journalistic activities or to the establishment or operation of a news bureau and are prohibited” by E.O. 14024, subject to certain qualifications.
Additionally, OFAC published several frequently asked questions clarifying “Russian Harmful Foreign Activities Sanctions,” which include guidance on the use of the National Payment Card System (NSPK) or the Mir National Payment System given the broad sanctions imposed on Russia’s financial system this year.
OFAC sanctions Iranians involved in production of UAVs to Russia
On September 8, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Orders 13382 and 14024 against an Iran-based air transportation service provider, as well as three companies and one individual involved in the research, development, production, and procurement of Iranian unmanned aerial vehicles (UAVs) and UAV components. Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson reiterated that the U.S. “is committed to strictly enforcing our sanctions against both Russia and Iran and holding accountable Iran and those supporting Russia’s war of aggression against Ukraine,” and stressed that the U.S. will “not hesitate to target producers and procurers who contribute to Iran and its IRGC’s UAV program, further demonstrating [the U.S.’s] resolve to continue going after terrorist proxies that destabilize the Middle East.” The sanctions follow designations implemented by OFAC last year against members of a network of companies and individuals that provided critical support to Iran’s Islamic Revolutionary Guard Corps Qods Force’s use of UAVs (previously covered by InfoBytes here).
As a result of the sanctions, all property and interests in property belonging to the sanctioned individuals and entities subject to U.S. jurisdiction are blocked and must be reported to OFAC. U.S. persons are also generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons. Additionally, OFAC warned that “any foreign financial institution that knowingly facilitates a significant transaction or provides significant financial services for any of the individuals or entities designated today could be subject to U.S. correspondent or payable-through account sanctions.”