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OFAC sanctions ISIS facilitators
On May 9, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13224 against five Islamic State of Iraq and Syria (ISIS) financial facilitators operating across Indonesia, Syria, and Turkey for allegedly supporting financial transfers connected to ISIS efforts in Syria-based displaced persons camps by collecting funds in Indonesia and Turkey. As a result of the sanctions, all property and interests in property of the designated individuals 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 United States from participating in transactions with the designated persons and warned foreign financial institutions that if they knowingly facilitate significant transactions for any of the designated individuals, OFAC may prohibit or impose strict conditions on the opening or maintaining of a U.S. correspondent account or payable-through account.
DOJ seizes $300 million yacht as part of Task Force KleptoCapture; OFAC issues Russia-related general licenses and updated FAQs
On May 5, the DOJ executed a seizure warrant freezing a $300 million yacht owned by a sanctioned Russian oligarch, following a determination that the yacht is subject to forfeiture based on probable cause of violations of U.S. law, including the International Emergency Economic Powers Act, money laundering and conspiracy. The Russian oligarch was designated in 2018 by the U.S. Treasury Department’s Office of Foreign Assets Control pursuant to the Countering America’s Adversaries Through Sanctions Act and Executive Order (E.O.) 13582 (covered by InfoBytes here). According to the DOJ’s announcement, the sanctioned oligarch owned the yacht after his designation and “caused U.S. dollar transactions to be routed through U.S. financial institutions for the support and maintenance of the [yacht].” The seizure was coordinated through the DOJ’s Task Force KleptoCapture, which is “an interagency law enforcement task force dedicated to enforcing the sweeping sanctions, export controls, and economic countermeasures that the United States, along with its foreign allies and partners, have imposed in response to Russia’s unprovoked military invasion of Ukraine” (covered by InfoBytes here.)
The same day OFAC also issued several Russia-related general licenses (GL), including GL 7A, which authorizes “transactions ordinarily incident and necessary to the receipt of, and payment of charges for, services rendered in connection with overflights of the Russian Federation or emergency landings in the Russian Federation by aircraft registered in the United States or owned or controlled by, or chartered to, U.S. persons that are prohibited by the Russian Harmful Foreign Activities Sanctions Regulations”; GL 26A, which authorizes all transactions ordinarily incident and necessary to the wind down of transactions involving Joint Stock Company SB Sberbank Kazakhstan or Sberbank Europe AG, or any entity that Sberbank subsidiaries owns, through July 12, provided certain criteria are met; GL 31, which authorizes certain transactions related to patents, trademarks, copyrights, or other forms of intellectual property protections in the U.S. or Russia that would otherwise be prohibited; and GL 32, which authorizes the wind down of transactions involving Amsterdam Trade Bank NV that would ordinarily be prohibited by E.O. 14024 through July 12. Additionally, OFAC issued one new and one amended Russia-related frequently asked questions.
OFAC announces first-ever sanctions against virtual currency mixer
On May 6, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13722 against a virtual currency mixer used by the Democratic People’s Republic of Korea (DPRK) to support its cyber activities and money-laundering. According to OFAC, in March, a DPRK state-sponsored cyber-hacking group carried out the largest virtual currency heist to date, worth almost $620 million, from a blockchain project linked to an online game. The virtual currency mixer was used to process over $20.5 million of the illicit proceeds. OFAC noted that the sanctions are the first-ever sanctions on a virtual currency mixer. 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 persons 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.
OFAC issues Russian sanctions, general licenses, and expanded E.O.s
On May 8, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced “sweeping” sanctions, which include the designations of board members from two of Russia’s most important banks, a Russian state-owned bank and 10 of its subsidiaries, a state-supported weapons manufacturer, and three of Russia’s state-controlled television stations that generate revenue for the state. OFAC also published a Determination Pursuant to Section 1(a)(i) of Executive Order (E.O.) 14024 and a Determination Pursuant To Section 1(a)(ii) Of E.O. 14071. According to OFAC's press release, the sanctions, issued pursuant to E.O. 14071, “cut off access to services that are used by the Russian Federation and Russian elites to evade sanctions.” OFAC identified accounting, trust and corporate formation, and management consulting as categories of services that are subject to a prohibition on the export, reexport, sale, or supply, directly or indirectly, from the U.S., or by a U.S. person, wherever located, to any person located in the Russian Federation. Additionally, OFAC determined that these same services sectors of the Russian Federation economy are subject to sanctions pursuant to E.O. 14024. OFAC also issued four Russia-related general licenses (GLs): (i) GL 25A authorizes transactions related to telecommunications and certain internet-based communications; GL 33 authorizes the wind down of operations or existing contracts involving certain blocked entities; GL 34 authorizes the wind down of accounting, trust and corporate formation, and management consulting services; and GL 35 authorizes transactions involving credit rating and auditing services. OFAC also issued a new frequently asked question clarifying transactions related to telecommunications and certain internet-based communications that involve Joint Stock Company Channel One Russia, Television Station Russia-1, or Joint Stock Company NTV Broadcasting Company authorized by Russia-related GL 25A.
OFAC also recently published amended Russia-related frequently asked questions 1034, 1035, and 1038 clarifying, among other things, (i) terms related to Executive Order (E.O.) 14071’s prohibition on certain accounting, trust and corporate formation, and management consulting services; (ii) what “credit rating services” and “auditing services” mean under General License 35; and (iii) certain activities related to products and services in or involving the Russian Federation in relation to E.O. 14024.
Find continuing InfoBytes coverage on the U.S. sanctions response to Russia’s invasion of Ukraine here.
OFAC amends and reissues the Ukraine-Related Sanctions Regulations
On April 29, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced that it amended and reissued the Ukraine-Related Sanctions Regulations, renaming them the Ukraine-/Russia-Related Sanctions Regulations. According to OFAC, this action replaces the regulations that were published in abbreviated form on May 8, 2014 with a more comprehensive set of regulations, including additional interpretive and definitional guidance, general licenses, and other regulatory provisions. OFAC also announced that it is revising several FAQs for the Ukraine-/Russia-Related Sanctions Regulations. OFAC also noted that “[t[he publication of this final rule has triggered an automatic administrative update to a number of sanctions entries. The unique identifier numbers (UIDs) for the affected entries are listed . . . as part of this administrative update.” The Ukraine-/Russia-Related Sanctions Regulations take effect May 2.
The same week, OFAC published Russia-related General License 30, “Authorizing Transactions Involving Gazprom Germania GmbH Prohibited by Directive 3 under Executive Order 14024,” which authorizes all transactions involving Gazprom Germania GmbH, or any entity in which Gazprom Germania GmbH owns, under certain criteria.
Find continuing InfoBytes coverage on the U.S. sanctions response to Russia’s invasion of Ukraine here.
OFAC reaches multiple settlements to resolve Cuban sanctions violations
On April 21, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $141,442 settlement with a Colorado-based multinational mining firm for allegedly violating the Cuban Assets Control Regulations (CACR). According to OFAC’s web notice, between June 2016 to November 2017, a wholly-owned subsidiary of the firm purchased Cuban-origin explosives and explosive accessories from a third-party vendor to be used in a mine construction. The distributor, on the subsidiary’s behalf, imported Cuban-origin explosives and explosive accessories for the mine on at least four separate occasions, despite the subsidiary being “generally prohibited from dealing in Cuban-origin goods.” According to OFAC, shipping documents clearly identified that the goods were sourced from Cuba. In addition, purchase orders failed to contain express statements that items provided to the subsidiary may not originate from embargoed jurisdictions, nor did the subsidiary ask for country-of-origin information for the goods acquired from its suppliers. Additionally, OFAC contended that the subsidiary’s failure to provide appropriate export and trade sanctions training led to the apparent violations.
In arriving at the settlement amount, OFAC considered various aggravating factors, including that (i) the parent firm and subsidiary failed to exercise reasonable due diligence to ensure it complied with U.S. Cuba sanctions requirements; and (ii) the firm and its subsidiaries and affiliates are “a large and sophisticated organization operating globally as a leading gold producer with experience and expertise in international transactions.” OFAC also considered various mitigating factors, including that (i) the apparent violations were self-disclosed and constituted a non-egregious case; (ii) the firm and subsidiary have not received a penalty notice from OFAC in the preceding five years; (iii) the amount of payments were not significant compared to the total volume of transactions undertaken on an annual basis; and (iv) the firm and its subsidiary cooperated with the investigation, signed a tolling agreement, and are currently implementing remedial measures to prevent future violations.
Separately, OFAC also announced a $45,908 settlement with a Florida-based company affiliated with a distributor of explosives and accessories for mining operations. According to the web notice issued in this action, on four occasions in 2016 and 2017, the company and certain affiliates procured Cuban-origin explosives and related accessories from a third-party vendor originating from Cuba on behalf of a U.S. company for the U.S. company’s mining project in Suriname in violation of the CACR. OFAC contended that the company was responsible for overseeing the processing of purchase orders and invoices for these transactions, and that in 2018, after the U.S. company customer learned of the goods’ Cuban origins, it was asked to no longer procure goods from Cuba. According to OFAC, the apparent violations occurred primarily because of the company’s failure “to understand U.S. prohibitions on dealings in Cuban property or engaging in transactions related to merchandise of Cuban origin outside the United States,” adding that the company did not have a compliance program in place when the four transactions occurred, nor did it realize the transactions were prohibited until they were flagged by the customer. The company immediately ceased all activities involving Cuba after learning of the sanctions implications but did not voluntarily self-disclose the violations, which OFAC deemed non-egregious.
In arriving at the settlement amount, OFAC considered various aggravating factors, including that (i) the company failed to “exercise a minimal degree of caution or care” when procuring Cuban-origin goods from its supplier; (ii) the company “had actual knowledge that it was financing the provision of Cuban-origin goods for export to Suriname”; and (iii) the company’s actions harmed the U.S. sanctions program. Mitigating factors included that the company is (i) small and largely overseen by one individual; (ii) the company has not received a penalty notice from OFAC in the preceding five years; and (iii) the company provided timely information and entered into a tolling agreement. Providing context for the settlement, OFAC stated that “[t]his case illustrates the risks facing companies of any size operating internationally that do not develop or maintain basic awareness of sanctions risks and do not institute appropriate measures to identify and prevent potential violations.”
OFAC issues new Ukraine-/Russia-related general licenses and updated FAQs
On April 25, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued Ukraine-/Russia-related General License (GL) 13R, “Authorizing the Wind Down of Certain Transactions Necessary to Divest or Transfer Debt, Equity, or Other Holdings in GAZ Group,” which authorizes all transactions ordinarily incident and necessary to the wind down of certain transactions by a non-U.S. person to another non-U.S. person through May 25, provided certain criteria are met. OFAC also issued GL 15L, “Authorizing the Wind Down of Transactions Involving GAZ Group,” which also authorizes certain transactions ordinarily incident and necessary to the wind down of transactions involving the GAZ Group, or any entity in which the GAZ Group owns, directly or indirectly, a 50 percent or greater interest. This wind down period also goes through May 25. Additionally, OFAC updated several related frequently asked questions about Ukraine-/Russia-related sanctions.
OFAC reaches $6 million settlement with logistics company
On April 25, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a roughly $6 million settlement with a freight forwarding and logistics company for allegedly processing transactions in violation of Iran-Related Sanctions Regulations, among others. According to OFAC’s web notice, between approximately January 2013 and February 2019, the company processed payments through the U.S. financial system in connection with sea, air, and rail shipments to the Democratic People’s Republic of Korea (DPRK), Iran, and Syria, involving the property or interests in property of an entity on OFAC’s Specially Designated Nationals and Blocked Persons List (SDN List) in apparent violation of OFAC sanctions. Specifically, in processing such payments, the company allegedly “failed to adopt or implement policies and controls that prevented it from conducting transactions that involved designated parties or persons in sanctioned jurisdictions.”
In arriving at the settlement amount, OFAC considered various aggravating factors, including, among other things, that (i) the company “acted with reckless disregard for U.S. economic sanctions laws when, over the period of six years, it caused at least 2,958 payments involving shipments from, to, or through sanctioned jurisdictions or the blocked property or an interest in blocked property of entities on the SDN List to be routed through U.S. financial institutions”; (ii) the company had knowledge “of the apparent violations”; and (iii) nearly “14 percent of the apparent violations were for transactions involving entities blocked by OFAC for terrorism or [weapons of mass destruction (WMD)] concerns.” OFAC also considered various mitigating factors, including that the company (i) has not received a penalty notice from OFAC in the preceding five years; (ii) “voluntarily self-disclosed the apparent violations to OFAC and cooperated with OFAC’s investigation”; and (iii) “ultimately took extensive actions to remedy its compliance gaps.”
Providing context for the settlement, OFAC stated that this “action highlights the importance of instituting strong internal controls and procedures to govern payments involving affiliates, subsidiaries, agents, or other counterparties when any of them conduct business with sanctioned jurisdictions or persons.”
OFAC sanctions facilitators of Russian sanctions evasion
On April 20, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 14024 against several entities and numerous individuals for attempting to evade sanctions imposed by the U.S. and its international partners on Russia. Included in the designations are a Russian commercial bank, a global network comprised of more than 40 individuals and entities led by a previously designated Russian oligarch (“including organizations whose primary mission is to facilitate sanctions evasion for Russian entities”), and several companies operating in Russia’s virtual currency mining industry. According to OFAC, this is the first time a virtual currency mining company has been sanctioned. In coordination with OFAC’s sanctions, the Department of State took further action by imposing visa restrictions on 635 Russian nationals and three Russian Federation officials for their involvement in human rights abuses, as well as 17 individuals responsible for undermining democracy in Belarus.
As a result of the sanctions, all property and interests in property belonging to the sanctioned entities 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 new frequently asked question guidance clarifying obligations for credit card operators with regard to payment cards issued by sanctioned Russian financial institutions. OFAC also published two Russia-related general licenses: (i) General License 28 authorizes certain transactions involving a public joint stock company that are “ultimately destined for or originating from Afghanistan”; and (ii) General License 29 authorizes the wind down of transactions involving the same public joint stock company.
Find continuing InfoBytes coverage on the U.S. sanctions response to Russia’s invasion of Ukraine here.
Treasury releases fact sheet on providing food and humanitarian support to persons impacted by Russian invasion of Ukraine
On April 19, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued a Fact Sheet for “Preserving Agricultural Trade, Access to Communication, and Other Support to Those Impacted by Russia’s War Against Ukraine” following an event on the topic held by OFAC. The Fact Sheet, among other things, highlights Treasury’s humanitarian-related or other general licenses (GL) issued to support of the people impacted by Russia’s war related to: (i) telecommunications and internet-based communications; (ii) Covid-19 and clinical trials; (iii) NGO activities; (iv) personal remittances; (v) personal maintenance of U.S. individuals; (vi) emergency medical services; (vii) government and international organization official business; (viii) overflight payments, emergency landings, and air ambulance services; (ix) civil maritime services in the Donetsk and Luhansk regions; and (x) journalistic activities.
The same day, OFAC issued a new Russia-related GL 27, “Certain Transactions in Support of Nongovernmental Organizations’ Activities,” to authorize transactions related to certain activities of NGOs in Russia and Ukraine.