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  • OFAC clarifies impact of sanctions on humanitarian assistance and trade

    Financial Crimes

    On June 14, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued a Fact Sheet for “Provision of Humanitarian Assistance and Trade to Combat COVID-19.” The Fact Sheet, among other things, highlights Treasury’s humanitarian-related or other general licenses (GL) issued to support people impacted by Covid-19 across Iran, Venezuela, North Korea, Syria, Cuba, and Russia. Relatedly, OFAC issued Iran-related GL N-2, Venezuela-related GL 39B, and Syria-related GL 21B to authorize transactions and activities related to the prevention, diagnosis, or treatment of Covid-19, as well as several amended FAQs.

    Financial Crimes Of Interest to Non-US Persons Department of Treasury OFAC OFAC Designations OFAC Sanctions Iran Syria North Korea Cuba Russia Venezuela Covid-19

  • OFAC sanctions Syrian financial facilitators allied with IRGC-QF

    Financial Crimes

    On May 30, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Order 13582 and the Caesar Syrian Civilian Protection Act of 2019 (Caesar Act), against two Syrian money service businesses and the three owners and operators of Al-Fadel Exchange, which have secretly helped the Syrian regime under Bashar al-Assad and its Hizballah and Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF) allies maintain access to the international financial system in violation of international sanctions. Both E.O. 13582 and the Caesar Act underscore the gravity of enabling violent regimes to circumvent sanctions. These sanctions come on the heels of OFAC’s March 28 designation, also pursuant of the Caesar Act, of individuals involved in Syria’s drug production and trafficking (previously covered by InfoBytes here). As a result of these sanctions, “all property and interests in property of these persons which are in or come within the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC. In addition, 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 also generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons. Additionally, “persons that engage in certain transactions with the persons designated today may themselves be exposed to sanctions or subject to an enforcement action.”

    Financial Crimes Of Interest to Non-US Persons Department of Treasury OFAC OFAC Designations OFAC Sanctions SDN List Syria

  • Multinational tech company to pay $3.3 million for OFAC and BIS violations

    Financial Crimes

    On April 6, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), in consultation with the Department of Commerce’s Bureau of Industry and Security (BIS), announced a $3.3 million settlement with a multinational technology company to resolve potential civil liabilities stemming from the exportation of services or software from the United States to sanctioned jurisdictions and to Specially Designated Nationals (SDNs) or blocked persons. The settlement comprised an agreement with OFAC to pay a civil penalty of $2,980,264.86 and an administrative penalty of $624,013 with BIS. In light of the related OFAC action, the company was given a $276,382 credit by BIS contingent upon the company fulfilling its requirements under the OFAC settlement agreement, resulting in a combined overall penalty amount of $3,327,896.86.

    According to OFAC’s web notice, the conduct underlying the administrative penalty imposed by BIS stemmed from certain conduct involving the company’s Russian subsidiary. The conduct underlying the settlement with OFAC took place between July 2012 and April 2019, when the company and certain subsidiaries allegedly “sold software licenses, activated software licenses, and/or provided related services from servers and systems located in the United States and Ireland to SDNs, blocked persons, and other end users located in Cuba, Iran, Syria, Russia, and the Crimea region of Ukraine.” The total value of the 1,339 apparent violations was more than $12 million. OFAC alleged that the causes of these apparent violations stemmed from a lack of complete or accurate information on end customers for the company’s products, and that during the relevant time period, there were shortcomings in the company’s restricted-party screening controls. Among other things, OFAC alleged that the company’s screening architecture did not aggregate identifying information across its various databases to identify SDNs or blocked persons, failed to screen and evaluate pre-existing customers in a timely fashion, and missed common variations of restricted party names.

    In arriving at the $2,980,265.86 settlement amount, OFAC considered various mitigating factors, including that (i) evidence did not show that persons located in U.S. offices or management were aware of the alleged activity at the time (the apparent violations were revealed during a self-initiated look back); (ii) upon identifying the apparent violations, the company self-disclosed the matter to OFAC, conducted a retrospective review of thousands of past transactions, cooperated with OFAC throughout the investigation, terminated the accounts of the SDNs or blocked persons, and updated internal procedures to disable access to products or services upon discovery of a sanctioned party; and (iii) the company “undertook significant remedial measures and enhanced its sanctions compliance program through substantial investment and structural changes.” OFAC outlined several compliance considerations for companies conducting business through foreign-based subsidiaries, distributors, and resellers, and reminded businesses that OFAC’s SDN List is dynamic, and that when changes to the list are made, “companies should evaluate their pre-existing trade relationships to avoid dealings with prohibited parties.”

    Financial Crimes Of Interest to Non-US Persons OFAC Department of Treasury OFAC Sanctions OFAC Designations Enforcement Settlement Department of Commerce Cuba Iran Syria Ukraine Russia

  • OFAC sanctions individuals involved in Syria’s drug production and trafficking

    Financial Crimes

    On March 28, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) designated key individuals for supporting the regime of Syrian President Bashar al-Assad and the regime’s billion-dollar illicit drug production and trafficking enterprise. Taken in coordination with the UK, the designations, issued pursuant to Executive Orders 13572, 13582, and 13224, “also highlight the important role of Lebanese drug traffickers—some of whom maintain ties to Hizballah—in facilitating the export of Captagon[,]” the dangerous amphetamine at issue. 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.” U.S. persons are also generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons. Persons that engage in certain transactions with the designated individuals or entities may themselves be exposed to sanctions or subject to an enforcement action, OFAC warned.

    Financial Crimes Of Interest to Non-US Persons OFAC Department of Treasury OFAC Sanctions OFAC Designations Syria SDN List UK

  • OFAC issues sanctions compliance guidance for transactions related to Syrian earthquake disaster relief

    Financial Crimes

    On February 21, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued sanctions compliance guidance for authorized transactions related to Syrian earthquake disaster relief. The OFAC Compliance Communique: Guidance on Authorized Transactions Related to Earthquake Relief Efforts in Syria responds to questions from nongovernmental organizations and the general public on how to provide assistance and funding to earthquake relief efforts in Syria that would otherwise be prohibited by the Syrian Sanctions Regulations. As previously covered by InfoBytes, earlier in February, OFAC issued Syria General License (GL) 23 to authorize certain transactions ordinarily prohibited by OFAC sanctions. Among other things, GL 23 informed U.S. financial institutions and U.S. registered money transmitters that they “may rely on the originator of a funds transfer with regard to compliance” for transactions related to earthquake relief efforts in Syria, provided that the financial institution does not know or have reason to know that the funds transfer is not related to such efforts.

    Financial Crimes Of Interest to Non-US Persons Department of Treasury OFAC OFAC Sanctions OFAC Designations Syria

  • OFAC authorizes certain transactions to aid Syrian earthquake disaster relief

    Financial Crimes

    On February 9, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued Syria General License (GL) 23 to authorize, for 180 days, all transactions related to earthquake relief efforts that would ordinarily be prohibited by the Syrian Sanctions Regulations (SySR). Specifically, authorizations under GL 23 include “the processing or transfer of funds on behalf of third-country persons to or from Syria in support of” transactions related to earthquake relief efforts in the country. Additionally, “U.S. financial institutions and U.S. registered money transmitters may rely on the originator of a funds transfer with regard to compliance” for transactions related to earthquake relief efforts in Syria, provided that the financial institution does not know or have reason to know that the funds transfer is not related to such efforts. GL 23 does not permit any transactions prohibited under the SySR related to the importation of petroleum or petroleum products of Syrian origin into the U.S., or any transactions involving persons “whose property and interests in property are blocked pursuant to the SySR, other than persons who meet the definition of the term Government of Syria, as defined in section 542.305(a) of the SySR, unless separately authorized.” Additionally, OFAC advised financial institutions and others who may be engaged in disaster relief activities for Syria to contact OFAC directly to seek specific licenses or guidance should they believe their activities are not covered by existing authorizations or exemptions.

    Financial Crimes Of Interest to Non-US Persons Department of Treasury OFAC OFAC Sanctions OFAC Designations Syria Money Service / Money Transmitters

  • OFAC sanctions individuals and entities tied to ISIS

    Financial Crimes

    On January 5, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13224 against a key financial facilitation network of the Islamic State of Iraq and Syria (ISIS), which includes four individuals and two entities in Türkiye who are connected to the group’s recruitment and financial transfers to and from Iraq and Syria. According to OFAC, the designated network has “played a key role in money management, transfer, and distribution for ISIS in the region.” The Turkish Ministry of Treasury and Finance, in collaboration with the Ministry of Interior, also implemented an asset freeze against members of this network. 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. U.S. persons are also generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons. Persons that engage in certain transactions with the designated individuals or entities may themselves be exposed to secondary sanctions, OFAC warned, adding that “OFAC 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 has knowingly conducted or facilitated any significant transaction on behalf of a Specially Designated Global Terrorist (SDGT).”

    Financial Crimes Of Interest to Non-US Persons Department of Treasury OFAC OFAC Sanctions OFAC Designations SDN List Iraq Syria ISIS

  • OFAC, FinCEN take action against virtual currency exchange

    Financial Crimes

    On October 11, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), together with the Financial Crimes Enforcement Network (FinCEN), announced two settlements for more than $24 million and $29 million, respectively, with a Washington state-based virtual currency exchange. According to OFAC’s announcement, this is the agency’s largest virtual currency enforcement action to date, and represent the first parallel actions taken by FinCEN and OFAC in this space.

    OFAC settlement. OFAC’s web notice stated that between March 28, 2014 and December 31, 2017, the exchange operated 1,730 accounts that processed 116,421 virtual currency-related transactions totaling roughly $263,451,600.13, in apparent violation of OFAC sanctions against Cuba, Ukraine, Iran, Sudan, and Syria. Specifically, due to alleged deficiencies in the exchange’s sanctions compliance procedures, the exchange failed to prevent persons located in the sanctioned jurisdictions from using its platform to engage in more than $263,000,000 worth of virtual currency-related transactions. OFAC claimed that while the IP addresses and physical address information collected on each customer at onboarding should have given the exchange reason to know that the persons were located in jurisdictions subject to sanctions, the exchange did not “screen customers or transactions for a nexus to sanctioned jurisdictions.” Rather, the exchange only screened transactions for hits against lists including OFAC’s List of Specially Designated Nationals and Blocked Persons. In arriving at the settlement amount of $24,280,829.20, OFAC considered various aggravating factors, including that the exchange did not exercise due caution or care for its sanctions compliance obligations and conveyed economic benefit to persons located in jurisdictions subject to OFAC sanctions, thus causing harm to the integrity of multiple sanctions programs. OFAC also considered various mitigating factors, including that the exchange provided substantial cooperation throughout the investigation, most of the transactions were for a relatively small amount and represented a small percentage when compared to the exchange’s annual volume of transactions, and the exchange has undertaken remedial measures intended to minimize the risk of recurrence of similar conduct.

    FinCEN settlement. According to FinCEN’s press release, an investigation found that from February 2014 through December 2018, the exchange failed to maintain an effective AML program, resulting in its inability to appropriately address risks associated with its products and services, including anonymity-enhanced cryptocurrencies. The exchange also failed to effectively monitor transactions on its trading platform, and relied “on as few as two employees with minimal anti-money laundering training and experience to manually review all of the transactions for suspicious activity, which at times were over 20,000 per day.” FinCEN claimed that the exchange conducted more than 116,000 transactions valued at over $260 million with persons located in jurisdictions subject to OFAC sanctions, including those operating in Iran, Cuba, Sudan, Syria, and the Crimea region of Ukraine, and failed to file suspicious activity reports (SARs) between February 2014 and May 2017. The exchange also “failed to file SARs on a significant number of transactions involving sanctioned jurisdictions, including the processing of over 200 transactions that involved $140,000 worth of virtual assets—nearly 100 times larger than the average withdrawal or deposit on the Bittrex platform—and 22 transactions involving over $1 million worth of virtual assets,” FinCEN said in its announcement. Under the terms of the consent order, the exchange—which admitted to willfully violating the Bank Secrecy Act (BSA) and its implementing regulations—will pay a $29,280,829.20 civil money penalty. FinCEN stated it will credit the $24,280,829.20 the exchange has agreed to pay for the OFAC violations.

    During remarks delivered at the Association of Certified Anti-Money Laundering Specialists, Under Secretary for Terrorism and Financial Intelligence Brian Nelson discussed, among other topics, Treasury’s efforts to counter illicit finance. Nelson highlighted the aforementioned settlements, stressing that failing to comply with BSA/AML requirements and SARs filing obligations “are not something that companies focused on growth can simply put off to a later day.” He also emphasized that Treasury will continue to strengthen ties with interagency partners and international counterparts to identify and pursue potential violations.

    Financial Crimes Of Interest to Non-US Persons OFAC Department of Treasury OFAC Sanctions OFAC Designations Enforcement FinCEN Digital Assets Anti-Money Laundering Virtual Currency Cuba Ukraine Iran Sudan Syria SARs Compliance Fintech

  • OFAC settles with banks for multiple sanctions violations

    Financial Crimes

    On September 26, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $720,258 settlement with an indirect subsidiary of a Switzerland-based bank for allegedly processing transactions in violation of the Cuba, Ukraine-related, Iran, Sudan, and Syria sanctions programs. According to OFAC’s web notice, from April 2013 to April 2016, the bank processed 273 transactions totaling approximately $3,076,180 on behalf of individuals residing in Cuba, Crimea, Iran, Sudan, and Syria. Specifically, OFAC noted that customers in sanctioned jurisdictions were able to continue to purchase and sell securities through the U.S. financial system and to receive related dividend and interest payments until the bank took further steps to prevent such payments.

    In arriving at the settlement amount of $720,258, OFAC considered various aggravating factors, including that bank personnel “had reason to know they were processing transactions through the U.S. financial system for individual customers located in comprehensively sanctioned jurisdictions based on the underlying [know-your-customer (KYC)] data obtained by [the bank], which included address information indicating the customers’ location,” and “conferred approximately $3,076,180 in economic benefit to persons in Cuba, Crimea, Iran, Sudan, and Syria,” which caused harm to multiple sanctions programs' integrity. OFAC also considered various mitigating factors, including that the bank cooperated with OFAC throughout the investigation, and has undertaken remedial measures intended to minimize the risk of recurrence of similar conduct.

    Separately, the same day OFAC announced a $401,039 settlement with a different indirect subsidiary of the Switzerland-based bank for allegedly processing transactions in violation of the Cuba, Ukraine-related, Iran, Sudan, and Syria sanctions programs. According to OFAC’s web notice, from December 2011 until July 2016, the bank processed 426 transactions totaling approximately $1,233,967 on behalf of individuals ordinarily resident in Cuba, Iran, and Syria.

    In arriving at the settlement amount of $401,039, OFAC considered various aggravating factors, including that bank personnel “had reason to know they were processing transactions through the U.S. financial system for individual customers located in comprehensively sanctioned jurisdictions based on the underlying KYC data [the bank had] obtained,” and the bank “conferred approximately $1,233,967 in economic benefit to persons in Cuba, Iran, and Syria,” which caused harm to multiple sanctions programs' integrity. OFAC also considered various mitigating factors, including that the bank cooperated with OFAC throughout the investigation, and has undertaken remedial measures intended to minimize the risk of recurrence of similar conduct.

    Financial Crimes OFAC Department of Treasury Of Interest to Non-US Persons SDN List Cuba Ukraine Iran Sudan Syria Enforcement OFAC Sanctions OFAC Designations Securities

  • OFAC issues Covid-related general licenses and FAQs

    Financial Crimes

    On June 10, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued Syria General License (GL) 21AVenezuela GL 39A, and Iran GL N-1, “Authorizing Certain Activities to Respond to the Coronavirus Disease 2019 (COVID-19) Pandemic.” Each GL authorizes certain Covid-19-related transactions through June 17, 2023. Additionally, OFAC updated Frequently Asked Questions regarding the purposes of the GLs and provided clarifying information.

    Financial Crimes Of Interest to Non-US Persons OFAC Covid-19 Iran Venezuela Syria OFAC Sanctions OFAC Designations

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