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  • OFAC sanctions entity and two individuals for tracking weapons to IRGC and facilitating sanctions evasion

    Financial Crimes

    On June 12, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) imposed sanctions on a resource trading company and its two Iraqi associates, for trafficking “hundreds of millions of dollars’ worth of weapons” to the Iraq-based Islamic Revolutionary Guard Corps (IRGC) and facilitating access to the Iraqi financial system to evade sanctions.

    According to OFAC, the sanctions were issued pursuant to Executive Order 13224, which “provides a means by which to disrupt the financial support network for terrorists and terrorist organizations.” As a result, “all property and interests in property of these targets that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC.” OFAC noted that persons who engage in transactions with the designated individuals and entities may be exposed to sanctions themselves or subject to enforcement action. Moreover, OFAC warned foreign financial institutions that, unless an exemption applies, they may be subject to U.S. sanctions if they knowingly facilitate significant transactions for any of the designed individuals or entities.

    Financial Crimes Department of Treasury OFAC Of Interest to Non-US Persons Executive Order Sanctions Venezuela

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  • OFAC adds Syrian developer and related businesses to Specially Designated Nationals List

    Financial Crimes

    On June 11, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced additions to the Specially Designated Nationals List pursuant to Executive Orders (E.O.) 13573 and 13582. OFAC’s additions to the list include 13 entities and three individuals associated with an international network benefiting the Assad regime in Syria. According to OFAC, a Syrian business developer and his associated businesses have “leveraged the atrocities of the Syrian conflict into a profit-generating enterprise.” As a result, “all property and interests in property of these individuals and entities that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC.”

    See here for continuing InfoBytes coverage of actions related to Syria.

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

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  • OFAC sanctions Iran’s largest petrochemical holding group for funding IRGC

    Financial Crimes

    On June 7, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against Iran’s largest petrochemical holding group for providing financial support to an engineering conglomerate of the Islamic Revolutionary Guard Corps (IRGC) whose property and interests in property are blocked pursuant to Executive Order 13382. In addition, OFAC designated the holding group’s network of 39 subsidiary petrochemical companies and foreign-based sales agents. According to OFAC, profits derived from the holding group’s activities “support the IRGC’s full range of nefarious activities, including the proliferation of weapons of mass destruction . . . and their means of delivery, support for terrorism, and a variety of human rights abuses, at home and abroad.”

    As a result, all property and interests in property belonging to the identified entities subject to U.S. jurisdiction are blocked and must be reported to OFAC, and U.S. persons are generally prohibited from transacting with them. Moreover, OFAC warned foreign financial institutions that they may be subject to U.S. correspondent account or payable-through account sanctions if they knowingly facilitate significant transactions for any of the designated entities. OFAC further issued a reminder that as of November 5, 2018, purchasing, acquiring, selling, transporting, or marketing petrochemical products from Iran is sanctionable under E.O. 13846 (covered by InfoBytes here).

    Visit here for additional InfoBytes coverage of actions related to Iran.

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

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  • OFAC amends three Venezuela-related General Licenses

    Financial Crimes

    On June 6, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) amended three General Licenses (GL), (i) GL 7B, which supersedes GL 7A; (ii) GL 8A, which supersedes GL 8; and (iii) GL 13A, which supersedes GL 13, to clarify that these general licenses do not authorize transactions or dealings related to the exportation or re-exportation of diluents, directly or indirectly, to Venezuela. Additionally, OFAC is issuing corresponding FAQ 672 to provide further guidance with respect to restrictions regarding diluents.

    Visit here for additional InfoBytes coverage of actions related to Venezuela.

    Financial Crimes Venezuela Of Interest to Non-US Persons Sanctions

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  • U.S., UK establish “Financial Innovation Partnership”

    Agency Rule-Making & Guidance

    On May 29, the Department of Treasury announced the establishment of a Financial Innovation Partnership (FIP) between the U.S. and the UK. The FIP will focus on expanding bilateral financial services collaborative efforts to study emerging fintech innovation trends and share information and expertise on regulatory practices. Specifically, the FIP will focus on (i) regulatory engagement, including building upon “existing regulatory cooperation by discussing regulatory developments and sharing experiences on technical issues related to innovation in financial services,” and (ii) commercial engagement, such as providing cross-border opportunities for private sector companies to engage with industry associations as well as market participants. The FIP was announced during a meeting of the U.S.-UK Regulatory Working Group, which, a week earlier, held discussions in Washington, D.C. on the outlook for financial regulatory reforms, future priorities, regulatory cooperation, and possible implications of the UK’s exit from the EU on financial stability and cross-border financial regulation.

    Agency Rule-Making & Guidance Department of Treasury UK Of Interest to Non-US Persons Fintech

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  • OFAC issues Finding of Violation, no penalties, against bank for alleged Iranian sanctions violations

    Financial Crimes

    On May 28, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a Finding of Violation against a bank, acting as a trustee for a customer, for violations of the Iranian Transactions and Sanctions Regulations (ITSR). According to the announcement, OFAC’s Finding of Violation was based on the fact that the bank processed at least 45 pension payments totaling over $11,000 to a U.S. citizen with a U.S. bank account, residing in Iran. After learning of and reporting the issue to OFAC, the bank modified its review and reporting process to ensure that retirement payments are screened by the right screening platform and that sanctions alerts are handled through the appropriate process, including review by compliance specialists with expertise in sanctions.

    When issuing a Finding of Violation against the bank, as opposed to a civil money penalty, OFAC considered the fact that, among other things, (i) no managers or supervisors appear to have been aware of the conduct that led to the violations; (ii) the payments at issue may not have actually been transferred to Iran; (iii) the bank took remedial action in response to the violations; and (iv) the bank cooperated with OFAC by self-disclosing the alleged violations and agreeing to tolling the matter with extensions.

    Financial Crimes OFAC Iran Enforcement Sanctions Department of Treasury Of Interest to Non-US Persons

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  • FinCEN announces innovation hours program

    Financial Crimes

    On May 24, the Financial Crimes Enforcement Network (FinCEN) announced a new program that will provide opportunities for fintech/regulatory technology companies and financial institutions to showcase new and emerging innovative approaches for combating money laundering and terrorist financing and to demonstrate how other financial institutions could use similar technologies. The FinCEN Innovation Hours Program will accept meetings once per month, with primary consideration given to entities that are already operational. According to FinCEN, the program is part of a broader initiative introduced last year (previously covered by InfoBytes here and here) that encourages banks and credit unions to explore innovative approaches such as artificial intelligence, digital identity technologies, and internal financial intelligence units to combat illicit financial threats, as well as collaborative arrangements to share resources and enhance the effectiveness and efficiency of Bank Secrecy Act/anti-money laundering compliance programs.

    Financial Crimes FinCEN Of Interest to Non-US Persons Bank Secrecy Act Anti-Money Laundering Fintech

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  • Agency officials urge Congress to create central repository to combat money laundering

    Federal Issues

    On May 21, the Senate Committee on Banking, Housing, and Urban Affairs held a hearing entitled “Combating Illicit Financing By Anonymous Shell Companies Through the Collection of Beneficial Ownership Information.” The Committee heard from the same panel of witnesses who testified in November on the need for modernization of the Bank Secrecy Act/Anti-Money Laundering regime. (Covered by InfoBytes here.) Committee Chairman Mike Crapo opened the hearing by stressing the need to discuss ways in which beneficial ownership information collected in an effort to deter money laundering and terrorist financing through anonymous shell companies can be made more useful.

    Financial Crimes Enforcement Network (FinCEN) Director Kenneth Blanco emphasized that while the collection of beneficial ownership information occurs when an account is opened at a financial institution, as required under FinCEN’s Customer Due Diligence Final Rule (CDD Rule), “it is but one critical step toward closing this national security gap.” Blanco stressed that “[t]he second critical step in closing this national security gap is collecting beneficial ownership information at the corporate formation stage,” and stated Congress should develop a streamlined solution.

    FBI Financial Crimes Section Chief Steven D’Antuono agreed with Blanco and said that, from a law enforcement perspective, a central repository would be “extremely helpful.” D’Antuono emphasized his support for the creation of a regime to collect and consolidate beneficial ownership information, which would enable law enforcement agencies to easily identify the beneficial owners of shell companies and help the agencies address illicit financing activity in a timely fashion. He encouraged Congress to consider other countries’ beneficial ownership disclosure requirements when developing legislation.

    OCC Senior Deputy Comptroller for Bank Supervision Policy Grovetta Gardineer also agreed that a standardized approach for beneficial ownership data verification should be established. She highlighted the compliance burden on banks caused by the implementation of the CDD Rule, and suggested that Congress could establish a nationwide requirement, or a centralized database, for legal entities to provide, update and verify beneficial ownership information. In addition, because cross-border transaction activity can present higher risks for money laundering and terrorist financing, she recommended that “foreign legal entities be required to report ownership information either at the time of state registration or upon establishing an account relationship with a U.S. financial institution.”

    Federal Issues Senate Banking Committee FinCEN Beneficial Ownership Financial Crimes Department of Treasury OCC FBI Of Interest to Non-US Persons Anti-Money Laundering Combating the Financing of Terrorism CDD Rule Hearing

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  • OCC highlights key banking risks

    Federal Issues

    On May 20, the OCC released its Semiannual Risk Perspective for Spring 2019, identifying and reiterating key risk areas that pose a threat to the safety and soundness of the federal banking system, focusing on the following risk areas: credit, operational, compliance, and interest rate. The OCC noted that rapid growth within the fintech and regulatory technology space impacts each of these risk areas, which the agency is monitoring closely in order to implement necessary actions to address concerns. Overall, although the OCC acknowledged that the health of the federal banking system remains strong, specific risk areas of concern include (i) the need to have in place appropriate risk management practices as well as methods for assessing “the quality and timeliness of credit risk identification, risk mitigation, and loan loss reserve methodology”; (ii) elevated operational risk as banks adapt to a changing and increasingly complex operating environment, including cybersecurity threats, fintech innovation, and a reliance on third-party providers; (iii) high compliance risk related to Bank Secrecy Act/anti-money laundering (BSA/AML), as well as challenges facing banks to “effectively manage money-laundering risks in a complex, dynamic global operating and regulatory environment”; and (iv) potential challenges to earnings due to interest rate risk and liquidity risk, which lead to increased difficulties when forecasting liability costs.

    Concerning BSA/AML risk, the OCC specifically noted that AML-related deficiencies “stem from three primary causes: inadequate customer due diligence and enhanced due diligence, insufficient customer risk identification, and ineffective processes related to suspicious activity monitoring and reporting, including the timeliness and accuracy of Suspicious Activity Report filings. Talent acquisition and staff retention to manage BSA/AML compliance programs and associated operations present ongoing challenges, particularly at smaller regional and community banks.” The report reminded banks that necessary training, quality assurance, independent testing, and control updates are expected to be implemented during the FY 2019 examination cycle as required under the Financial Crimes Enforcement Network’s customer due diligence rule (previously covered by InfoBytes here).

    “Innovation can enhance a bank’s ability to compete by introducing new ways to meet customer product and service needs, improve operating efficiencies, and increase revenue,” the OCC noted, but changing business models or offering new products and services can “elevate strategic risk when pursued without appropriate corporate governance and risk management.”

    Federal Issues OCC Fintech Bank Secrecy Act Anti-Money Laundering Of Interest to Non-US Persons Financial Crimes

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  • OFAC imposes additional oil sector sanctions connected to Venezuela’s defense and intelligence sector

    Financial Crimes

    On May 10, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against two companies for their alleged involvement in the transportation of oil from Venezuela to Cuba, which provides support to former President Maduro’s defense and intelligence sector. In addition, OFAC identified two vessels as blocked property owned by the identified companies. According to the Treasury Secretary Steven T. Mnuchin, “[OFAC’s] action today puts Venezuela’s military and intelligence services, as well as those who support them, on notice that their continued backing of the illegitimate Maduro regime will be met with serious consequences.” As a result, all property and interests in property of the sanctioned entities or of other entities that are owned at least 50 percent by the sanctioned entities, that are either in the United States or in the possession or control of a U.S. person, are blocked and must be reported to OFAC. U.S. persons are also generally prohibited from entering into transactions with these entities. Furthermore, OFAC also referred financial institutions to Financial Crimes Enforcement Network advisories FIN-2019-A002, FIN-2017-A006, and FIN-2018-A003 for further information concerning the efforts of Venezuelan government agencies and individuals to use the U.S. financial system and real estate market to launder corrupt proceeds, as well as human rights abuses connected to corrupt foreign political figures and their financial facilitators.

    Visit here for continuing InfoBytes coverage of actions related to Venezuela.

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

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