InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
OFAC sanctions additional networks used by Russian elites, issues new Russia-related General Licenses
On June 2, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced additional sanctions pursuant to Executive Orders (E.O.) 14024, 13685, and 13661, against key networks used by Russian elites, including President Putin, that target “a Kremlin-aligned yacht brokerage, several prominent Russian government officials, and a close Putin associate and money-manager [] who is a custodian of President Putin’s offshore wealth.” OFAC’s announcement also identified “yachts and aircraft in which sanctioned Russian elites maintain interests.” The designations were taken in tandem with the Department of State (which imposed sanctions on five Russian oligarchs and elites) as well as the Department of Commerce (which added 71 new parties located in Russia and Belarus to its Entity List, thus “further restricting the Russian military’s ability to obtain technologies and other items it needs to sustain aggression and project power”).
As a result of the sanctions, all property and interests in property belonging to the sanctioned persons in the U.S. 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 noted that U.S. persons are prohibited from participating in transactions with the sanctioned persons unless authorized by a general or specific license.
On the same day, OFAC issued several new Russia-related general licenses (GL): (i) GL 25B authorizes transactions related to telecommunications and certain internet-based communications that are otherwise prohibited by Russian Harmful Foreign Activities Sanctions Regulations; (ii) GL 36 and GL 37 authorize the wind down of transactions normally prohibited by E.O. 14024 involving an identified public joint stock company and a gold mining company respectively; and (iii) GL 38 authorizes transactions related to pension payments to U.S. persons that are normally prohibited by E.O. 14024 “provided that the only involvement of blocked persons is the processing of funds by financial institutions blocked pursuant to E.O. 14024.” Additionally, OFAC issued several new and amended Russia-related frequently asked questions.
OFAC issues FAQs related to securities investments in Chinese military companies
On June 1, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) published three new frequently asked questions related to the Chinese military-industrial complex sanctions. As previously covered by InfoBytes, Executive Order 13959, as amended, addressed threats from securities investments that finance Communist Chinese military companies. The FAQs address questions pertaining to (i) whether U.S. financial institutions are required to block the attempted purchase or sale of covered securities after the relevant 365-day divestment period; (ii) whether U.S. financial institutions are permitted to process transactions for holders of covered securities related to stock splits, cash dividends, or dividend reinvestments; and (iii) whether U.S. persons are required to divest their holdings of covered securities before the end of the relevant 365-day divestment period.
OFAC sanctions entities connected to IRGC-QF
On May 25, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13224 against an international oil smuggling and money laundering network led by the Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF). According to OFAC, the designated network, “has acted as a critical element of Iran’s oil revenue generation, as well as its support for proxy militant groups that continue to perpetuate conflict and suffering throughout the region.” As a result, all property, and interests in property of the designated individuals and entities, “and of any entities that are owned, directly or indirectly, 50 percent or more by them, individually, or with other blocked persons, that are in the United States or in the possession or control of U.S. persons, must be blocked and reported to OFAC.” U.S. persons are generally prohibited from engaging in transactions with the designated persons. OFAC further warned that “engaging in certain transactions with the individuals and entities designated today entails risk of secondary sanctions.”
OFAC reaches settlement with Puerto Rican bank to resolve Venezuela sanctions violations
On May 27, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $225,937 settlement with a Puerto Rican bank for allegedly violating the Venezuela Sanctions Regulations. According to OFAC’s web notice, the bank allegedly processed 337 transactions totaling $853,126 on behalf of two low level employees of the Government of Venezuela (GoV). The apparent violations allegedly resulted from the bank’s maintenance of four personal accounts operated by these two employees that should have been blocked by Executive Order (E.O.) 13884 (which blocks property and interests in property of the GoV, including “‘any person owned or controlled, directly or indirectly,’ by the GoV, and ‘any person who has acted or purported to act directly or indirectly for or on behalf of’ any such entity”). OFAC stated that the two GoV individuals also did not meet the criteria for authorized transaction exemptions under General License 34A and found that the bank failed to identify the customers for 14 months following the issuance of E.O. 13884.
In arriving at the settlement amount, OFAC considered various aggravating factors, including, among other things, that (i) the bank maintained documentation showing that the two individuals were low-level GoV employees but delayed identifying them; and (ii) the bank has more than $61 billion in assets. OFAC also considered various mitigating factors, including that the bank (i) took remedial action to ensure compliance with OFAC sanctions; (ii) created more robust sanctions-related procedures; (iii) developed additional resources and guidance in connection to sanctions alert review and disposition; (iv) added staff to oversee OFAC sanctions matters; (v) reviewed policies and procedures for identifying, reviewing, and reporting transactions that violate OFAC’s regulations; and (vi) enhanced its sanctions screening trainings. The bank also voluntarily self-disclosed the apparent violations to OFAC and cooperated with OFAC’s investigation.
Providing context for the settlement, OFAC stated that this action “demonstrates the importance of financial institutions conducting timely due diligence…following the issuance of new sanctions prohibitions.”
OFAC sanctions North Koreans and issues Venezuela general license
On May 27, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order (E.O.) 13382 against one individual, two banks, and a trading company connected to the Democratic People’s Republic of Korea’s (DPRK) development of weapons of mass destruction (WMD) and ballistic missile programs and to the U.S.-designated DPRK national airline. According to OFAC, the U.S. is “committed to seeking dialogue and diplomacy with the DPRK but will continue to address the threat posed by the DPRK’s unlawful WMD and ballistic missile programs to the United States and the international community.” As a result of the sanctions, all property and interests in property of the sanctioned individuals and entities subject to U.S. jurisdiction are blocked and must be reported to OFAC. OFAC noted that its regulations generally prohibit U.S. persons from participating in transactions with the designated person, including transactions transiting the U.S. OFAC’s announcement further warned that any foreign financial institution that knowingly facilitates significant transactions or provides significant financial services for any of the designated individuals or entities may be subject to U.S. correspondent account or payable-through account sanctions.
The same day, OFAC issued Venezuela- related General License 8J, which authorizes certain transactions involving Petróleos de Venezuela, S.A. (PDVSA) that were previously prohibited under prior Executive Orders to the extent such transactions and activities are “necessary for the limited maintenance of essential operations in Venezuela or the wind down of operations in Venezuela for certain entities,” among other things.
OFAC issues new Russia-related general license, will not renew general license concerning debt or equity dealings with certain Russian financial institutions
On May 25, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued Russia-related General License (GL) 13A, “Authorizing Certain Administrative Transactions Prohibited by Directive 4 under Executive Order 14024.” Specifically, GL 13A permits U.S. persons, or entities owned or controlled, directly or indirectly, by a U.S. person “to pay taxes, fees, or import duties, and purchase or receive permits, licenses, registrations, or certifications” for certain transactions normally prohibited by Directive 4, “provided such transactions are ordinarily incident and necessary to the day-to-day operations in the Russian Federation of such U.S. persons or entities.” GL 13A expires September 30 at 12:01 am EDT.
The day before, OFAC announced that provisions of GL 9C, issued pursuant to the Russian Harmful Foreign Activities Sanctions Regulations (RuHSR), will not be renewed. As previously covered by InfoBytes, GL 9C was issued last month to authorize transactions “ordinarily incident and necessary to dealings in debt or equity” issued before February 24, 2022 involving certain Russian financial institutions that would otherwise be prohibited by the RuHSR. GL 9C expires on May 25 at 12:01 am EDT.
OFAC sanctions Hizballah financial facilitator
On May 19, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13224 against a Lebanese businessman and Hizballah financial facilitator, as well as five of his associates and eight of his companies in Lebanon and Iraq. According to OFAC, the sanctions “illuminate[] Hizballah’s modus operandi of using the cover of seemingly legitimate businesses to generate revenue and leverage commercial investments across a multitude of sectors to secretly fund Hizballah and its terrorist activities.” OFAC also highlighted Hizballah’s practice of building “a web of businesses” with “opaque ownership structures” to “hide its activities and generate funds for its destabilizing activities.” According to Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson, the “designation of this network demonstrates the U.S. government’s commitment to protect Lebanon’s private sector and financial system from Hizballah’s abuse by targeting and exposing the group’s financial activities.”
As a result of the sanctions, all property and interests in property of the designated individuals and entities within U.S. jurisdiction must be blocked and reported to OFAC. OFAC further noted that its regulations “generally prohibit” U.S. persons or persons within the U.S. from participating in transactions with the designated persons unless exempt or authorized by a general or specific OFAC license. OFAC also warned that the agency “can prohibit or impose strict conditions on the opening or maintaining in the United States of a correspondent account or a payable-through account of a foreign financial institution that knowingly conducted or facilitated any significant transaction on behalf of [a Specially Designated Global Terrorist] or, among other things, knowingly facilitates a significant transaction for Hizballah or certain persons designated for their connection to Hizballah.”
OFAC announces Hamas sanctions
On May 24, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against a Hamas finance official as well as an expansive network of three Hamas financial facilitators and six companies that have generated revenue for the terrorist group through the management of an international investment portfolio. According to OFAC, Hamas’s Investment Office, whose leadership oversees the sanctioned network, has assets totaling over $500 million, including companies operating in Sudan, Turkey, Saudi Arabia, Algeria, and the United Arab Emirates (UAE). As a result of the sanctions, all property and interests in property belonging to the sanctioned 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 person are also blocked. U.S. persons are generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons. The designated entities are also subject to secondary sanctions pursuant to Executive Order 13224, which authorizes OFAC to “prohibit or impose strict conditions on the opening or maintaining in the United States of a correspondent account or a payable-through account of a foreign financial institution that knowingly conducted or facilitated any significant transaction on behalf of a Specially Designated Global Terrorist.”
Agencies release risk advisory for businesses operating in Sudan
On May 23, the U.S. Departments of Treasury, State, Commerce, and Labor issued an advisory, Risks and Considerations for U.S. Businesses Operating in Sudan, highlighting growing risks to American businesses and individuals associated with conducting business with Sudanese State-Owned Enterprises. According to the advisory, the risks outlined come from recent actions undertaken by Sudan’s Sovereign Council and security forces under the military’s control and could adversely impact U.S. businesses, individuals, other persons, and their operations in the country and the region. The advisory also noted that the U.S. recently imposed sanctions on the Central Reserve Police (CRP) for serious human rights abuse under Executive Order 13818. As previously covered by InfoBytes, OFAC noted that, the “CRP has used excessive force against pro-democracy protesters peacefully demonstrating against the military-led overthrow of the civilian-led transitional government in Sudan.” As a result of the sanctions, all property and interests in property belonging to the sanctioned person subject to U.S. jurisdiction are blocked and must be reported to OFAC. OFAC also noted that its regulations generally prohibit all dealings by U.S. persons that involve any property or interests in property of designated persons.
OFAC updates Syrian sanctions guidance; issues DPRK advisory on information technology workers
On May 12, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) amended a Frequently Asked Question (FAQ) and published a new General License (GL) regarding Syrian sanctions. Back in April (covered by InfoBytes here), OFAC published FAQ 884, which relates to non-U.S. persons’ (including nongovernmental organizations and foreign financial institutions) exposure to U.S. secondary sanctions under the Caesar Syrian Civilian Protection act of 2019 (Caesar Act). Specifically, FAQ 884 addresses sanctions exposure for activities authorized under the Syrian Sanctions Regulations. OFAC’s recent update of FAQ 884 clarifies that “OFAC will not consider transactions to be ‘significant’ for the purpose of a sanctions determination under the Caesar Act if U.S. persons would not require a specific license from OFAC to participate in such a transaction.” Additionally, GL 22 now authorizes “activities in certain economic sectors in non-regime held areas of Northeast and Northwest Syria.”
Later in the week, OFAC announced that Treasury, the Department of State, and the FBI issued an advisory regarding an attempt by the Democratic People’s Republic of Korea (DPRK) and DPRK information technology (IT) workers to obtain employment while posing as non-DPRK nationals. Among other things, the advisory provides information on how DPRK IT workers operate and identifies red flags for companies to avoid hiring DPRK freelance developers. A Fact Sheet was also published to provide information on the advisory.