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OFAC announces international terrorism sanctions
On December 22, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13224 against three members of a Brazil-based network of an international terrorist group and two connected entities for providing support to the terrorist group. According to OFAC, the terrorist group generates most of its revenue outside of the U.S., and the U.S. government has used financial tools to limit its funding streams globally, such as designating almost 300 individuals and entities affiliated with the terrorist group and other terrorist organizations throughout Afghanistan, Pakistan, the Gulf, Africa, and other regions. As a result, all property and interests in property belonging to the designated individual subject to U.S. jurisdiction are blocked, and 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 report to OFAC.” U.S. persons are generally prohibited from engaging in transactions with the designated individual unless authorized by a general or specific OFAC license or otherwise exempt. OFAC warned that the agency “can prohibit or impose strict conditions on the opening or maintaining in the United State[s] of a correspondent account or a payable-through account by a foreign financial institution that either knowingly conducted or facilitated any significant transaction on behalf of a Specially Designated Global Terrorist.” OFAC further noted that that engaging in certain transactions with the designated individual “entails risk of secondary sanctions pursuant to E.O. 13224, as amended.”
OFAC settles with bank for alleged NKSR and Foreign Narcotics Kingpin Sanctions Regulations violations
On December 23, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a roughly $115,005 settlement of two cases with a Delaware-based bank for allegedly processing transactions in violation of the North Korea Sanctions Regulations (NKSR) and the Foreign Narcotics Kingpin Sanctions Regulations. According to OFAC’s web notice, in the first matter, between December 2016 and August 2018, the bank processed 1,479 transactions totaling $382,685, and maintained nine accounts on behalf of five employees of the North Korean Mission to the United Nations without a license from OFAC. Additionally, the bank allegedly often misidentified North Korea or did not properly complete the citizenship field in the customer profiles, which resulted in failing to flag the accounts. The web notice explained that “[u]nder the [NKSR], a general license authorizing certain transactions with the North Korean Mission to the United Nations specifies that it does not authorize U.S. financial institutions to open and operate accounts for employees of the North Korean mission. It further specifies that U.S. financial institutions are required to obtain OFAC specific licenses to operate accounts for such persons.” According to the web notice, since the bank did not obtain a specific license to offer these services, its conduct resulted in apparent violations.
In arriving at the settlement amount of $105,238, OFAC considered various aggravating factors, including, among other things, that the bank (i) failed to use due caution or care in processing the 1,479 transactions, which was in violation of the NKSR for over a year; (ii) “had reason to know that it maintained accounts for North Korean nationals because at account opening, the account holders of all nine accounts presented to [the bank] North Korean passports”; and (iii) “is a large and commercially sophisticated financial institution with a global presence.” OFAC also considered various mitigating factors, including, among other things, that the bank (i) “enhanced its controls for identifying government officials of sanctioned countries”; and (ii) “updated its operating procedures to specify that reviews of customers in or affiliated with sanctioned jurisdictions must be escalated.”
In the second matter, according to the web notice, the bank allegedly maintained accounts for a U.S. resident who was on OFAC’s SDN List. The bank did not block the account and disclose to OFAC until after the fifth high-confidence sanctions screening alert was generated because the previous alerts had a “match on full name DOB and geographical location.” The bank’s fraud unit, unaware of the sanctions-related reason for account closure, then credited one of the individual’s accounts, which caused it to be re-opened. The notice reported that the failure to correctly identify the individual as a person on the SDN List was the result of human error and a breakdown in the bank’s sanctions compliance procedures. Further, “[i]n addition to incorrectly dispositioning these alerts, [the bank’s] analysts contravened [the bank’s] procedures which require alerts to be escalated if a match occurs in first and last name and any additional information field.” Such conduct resulted in 145 apparent violations of the Foreign Narcotics Kingpin Sanctions Regulations.
In arriving at the settlement amount of $9,766, OFAC considered various aggravating factors, including, among other things, that the bank (i) “failed to exercise due caution or care for U.S. economic sanctions requirements by incorrectly adjudicating high-confidence sanctions screening alerts four times over four years, despite full date-of-birth and first and last name matches”; (ii) permitted $35,514.13 in transactions by an individual on the SDN List; and (iii) “is a large and sophisticated financial institution with a global presence.” OFAC also considered various mitigating factors, including, among other things, that the bank did not appear to have had actual knowledge of the conduct that led to the apparent violations, and represented that it has terminated this conduct and has undertaken remedial measures.
OFAC sanctions Chinese tech firms
On December 16, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) added eight Chinese companies to OFAC’s Non-SDN Chinese Military-Industrial Complex Companies sanctions list. The eight Chinese technology firms were identified by OFAC pursuant to E.O. 13959, as expanded by E.O. 14032, for “actively support[ing] the biometric surveillance and tracking of ethnic and religious minorities in China.” As previously covered by InfoBytes, last month President Biden extended, for one year, the national emergency declared pursuant to E.O. 13959, as expanded by E.O. 14032, involving securities investments related to Non-SDN Chinese Military-Industrial Complex Companies. Among other things, E.O. 14032 generally prohibits U.S. persons from “the purchase or sale of any publicly traded securities, or any securities that are derivative of such securities, or are designed to provide investment exposure to such securities, of” any such companies.
Additionally, the U.S. Commerce Department’s Bureau of Industry and Security issued a final rule, amending the Export Administration Regulations through the addition of 37 new foreign entities to the Entity List after determining the entities have engaged in activities that are “contrary to the foreign policy or national security interests of the United States.” According to OFAC’s announcement, these 37 entities “include 25 PRC entities that contribute to Beijing’s efforts to develop and deploy biotechnology and other technologies for military applications and human rights abuses, including four entities previously identified in E.O. 13959, as amended.”
OFAC sanctions Central African Republic leader
On December 17, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) added a leader of a Central African Republic based militia group to OFAC’s SDN sanctions list. According to OFAC, the militia group leader was identified pursuant to E.O. 13667 for serious human rights abuses. The sanctioned individual is a leader of an entity that has engaged in the targeting of women, children, or any civilians through the commission of acts of violence, among other things, that would constitute a serious abuse or violation of human rights or a violation of international humanitarian law. As a result of the sanction, all property and interests in property of the designated individual generally must be blocked and 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.
Biden issues executive order expanding Treasury sanction authority; OFAC issues sanctions pursuant to the Kingpin Act
On December 15, President Biden issued an Executive Order (E.O.), “Imposing Sanctions on Foreign Persons Involved in the Global Illicit Drug Trade.” The E.O. was issued due to the threat of drug trafficking into the U.S of illicit drugs, which “is causing the deaths of tens of thousands of Americans annually, as well as countless more non-fatal overdoses with their own tragic human toll.” Among other provisions, the E.O authorizes the Department of Treasury to impose certain sanctions on any foreign person determined by the Secretary of the Treasury, in consultation with the Secretary of State, the Attorney General, and the Secretary of Homeland Security to have engaged in activities contributing to the international proliferation of drugs or to have knowingly received property derived from drug proliferation.
According to an announcement issued by Treasury, the E.O provides “the Treasury Department with new tools to tackle changes in the global illicit drug trade that substantially contributed to over 100,000 American overdose deaths in the 12-month period ending in April 2021.” Among other things, the E.O. “enhances the Department of Treasury’s authorities to target any foreign person engaged in drug trafficking activities, regardless of whether they are linked to a specific kingpin or cartel” and “enables Treasury to sanction foreign persons who knowingly receive property that constitutes, or is derived from, proceeds of illicit drug trafficking activities.” Under the E.O., Treasury’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to the Foreign Narcotics Kingpin Designation Act against 10 individuals and 15 entities in 4 countries “for having engaged in, or attempted to engage in, activities or transactions that have materially contributed to, or pose a significant risk of materially contributing to, the international proliferation of illicit drugs or their means of production.”
Counter ISIS Finance Group continues efforts to isolate ISIS from international financial system
On December 14, the U.S. Treasury Department 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. CIFG held its fifteenth meeting on December 6-7 to discuss ongoing efforts to combat ISIS financing worldwide. According to the statement, the “Coalition is deepening and expanding cooperation to identify and disrupt ISIS finance networks around the world, while taking steps to strengthen oversight of financial systems and non-profit sectors in vulnerable jurisdictions to prevent their abuse by terrorist groups and their supporters.” During the meeting, participants discussed ISIS financing in Africa, the Middle East, and South Asia, as well as recent judicial and administrative enforcement actions. CIFG noted that while ISIS continues to rely on the use of informal money service businesses (e.g., cash couriers and charitable appeals made through internet platforms) to move funds across borders, authorities in several key countries have coordinated measures to disrupt these activities. CIFG noted that local virtual asset service providers’ compliance with anti-money laundering and countering the financing of terrorism standards have helped as well. CIFG further stressed the importance of “ongoing vigilance” to prevent ISIS’ abuse of non-profit organizations, and “encourage[d] counterterrorism partners to share their knowledge and experiences to strengthen our fight against ISIS financing and defend the international financial system from abuse by terrorists.”
OFAC issues counter terrorism general license and related FAQs for Afghanistan
On December 10, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued Counter Terrorism General License 16 – Authorizing Noncommercial, Personal Remittances to Afghanistan. Under GL 16, “all transactions involving the Taliban or the Haqqani Network, or any entity in which the Taliban or the Haqqani Network owns, directly or indirectly, individually or in the aggregate, a 50 percent or greater interest,” that would otherwise be prohibited by the Global Terrorism Sanctions Regulations, the Foreign Terrorist Organizations Sanctions Regulations, or amended Executive Order 13224, that are “ordinarily incident and necessary to the transfer of noncommercial, personal remittances to Afghanistan, including through Afghan depository institutions, are authorized.” GL 16 does not, however, authorize (i) financial transfers to identified blocked persons (except for when executing the payment of certain taxes, fees, or other duties); (ii) “[a]ny debit to an account on the books of a U.S. financial institution of any blocked person” described within GL 16; or (iii) any transactions or activities otherwise prohibited by the aforementioned sanctions regulations and executive order. Additionally, OFAC published related amended FAQ 931 and new FAQ 949.
OFAC announces human rights abuse sanctions
On December 10, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13818 against 15 individuals and 10 entities under the Global Magnitsky Human Rights Accountability Act. According to OFAC, the sanctioned individuals and entities are connected to human rights abuse and repression in several countries. The same day, OFAC announced that it imposed investment restrictions on one company in connection with the surveillance technology sector of the People’s Republic of China’s economy, highlighting the human rights abuses allowed through technology. OFAC also noted that the actions are taken on International Human Rights Day, which marks the day the United Nations General Assembly adopted the Universal Declaration of Human Rights in 1948.
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.” OFAC noted that its regulations generally prohibit U.S. persons from participating in transactions with these persons, which include “the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any blocked person or the receipt of any contribution or provision of funds, goods or services from any such person.”
OFAC sanctions corruption networks connected to transnational organized crime
On December 8, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against 16 individuals and 24 entities across several countries in Europe and the Western Hemisphere under the Global Magnitsky Human Rights Accountability Act, which “targets perpetrators of corruption and serious human rights abuse.” These designations follow actions announced last week targeting corruption in the Democratic Republic of Congo as well as persons that contribute to repression and the undermining of democracy around the world (covered by InfoBytes here and here). OFAC also highlighted the recently released United States Strategy on Countering Corruption, which outlines a whole-of-government approach to elevating the fight against corruption, and places particular “emphasis on the transnational dimensions of the challenges posed by corruption, including by recognizing the ways in which corrupt actors have used the U.S. financial system and other rule-of-law based systems to launder their ill-gotten gains.” (Covered by InfoBytes here.) Organized crime and corruption, which are often linked, OFAC warned, undermine the integrity of the international financial system.
As a result of the sanctions, all property and interests in property belonging to the sanctioned persons 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 noted that U.S. persons are prohibited from participating in transactions with these persons, which includes “the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any blocked person or the receipt of any contribution or provision of funds, goods or services from any such person.”
OFAC sanctions persons linked to Democratic Republic of Congo
On December 6, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13818 against an individual and 12 associated entities in the Democratic Republic of the Congo and Gibraltar under the Global Magnitsky Human Rights Accountability Act. All of the designated persons have allegedly provided support for a previously sanctioned billionaire, OFAC stated, adding that these measures build upon Treasury’s commitment to “supporting the Democratic Republic of the Congo’s anti-corruption efforts by going after those that abuse the political system for economic gain and unfairly profit from the Congolese state.” 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 noted that its regulations generally prohibit U.S. persons from participating in transactions with these individual and entities unless authorized by a general or specific license. This includes “the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any blocked person or the receipt of any contribution or provision of funds, goods, or services from any such person.”