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OFAC sanctions al-Qa’ida-linked financial facilitators
On July 28, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13224 against one Turkey-based al-Qa’ida financial facilitator for providing material assistance to al-Qa’ida and one Syria-based terrorist fundraiser and recruiter for providing material support to Hay’et Tahrir Al-Sham (HTS). According to OFAC, the designations “expose the continued efforts by al-Qa’ida and HTS to use the global formal financial system and highlight the need for continued vigilance against terrorist fundraising and recruitment on the internet.” As a result of the sanctions, all property and interests in property belonging to the sanctioned individuals, and “any entities that are owned, directly or indirectly, 50 percent or more by them, individually, or with other blocked persons,” that are subject to U.S. jurisdiction must be blocked and reported to OFAC. OFAC 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. Furthermore, OFAC cautioned that “engaging in certain transactions with the individuals designated today entails risk of secondary sanctions,” and warned foreign financial institutions that if they knowingly facilitate significant transactions on behalf of a Specially Designated Global Terrorist, OFAC may prohibit or impose strict conditions on their opening or maintaining of correspondent accounts or payable-through accounts in the U.S.
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 sanctions Cuban officials
On July 22, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13818 against one Cuban individual and one Cuban entity under the Global Magnitsky Human Rights Accountability Act. According to OFAC, the sanctioned parties are connected with the repression of peaceful, pro-democratic protests in Cuba that began on July 11. As a result of the sanctions, all transactions by U.S. persons or in the U.S. that involve any property or interests in property of designated or otherwise blocked persons are generally prohibited. OFAC notes 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 reaches multiple settlements with companies that conspired to export equipment to Iran
On July 19, OFAC announced a $415,695 settlement with the United Arab Emirates (UAE)-based head regional office of a Sweden-based equipment company for apparent violations of the Iranian Transactions and Sanctions Regulations (ITSR). According to OFAC’s website notice, between 2015 and 2016, the UAE company allegedly conspired with Dubai- and Iran-based companies to export equipment from the U.S. to Iran. As a result, the UAE company caused its U.S.-based affiliate to indirectly export goods to Iran by incorrectly listing a Dubai-based company on its export documentation as the end-user. The conspiracy also allegedly included the organization of additional sales of the equipment in the same manner as the initial sale, which ultimately ended when the U.S. Department of Commerce’s Bureau of Industry and Security requested post-shipment verification that showed certain products in question were reexported to Iran.
In arriving at the settlement amount, OFAC considered various aggravating factors, including that (i) the UAE company did not voluntarily self-disclose the apparent violations; (ii) the UAE company “willfully violated the ITSR” by conspiring to export goods from the U.S. to Iran by “obfuscating the end-user’s identity from its U.S. affiliate,” thus causing the U.S. affiliate to violate the ITSR; (iii) multiple managers had actual knowledge of the conduct giving rise to the apparent violations; and (iv) the UAE company “caused harm to the integrity of the ITSR by circumventing U.S. sanctions and conferring an economic benefit to Iran’s energy sector.”
OFAC also considered various mitigating factors, including that (i) none of the relevant subsidiaries, including the UAE company, have received a penalty notice from OFAC in the preceding five years; (ii) the UAE company, through the U.S. affiliate, conducted an internal investigation resulting in numerous remedial measures, including taking disciplinary actions against participating individuals, adopting an enhanced review and screening process for Iran-related transactions, and conducting additional in-person training; and (iii) the UAE company, through the U.S. affiliate, provided substantial cooperation to OFAC during the investigation.
OFAC separately reached a $16,875 settlement with a Virginia-based U.S. subsidiary for its apparent ITSR violations arising from this matter. The Virginia subsidiary did not voluntarily self-disclose the apparent violations, but agreed to the settlement on behalf of a former Pennsylvania-based subsidiary that allegedly referred a known Iranian business opportunity to its foreign affiliate in Dubai. This foreign affiliate, OFAC claimed, then “orchestrated a scheme to export goods” from the U.S. to Iran.
OFAC issues advisory for China and Hong Kong
On July 16, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), along with the Departments of State, Treasury, Commerce, and Homeland Security, issued an advisory on the risks associated with actions carried out by the Government of the People’s Republic of China and the Government (PRC) of the Hong Kong Special Administrative Region (SAR) that may impact U.S. companies operating in the Hong Kong SAR of the People’s Republic of China. The advisory divides risks into four categories: (i) risks for businesses following the imposition of the NSL; (ii) data privacy risks; (iii) risks regarding transparency and access to critical business information; and (iv) risks for businesses with exposure to sanctioned Hong Kong or PRC entities or individuals. As previously covered by InfoBytes, OFAC issued regulations implementing Executive Order (E.O.) 13936 issued last July. E.O. 13936, among other things, targets and authorizes the imposition of sanctions on persons who materially assist, sponsor, or provide financial, material, or technological support to activities contributing to the undermining of Hong Kong’s democracy and autonomy (covered by InfoBytes here). In addition to the advisory, OFAC added several individuals and entities to its Specially Designated Nationals List.
OFAC issues advisory for China’s Xinjiang region
On July 13, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), along with the Departments of State, Commerce, Homeland Security, and Labor, as well as the Office of the U.S. Trade Representative, issued an updated advisory on the risks for businesses with possible exposure in their supply chain to entities involved in human rights abuses in the Xinjiang Region. The recent advisory updates the original version released in July 2020 (covered by InfoBytes here), which was issued after OFAC announced sanctions pursuant to Executive Order 13818 against a Chinese government entity and four current or former government officials for alleged corruption violations of the Global Magnitsky Human Rights Accountability Act. The updated advisory outlines risks to be considered when “assessing business partnerships with, investing in, sourcing from, or providing other support to companies operating in Xinjiang, linked to Xinjiang, or with laborers from Xinjiang.”
OFAC issues new general license and related FAQs involving Venezuela
On July 12, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued General License (GL) 40, “Authorizing Certain Transactions Involving the Exportation or Reexportation of Liquefied Petroleum Gas to Venezuela.” GL 40 permits transactions and activities otherwise prohibited by Executive Order 13884 (covered by InfoBytes here) involving “the Government of Venezuela, Petróleos de Venezuela, S.A. (PdVSA), or any entity in which PdVSA owns, directly or indirectly, a 50 percent or greater interest.” OFAC also published two new FAQs, 914 and 915, related to GL 40.
OFAC sanctions officials and family connected to Burmese military
On July 2, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 14014 against 22 individuals connected to Burma’s military regime. The designations include seven key military members, along with 15 individuals identified as either the spouses or adult children of previously sanctioned senior military officials “whose financial networks have contributed to military officials’ ill-gotten gains.” The sanctions complement new restrictions imposed on four entities that have provided support for the Burmese military by the U.S. Department of Commerce’s Bureau of Industry and Security. As a result of the sanctions, all property and interests in property belonging to the identified individuals subject to U.S. jurisdiction are blocked and must be reported to OFAC. Additionally, “any entities that are owned, directly or indirectly, in the aggregate, 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 individuals, unless exempt or authorized by a general or specific license.
OFAC removes sanctions on International Criminal Court
On July 2, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued a final rule removing the International Criminal Court-Related Sanctions Regulations from the Code of Federal Regulations. The final rule is issued pursuant to Executive Order (E.O.) 14022, which was published in April and terminated a national emergency declared in E.O. 13928, “Blocking Property of Certain Persons Associated with the International Criminal Court,” which, among other things, authorized the federal government to block the assets and suspend entry into the United States of certain International Criminal Court (ICC) officials, employees, and agents, as well as their immediate family members. President Biden issued E.O. 14022 to revoke E.O. 13928, finding that, “although the United States continues to object to the [ICC’s] assertions of jurisdiction over personnel of such non-States Parties as the United States and its allies absent their consent or referral by the United Nations Security Council and will vigorously protect current and former United States personnel from any attempts to exercise such jurisdiction, the threat and imposition of financial sanctions against the Court, its personnel, and those who assist it are not an effective or appropriate strategy for addressing the United States’ concerns with the ICC.” As such, OFAC’s final rule formally rescinds the sanctions regulations effective July 6.
FinCEN issues first government-wide AML/CFT priorities
On June 30, the Financial Crimes Enforcement Network (FinCEN) issued the first government-wide priorities for anti-money laundering and countering the financing of terrorism (AML/CFT) policy (AML/CFT Priorities) pursuant to the Anti-Money Laundering Act of 2020 (AML Act). The AML/CFT Priorities were established in consultation with the Treasury Department’s Office of Foreign Assets Control, SEC, CFTC, IRS, state financial regulators, law enforcement, and national security agencies, and highlight key threat trends as well as informational resources to assist covered institutions manage their risks and meet their obligations under laws and regulations designed to combat money laundering and counter terrorist financing. According to the AML/CFT Priorities, the most significant AML/CFT threats currently facing the U.S. (in no particular order) are corruption, cybercrime, domestic and international terrorist financing, fraud, transnational criminal organization activity, drug trafficking organization activity, human trafficking and human smuggling, and proliferation financing. FinCEN further noted it will update the AML/CFT Priorities to highlight new or evolving threats at least once every four years as required under the AML Act, and issued a separate statement providing additional clarification for covered institutions.
Separately, the Federal Reserve Board, FDIC, NCUA, OCC, state bank and credit union regulators, and FinCEN also issued a joint statement providing clarity for banks on the AML/CFT Priorities. The statement emphasized that the publication of the AML/CFT Priorities “does not create an immediate change to Bank Secrecy Act (BSA) requirements or supervisory expectations for banks.” Rather, within 180 days of the establishment of the AML/CFT Priorities, FinCEN will promulgate regulations, as appropriate, in consultation with the federal functional regulators and relevant state financial regulators. The federal banking agencies noted that they intend to revise their BSA regulations as needed to address how the AML/CFT priorities will be incorporated into BSA requirements for banks, adding that banks will not be required to incorporate the AML/CFT Priorities into their risk-based BSA compliance programs until the effective date of the final revised regulations. However, banks may choose to begin considering how they intend to incorporate the AML/CFT Priorities, “such as by assessing the potential related risks associated with the products and services they offer, the customers they serve, and the geographic areas in which they operate.” Moreover, the statement confirmed that federal and state examiners will not examine banks for the incorporation of the AML/CFT Priorities into their risk-based BSA programs until the final revised regulations take effect.