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OFAC reaches $1.4 million settlement with money transmitter
On July 23, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $1.4 million settlement with a New York-based online money transmitter for 2,260 apparent violations of multiple sanctions programs. According to OFAC’s web notice, between February 4, 2013 and February 20, 2018, the company allegedly processed 2,241 payments for parties located in sanctioned jurisdictions and regions, including the Crimea region of Ukraine, Iran, Sudan, and Syria, as well as 19 payments on behalf of sanctioned persons identified on OFAC’s List of Specially Designated Nationals and Blocked Persons. Identified deficiencies in the company’s sanctions compliance program related to screening, testing, auditing, and transaction review procedures allowed persons in these jurisdictions and regions and those on the SDN List to engage in roughly $802,117.36 worth of transactions, OFAC stated. The apparent violations—related to commercial transactions that the company processed on behalf of its corporate customers and card-issuing financial institutions—allegedly occurred as a result of weak algorithms, business identifier code screening failures, backlogs, and a failure to monitor IP addresses or flag addresses in sanctioned locations.
In arriving at the settlement amount, OFAC considered various aggravating factors, including that (i) the company failed to exercise sufficient caution or care for its sanctions compliance obligations; (ii) the company had reason to know users were located in sanctioned jurisdictions and regions based on common indications it had within its possession; and (iii) the apparent violations harmed six different sanctions program.
OFAC also considered various mitigating factors, including that (i) senior management quickly self-disclosed the apparent violations upon discovery and provided substantial cooperation during the investigation; (ii) the company has not received a penalty notice from OFAC in the preceding five years; and (iii) the company has taken remedial measures to minimize the risk of recurrence, including terminating the conduct leading to the apparent violations, retraining compliance employees, enhancing screening software, putting flagged transactions into a pending status rather than completing them, and conducting a daily review of customers’ and counter-parties’ identification documents.
OFAC issues Covid-19 related general license and FAQs
On June 17, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued three general licenses, Iran GL N, Syria GL 21, and Venezuela GL 39, (referred to as the “COVID-19-related GLs”) to expand upon Treasury’s existing authorizations for Covid-19-related transactions and activities. As previously covered by InfoBytes, 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. The recently released COVID-19-related GLs build on longstanding humanitarian exemptions, exceptions, and authorizations to cover Covid-19-related transactions and activities, which include, among others, “transactions and activities involving the delivery of face masks, ventilators and oxygen tanks, vaccines and the production of vaccines, COVID-19 tests, air filtration systems, and COVID-19-related field hospitals.” These GLs are also part of the Biden Administration’s efforts designated in National Security Memorandum – 1, which directs certain government agencies to review existing U.S. and “multilateral financial and economic sanctions to evaluate whether they are unduly hindering responses to the COVID-19 pandemic worldwide.” According to OFAC, these new authorizations will continue to support the effort by governments, international organizations, non-governmental organizations, and private sector actors in providing Covid-19-related assistance to people in certain sanctioned jurisdictions. OFAC also published six FAQs related to the COVID-19-related GLs (see 906, 907, 908, 909, 910, and 911).
Counter ISIS Finance Group seeks to isolate ISIS from the international financial system
On May 26, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced the release of a joint statement by the Counter ISIS Finance Group (CIFG) of the Global Coalition to Defeat ISIS, which coordinates efforts to isolate the Islamic State of Iraq and Syria (ISIS) from the international financial system and eliminate revenue sources. The CIFG held its fourteenth meeting on May 17 to discuss ongoing efforts to combat ISIS financing worldwide, which coincided with sanctions against three individuals and one entity connected to ISIS for allegedly helping ISIS access the financial system in the Middle East through a network of international donors (covered by InfoBytes here).
Among other things, the statement highlighted ISIS’s “reliance on regional money services businesses (MSBs) to transfer funds internationally,” its focus on funding “the release of its detained operatives and family members, and its extortion and looting of Syrian and Iraqi populations.” CIFG members and observers also noted the significance of “information-sharing, increased oversight over financial institutions, and coordinated disruptive actions to deter ISIS financial supporters from accessing the regional financial system.” CIFG members and observers were also briefed on ISIS supporters’ abuse of the charitable sector and madrassa networks in Asia, in addition to “discussions on how ISIS branches and networks in Africa utilize informal funds transfer mechanisms and participate in looting to support their extremist affairs.” Delegates also “presented case studies on security operations against Europe-based ISIS supporters who raise and transfer funds online, in some cases via virtual currencies.” The statement concludes: “The work of the CIFG is critical to the global fight to defeat ISIS in all corners of the world and we will continue to engage global partners to deprive ISIS of its sources of revenue and prevent it from accessing the international financial system. We will continue learning from each other’s successes and challenges, and empowering partners in the most vulnerable jurisdictions to strengthen their anti-money laundering and combating the financing of terrorism regimes.”
OFAC sanctions ISIS financial facilitators in Syria and Turkey
On May 17, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13224 against three individuals and one entity connected to the Islamic State of Iraq and Syria (ISIS) for allegedly helping ISIS access the financial system in the Middle East through a network of international donors. OFAC noted that these sanctions coincide with the fourteenth meeting of the Counter ISIS Finance Group, which coordinates efforts to isolate ISIS from the international financial system and eliminate revenue sources. As a result of the sanctions, all property and interests in property belonging to the sanctioned persons, and “any entities that are owned, directly or indirectly, 50 percent or more” by them that are subject to U.S. jurisdiction are blocked and must be reported to OFAC. OFAC’s announcement further noted that OFAC regulations “generally prohibit” U.S. persons from participating in transactions with the designated persons unless exempt or otherwise authorized by a general or specific license, and warned foreign financial institutions that if they knowingly facilitate significant transactions for any of the designated persons, they may be subject to U.S. correspondent account or payable-through account sanctions.
OFAC issues new Syria sanctions FAQs
On April 5, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) published two new Syria Frequently Asked Questions, FAQs 884 and 885. FAQ 884 relates to non-U.S. persons’, including nongovernmental organizations’ (NGOs) and foreign financial institutions’ exposure to U.S. secondary sanctions pursuant to the Caesar Syria Civilian Protection Act of 2019 (Caesar Act) for activities that would be authorized under the Syrian Sanctions Regulations (SySR), while FAQ 885 governs whether U.S. and non-U.S. persons (including NGO and foreign financial institutions) may facilitate certain humanitarian assistance to Syria without the risk of sanctions. OFAC clarified, among other things, that “non-U.S. persons, including NGOs and foreign financial institutions, would not risk exposure to sanctions under the Caesar Act for engaging in activity, or facilitating transactions and payments for such activity, that is authorized for U.S. persons under a general license (GL) issued pursuant to the SySR.” With respect to certain humanitarian assistance, OFAC explained that “[t]he export of U.S.-origin food and most medicines to Syria is not prohibited and does not require a Department of Commerce Bureau of Industry and Security (BIS) or OFAC license, and therefore non-U.S. persons would not risk exposure to sanctions under the [Caesar Act] for engaging in such activity.”
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 issues Syria-related settlement with French bank for $8.5 million
On January 4, the Department of Treasury’s Office of Foreign Assets Control (OFAC) announced an over $8.5 million settlement with a French bank that facilitates trade finance between Europe and the Middle East, North Africa, sub-Saharan Africa, and Asia for 127 apparent violations of Syria-related sanctions. The 127 apparent violations include: (i) 114 internal transfers on behalf of Syrian entities totaling over $1 billion, with 45 of the transfers processed between two clients, one being a sanctioned Syrian entity and 69 of the transfers conducted as a foreign exchange transaction with a sanctioned Syrian customer; and (ii) 13 “back-to-back” letter of credit transactions or other trade finance transactions involving sanctioned Syrian parties, processed through a U.S. bank.
In arriving at the settlement amount, OFAC considered various aggravating factors, including that management had “actual knowledge” of the conduct, and that the bank “conferred substantial economic benefit to U.S.-sanctioned parties,” causing “significant harm to the integrity of U.S. sanctions programs and their associated policy objectives.”
OFAC also considered various mitigating factors, including (i) the majority of the violations occurred in late 2011, after an August 2011 Executive Order significantly expanded U.S. sanctions against Syria; (ii) the bank voluntarily self-disclosed the apparent violations and cooperated with the investigations; and (iii) had a compliance program in place at the time of the apparent violations.
OFAC reaches settlement with Saudi Arabian bank to resolve Sudanese and Syrian sanctions violations
On December 28, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $653,347 settlement with a Saudi Arabian bank to resolve 13 apparent violations of the Sudanese Sanctions Regulations, or section 2(b) of Executive Order (E.O.) 13582, which prohibits certain transactions with respect to Syria. According to OFAC’s web notice, between 2011 and 2014, the bank processed—directly or indirectly—13 U.S. dollar (USD) transactions totaling more than $5.9 million “to or through the United States in circumstances where a benefit of [the bank’s] service was received by Sudanese or Syrian counterparties, or that involved goods originating in or transiting through Sudan or Syria.” OFAC noted that the apparent violations began after the bank had implemented more robust compliance measures, “including those relating to sanctions screening and OFAC sanctions compliance.”
In arriving at the settlement amount, OFAC considered various aggravating factors, including that the bank “conferred substantial economic benefit to U.S.-sanctioned parties,” causing “significant harm to the integrity of U.S. sanctions programs and their associated policy objectives.”
OFAC also considered various mitigating factors, including that the bank (i) did not willfully intend to violate U.S. sanctions law or recklessly disregard its sanctions obligations; (ii) cooperated with the investigation and signed a tolling agreement; and (iii) has undertaken remedial measures and has enhanced its compliance controls and internal policies, including by requiring the screening of all payments against international sanctions lists and prohibiting the opening of USD accounts for any Sudanese customers or financial institutions.
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 sanctions Central Bank of Syria and Syrian officials
On December 22, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against two individuals, nine business entities, and the Central Bank of Syria, pursuant to Syria sanctions authorities. Treasury notes that the sanctions are intended to “discourage future investment in government-controlled areas of Syria, force the regime to end its atrocities against the Syrian people, and compel its commitment to the United Nations-facilitated process in line with UN Security Council Resolution 2254.” Additionally, concurrent with OFAC’s designations, the State Department also designated six Syrian persons pursuant to Section 2 of Executive Order 13894. As a result, all property and interests in property belonging to the designated individuals and entities subject to U.S. jurisdiction are blocked and must be reported to OFAC. OFAC noted that its regulations “generally prohibit all dealings by U.S. persons or within (or transiting) the United States that involve any property or interests in property of designated or otherwise blocked persons,” and warned that non-U.S. persons that engage in certain transactions with the designated persons may expose themselves to designation.