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On October 26, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) designated the Iranian Ministry of Petroleum and two oil companies, as well as multiple entities and individuals, including front companies, subsidiaries, and senior executives, for allegedly providing financial support to Iran’s Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF), pursuant to Executive Order 13224. Additionally, OFAC designated four persons involved in the sale of Iranian gasoline to “the illegitimate Maduro regime in Venezuela.” As a result, all property and interests in property belonging to the identified individuals subject to U.S. jurisdiction are blocked, and “any entities that are owned, directly or indirectly, 50 percent or more by such persons, are also blocked.” U.S. persons are generally prohibited from dealing with any property or interests in property of blocked or designated persons, and OFAC warned foreign financial institutions that if they knowingly facilitate significant transactions for the designated persons they “risk exposure to sanctions that could sever their access to the U.S. financial system or block their property and interests in property under U.S. jurisdiction.”
Concurrently, OFAC issued amended General License 8A, “Authorizing Certain Humanitarian Trade Transactions Involving the Central Bank of Iran or the National Iranian Oil Company,” which replaces and supersedes GL 8 and allows certain humanitarian trade transactions involving one of the designated oil entities.
On October 22, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order (E.O.) 13848 against five Iranian entities for allegedly attempting to influence the U.S. electoral process. According to OFAC, these designations are intended to “counter efforts” from foreign actors that “spread disinformation online and execut[e] malign influence operations aimed at misleading U.S. voters.” Three of the entities, including the Islamic Revolutionary Guard Corps (IRGC) and the IRGC-Qods Force (IRGC-QF), are designated “for having directly or indirectly engaged in, sponsored, concealed, or otherwise been complicit in foreign interference in the 2020 U.S. presidential election.” Two other entities are designated for being owned or controlled by the IRGC-QF, which, along with the IRGC, has been designated under a number of authorities since 2007. As a result, all property and interests in property belonging to, or owned by, the designated persons subject to U.S. jurisdiction are blocked, and “any entities 50 percent or more owned by one or more designated persons are also blocked.”
The same day, OFAC also sanctioned an IRGC-QF general pursuant to E.O. 13224 for allegedly “exploit[ing] his position as the Iranian regime’s ambassador in Iraq to obfuscate financial transfers conducted for the benefit of the IRGC-QF.” According to OFAC, the designated individual, among other things, allegedly facilitated financial transfers benefiting the IRGC-QF, and helped “IRGC-QF obtain foreign currency in Iraq, in return for equivalent sums that the IRGC-QF in Iran has transferred to relevant entities.”
As a result of OFAC’s recent actions, all property and interests in property belonging to, or owned by, the designated persons subject to U.S. jurisdiction are blocked. U.S. persons are also “generally prohibited from engaging in transactions” with the designated individuals. OFAC further warned foreign financial institutions that knowingly facilitating significant transactions or providing significant support to the designated entities may subject them to sanctions and could terminate access to the U.S. financial system.
On October 8, the U.S. Treasury Department announced that the Secretary of the Treasury, in consultation with the Secretary of State, sanctioned 18 major Iranian banks, consistent with E.O. 13902, which identified Iran’s financial sector “as an additional avenue that funds the Iranian government’s malign activities.” E.O. 13902 provides Treasury with the authority to sanction any Iranian financial institution. The sanctioned banks include 16 banks operating in Iran’s financial sector and one bank that is owned or controlled by a sanctioned Iranian bank. In addition, OFAC sanctioned an Iranian military-affiliated bank under Treasury’s counter-proliferation authority pursuant to E.O. 13382. “Today’s action to identify the financial sector and sanction eighteen major Iranian banks reflects our commitment to stop illicit access to U.S. dollars,” Treasury Secretary Steven T. Mnuchin stated. OFAC noted that the sanctions under E.O. 13902 do not affect existing authorizations and exceptions for humanitarian trade (covered by a Buckley Special Alert), “which remain in full force and effect for these seventeen banks.”
As a result, all property and interests in property of the designated entities that are in the U.S. or in the possession or control of U.S. persons must be blocked and reported to OFAC. U.S. persons are also generally prohibited from engaging in transactions with the designated entities. OFAC is providing a 45-day period for non-U.S. persons to wind down non-humanitarian transactions that may become subject to sanctions as a result of the designations. OFAC further warned that “financial institutions and other persons that engage in certain transactions or activities with the sanctioned entities after a 45-day wind-down period may expose themselves to secondary sanctions or be subject to an enforcement action.”
Concurrent with the action, OFAC issued General License L, which outlines transactions and activities involving the sanctioned entities “that are authorized, exempt, or otherwise not prohibited under the Iranian Transactions and Sanctions Regulations.” Additional guidance is also provided in recently issued FAQs.
On September 24, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $473,157 settlement with a California-based equipment and software company for six apparent violations of the Iranian Transactions and Sanctions Regulations (ITSR). According to OFAC’s web notice, from roughly January 2016 to June 2016, the company—through a former subsidiary it had since merged with—allegedly reexported U.S. export-controlled test measurement equipment to Iran. Among other things, OFAC noted that prior to the merger, the subsidiary “committed to cease all existing and future business” with certain sanctioned countries, including Iran. However, after the acquisition, certain subsidiary personnel continued to engage in transactions with Iran, with three employees taking “measures to obfuscate from [the company] their dealings with Iran.”
In arriving at the settlement amount, OFAC considered various aggravating factors, including that (i) the subsidiary willfully violated the ITSR by shipping products in order to bypass the company’s directive to cease Iran-related business; and (ii) some of the subsidiary’s senior branch and sales managers knowingly participated in the apparent violations.
OFAC also considered various mitigating factors, including that the company (i) fully cooperated with OFAC’s investigation; (ii) undertook several remedial measures, such as terminating the appropriate employees; (iii) “assess[ed] past and current transactions for compliance with OFAC regulations, implement[ed] mechanisms to halt current transactions, and ensur[ed] that no further transactions involved restricted countries”; and (iv) enhanced its sanctions compliance program to minimize the risk of similar violations from occurring in the future.
On September 21, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) designated three high-ranking individuals of the Atomic Energy Organization of Iran (AEOI), numerous AEOI subsidiaries, equipment supply companies, and various senior officials working on Iran’s missile programs pursuant to Executive Order (E.O.) 13382, which allows for sanctions for engaging in or supporting the proliferation of weapons of mass destruction (WMD). As a result of the sanctions, all property and interests in property of the designated persons that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC. OFAC further warned foreign financial institutions that knowingly facilitating significant transactions or providing significant support to the designated entities may subject them to sanctions and could sever access to the U.S. financial system.
In addition, the U.S. Department of Treasury announced a new Executive Order titled, "Blocking Property of Certain Persons with Respect to the Conventional Arms Activities of Iran,” which authorizes the Secretary of the Treasury, in conjunction with the Secretary of State, to impose asset blocking sanctions on any person engaged in any activity that materially contributes to the supply, sale, or transfer of destabilizing conventional weapons and acquisition of arms and related materiel by Iran.
On September 17, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) sanctioned an Iranian cyber threat group, 45 associated individuals, and one additional “front company” for allegedly being involved in a Government of Iran (GOI) malware campaign targeting international travel companies, Iranian dissidents, and journalists. Specifically, OFAC alleges that the front company “advances Iranian national security objectives and the strategic goals of Iran’s Ministry of Intelligence and Security (MOIS) by conducting computer intrusions and malware campaigns against perceived adversaries.” OFAC asserts that the 45 individuals provided support for MOIS cyber intrusions by serving as managers, programmers, and hacking experts. The front company has allegedly targeted hundreds of individuals and entities from more than 30 different countries, including using “malicious cyber intrusion tools” to target approximately 15 U.S. companies primarily in the travel sector.
As a result, all property and interests in property belonging to, or owned by, the identified individuals subject to U.S. jurisdiction are blocked, and “any entities 50 percent or more owned by one or more designated persons are also blocked.” U.S. persons are also generally prohibited from engaging in transactions with the designated individuals.
The FBI also issued a Public Intelligence Alert on the Iranian cyber threat group.
On September 3, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) designated six entities, pursuant to Executive Order 13846, for allegedly providing support to a petrochemical company previously designated for “transfer[ing] the equivalent of hundreds of millions of dollars’ worth of exports from the National Iranian Oil Company (NIOC), which helps to finance Iran’s Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF) and its terrorist proxies.” According to OFAC, the designated entities “materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of” the sanctioned petrochemical company by, among other things, (i) selling and purchasing thousands of tons of petrochemicals on behalf of the company; (ii) brokering the sales of petrochemicals for the company; (iii) facilitating the shipment and resale of petrochemical products for the company; and (iv) processing millions of dollars in proceeds of petrochemical sales.
As a result of the sanctions, all property and interests in property of the designated persons that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC. OFAC further warned foreign financial institutions that knowingly facilitating significant transactions or providing significant support to the designated entities may subject them to sanctions and could sever access to the U.S. financial system.
On August 21, the FDIC, Federal Reserve Board, FinCEN, NCUA, and OCC issued a joint statement clarifying that banks should ensure customers who may be considered “politically exposed persons” (PEPs) be subject to customer due diligence matching the risk levels posed by the relationships. In general, while PEPs are not defined within the Bank Secrecy Act/Anti-Money Laundering (BSA/AML) regulations, they commonly refer to “foreign individuals who are or have been entrusted with a prominent public function, as well as their immediate family members and close associates.” U.S. public officials are not included. Specifically, the agencies emphasized that not all individuals who might qualify as PEPs “are high risk solely by virtue of their status.” While FinCEN’s customer due diligence rule (CDD rule), requires banks to identify and verify the identities of new account holders, assess the riskiness of these customer relationships, and conduct ongoing monitoring (see InfoBytes coverage of the CDD Rule here), the agencies note that “the CDD rule does not create a regulatory requirement, and there is no supervisory expectation, for banks to have unique, additional due diligence steps for customers who are considered PEPs. Instead, the level and type of CDD should be appropriate for the customer risk.”
The joint statement also outlines a number of considerations for banks to take into account when evaluating a PEP’s risk level, including the type of products and services used, the volume and nature of transactions, the nature of the customer’s authority or influence over government activities or officials, and the customer’s access to significant government assets or funds. Among other impacts, the agencies note that the customer risk profile may effect “how the bank complies with other regulatory requirements, such as suspicious activity monitoring, since the bank structures its BSA/AML compliance program to address its risk profile, based on the bank’s assessment of risks.” The joint statement also rescinds the 2001 Guidance on Enhanced Scrutiny for Transactions that May Involve the Proceeds of Foreign Corruption related to foreign PEPs.
The agencies emphasized, however, that the joint statement does not change existing BSA/AML legal or regulatory requirements, nor does it “require banks to cease existing risk management practices if the bank considers them necessary to effectively manage risk.”
OFAC sanctions persons for providing support to Iranian airline, DOJ files concurrent criminal charges
On August 19, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) designated two companies, as well as the owner of one of the companies, pursuant to Executive Order 13224 for allegedly providing material support to an Iranian airline previously “designated under counterterrorism authorities for support to Iran’s Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF), as well as under a counter proliferation authority that targets weapons of mass destruction proliferators and their supporters.” According to OFAC, the designated persons allegedly provided services to assist the airline sustain its fleet of aircraft and allow it to support the IRGC-QF, as well as transport Iranian technicians and technical equipment to Venezuela to support the Maduro regime. The designations follow a recent OFAC action that targeted a China-based company for allegedly acting as a general sales agent for or on behalf of the Iranian airline (covered by InfoBytes here), and serves as “another warning to the international aviation community of the sanctions risk for individuals and entities that choose to maintain commercial relationships with [the Iranian airline] and other designated airlines.” As a result of the sanctions, all property and interests in property of the designated persons that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC. OFAC further 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 blocked or designated persons, unless licensed or exempt,” and warned foreign financial institutions that knowingly facilitating significant transactions or providing significant financial services to the designated persons may subject them to U.S. correspondent account or payable-through sanctions.
On the same day, the DOJ announced criminal charges against the designated individual and one of the companies for allegedly conspiring to violate U.S. export laws, defraud the U.S., and violate the International Emergency Economic Powers Act (IEEPA) and the Iranian Transactions and Sanctions Regulations (ITSRs).
On July 28, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $824,314 settlement with a Pennsylvania-based cookware coating manufacturer for 74 apparent violations of the Iranian Transactions and Sanctions Regulations. According to OFAC, between November 2012 and December 2015, two of the company’s foreign subsidiaries allegedly sold coatings intended for customers in Iran and engaged in trade-related transactions with Iran, despite changes to OFAC’s Iran sanctions program, which prohibited such transactions. In addition, OFAC stated that in 2013, once the company realized that these sales may be problematic, some of its U.S. employees devised and facilitated a plan to continue sales from the two subsidiaries by using third-party distributers and avoiding referencing Iran on documentation.
In arriving at the settlement amount, OFAC considered various mitigating factors, including that the apparent violations were non-egregious and (i) the company voluntarily disclosed the violations and cooperated with the investigation; and (ii) the company has undertaken significant remedial efforts to address the deficiencies and minimize the risk of similar violations from occurring in the future, including appointing compliance monitors and outside counsel, making changes to its leadership, and adopting compliance and training policies.
OFAC also considered various aggravating factors, including that the company (i) failed to implement appropriate compliance policies “commensurate with selling to a high-risk jurisdiction such as Iran”; (ii) took “affirmative steps” to help the foreign subsidiaries continue to sell to Iran through indirect channels even though it knew the sales were problematic; and (iii) senior management, including U.S. employees, had actual knowledge of the conduct leading to the alleged violations and continued to facilitate transactions with Iran.
- Daniel R. Alonso to discuss "Independent monitoring in the United States" at the World Compliance Association Peru Chapter IV International Conference on Compliance and the Fight Against Corruption
- Jonice Gray Tucker to discuss "Cyber security, incident response, crisis management" at the Legal & Diversity Summit
- Jonice Gray Tucker to discuss "The future of fair lending" at the Mortgage Bankers Association Regulatory Compliance Conference
- Michelle L. Rogers to discuss "Major litigation" at the Mortgage Bankers Association Regulatory Compliance Conference
- Kathryn L. Ryan to discuss "Pandemic fallout – Navigating practical operational challenges" at the Mortgage Bankers Association Regulatory Compliance Conference
- Jonice Gray Tucker to discuss "Consumer financial services" at the Practising Law Institute Banking Law Institute
- Daniel P. Stipano to discuss "BSA/AML - Covid impact and regulatory/guidance roundup" at an NAFCU webinar
- Daniel P Stipano to moderate "Digital identity: The next gen of CIP" at the American Bankers Association/American Bar Association Financial Crimes Enforcement Conference