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  • U.S.-UK Financial Innovation Partnership reports on progress

    Federal Issues

    On August 6, the U.S. Treasury Department provided an overview of a recent meeting of the U.S.-UK Financial Innovation Partnership (FIP) where Regulatory and Commercial Pillars participants exchanged views on “deepening U.S.-UK ties in financial innovation.” As previously covered by InfoBytes, the FIP was created in 2019 as a way to expand bilateral financial services collaborative efforts, study emerging fintech innovation trends, and share information and expertise on regulatory practices. Topics discussed included digital payments, cross-border testing of innovative financial services, regulatory and supervisory technology, connections between financial technology firms and financial institutions, and the upcoming 2021 U.S. financial services trade mission to the UK. Participants recognized “the importance of the ongoing partnership in monitoring and analyzing trends in global financial innovation, as well as being an integral component of the U.S.-UK financial services cooperation.”

    Federal Issues Of Interest to Non-US Persons Fintech UK Department of Treasury

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  • ARRC releases “SOFR Starter Kit”

    Federal Issues

    On August 7, the Alternative Reference Rates Committee (ARRC) released the “Secured Overnight Financing Rate (SOFR) Starter Kit,” which includes three factsheets that are the result of a series of educational panel discussions held by ARRC in July and August. The various panel discussions were designed to educate on “the history of LIBOR; the development and strengths of SOFR; progress made in the transition away from LIBOR to date; and how to ensure organizations are ready for the end of LIBOR.” Highlights of the three factsheets include (i) background on LIBOR and the selection of SOFR; (ii) key facts on SOFR, including how it works and common misconceptions; and (iii) next steps, including SOFR best practices and recommended fallback language. Additionally, ARRC provided FAQs covering additional background details on the committee and the transition from LIBOR.

    Federal Issues ARRC LIBOR SOFR Of Interest to Non-US Persons

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  • $21.7 million FCPA settlement for consumer lender

    Financial Crimes

    On August 6, the SEC announced that a South Carolina-based consumer loan company agreed to pay over $21.7 million to settle the SEC’s claims that the company violated the books and records and internal accounting controls provisions of the FCPA through its Mexican loan operations. According to the SEC, the company’s former Mexican subsidiary paid more than $4 million in bribes, “directly or through intermediaries, to Mexican government officials and union officials, from at least December 2010 through June 2017 to obtain and retain business” related to the offering of small loans to state and federal government employees. The SEC alleged that in order to “retain the ability to make loans to government employees under all of the contracts” and to ensure loan repayments were made in a timely manner, the former subsidiary paid bribes in several ways, including (i) cash payments; (ii) making deposits into bank accounts linked to government officials and union officials or those of their relatives and friends; and (iii) hiring third-party intermediaries to assist in securing business and making bribe payments, including large bags of cash, to officials.

    These bribes, the SEC alleged, were then inaccurately recorded in the company’s books and records as “legitimate ‘commission’ expenses.” The SEC also found that the company and its former subsidiary lacked “internal accounting controls sufficient to detect or prevent such payments,” and that as a result of the subsidiary’s failure to implement a sufficient accounts payable system, managers pre-signed blank checks, which made “it impossible to enforce authorization limits in place over payments.” The SEC further alleged that while the former subsidiary sent spreadsheets to the parent company each month detailing the payments, the company did not require invoices or back-up support to account for the expenses and failed to identify the high risk of bribery and corruption in Mexico. Additionally, the SEC noted that despite incorporating an FCPA policy into the company’s corporate compliance manual in 2013, there was no effective formal monitoring or internal controls to ensure the former subsidiary complied with the policy. The company also allegedly lacked personnel oversight in Mexico, and “the tone at the top” from company management “did not support robust internal audit and compliance functions,” leading to several material weaknesses.

    In entering into the administrative order, the SEC considered the company’s cooperation and remedial efforts. Without admitting or denying wrongdoing, the company consented to a cease and desist order, and agreed to pay a $2 million civil money penalty and approximately $19.7 million in disgorgement and pre-judgment interest.

    Financial Crimes SEC FCPA Bribery Of Interest to Non-US Persons

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  • OFAC sanctions additional persons for human rights violations in China’s Xinjiang region

    Financial Crimes

    On July 31, the U.S. Treasury Department’s Office of Foreign Assets Control announced sanctions pursuant to Executive Order 13818 against a Chinese government entity and two current or former government officials for alleged corruption violations of the Global Magnitsky Human Rights Accountability Act. According to OFAC, the sanctioned persons are connected to serious human rights abuse against ethnic monitories, including Uyghurs, in the Xinjiang region. Earlier in July, OFAC sanctioned another Chinese government entity and several current or former government officials for similar corruption violations (covered by InfoBytes here). As a result of the sanctions, all property and interests in property of the designated persons within U.S. jurisdiction must be blocked and reported to OFAC. OFAC notes that its regulations generally prohibit U.S. persons from participating in transactions with these individuals and entities, 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.”

    Concurrent with the sanctions, OFAC also issued General License No. 2, which authorizes certain wind down and divestment transactions and activities related to blocked subsidiaries of the Chinese entity through September 30.

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

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  • OFAC settles Iranian sanctions violations

    Financial Crimes

    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.

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

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  • OFAC sanctions ISIS financial facilitators

    Financial Crimes

    On July 28, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13224 against two Islamic State of Iraq and Syria (ISIS) financial facilitators based in Syria and Turkey for allegedly providing financial and logistical support to ISIS. OFAC noted that these sanctions coincide with the thirteenth meeting of the Counter ISIS Finance Group, which coordinates efforts to isolate ISIS from the international financial system and eliminate revenue sources. As a result of the sanctions, all property and interests in property of the designated individuals within U.S. jurisdiction must be blocked and reported to OFAC. OFAC further noted that its regulations “generally prohibit” U.S. persons from participating in transactions with the designated persons, and warned foreign financial institutions that if they knowingly facilitated significant transactions for any of the designated individuals, they may be subject to U.S. correspondent account or payable-through account sanctions.

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

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  • OFAC sanctions investors supporting Syrian government

    Financial Crimes

    On July 29, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against one individual and nine entities for providing significant investment support to the Syrian government. OFAC noted that, among other things, the designated individual and his companies knowingly provided “significant financial, material, or technological support to, or knowingly engag[ed] in a significant transaction with, the Government of Syria (including any entity owned or controlled by the Government of Syria) or a senior political figure of the Government of Syria.” As a result, all property and interests in property belonging to the designated persons and subject to U.S. jurisdiction are blocked and must be 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 designated persons,” and warned that non-U.S. persons that engage in transactions with the designated persons may expose themselves to designation. OFAC also referenced a previously published Fact Sheet (covered by InfoBytes here), which highlights the most pertinent exemptions, exceptions, and authorizations for humanitarian assistance and trade under the Syria, Iran, Venezuela, North Korea, Cuba, and Ukraine/Russia-related​ sanctions programs to ensure humanitarian-related trade and assistance reaches at-risk populations through legitimate and transparent channels during the global Covid-19 pandemic.

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

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  • Fed extends temporary repurchase agreement facility through March 2021

    Federal Issues

    On July 29, the Federal Reserve Board announced the extensions of its temporary U.S. dollar liquidity swap lines as well as the temporary repurchase agreement facility for foreign and international monetary authorities (FIMA Repo Facility) through March 31, 2021. As previously covered by InfoBytes, the FIMA Repo Facility was established in March in response to the Covid-19 pandemic to allow central banks and other international monetary authorities with accounts at the Federal Reserve Bank of New York to enter into repurchase agreements with the Federal Reserve to temporarily exchange their U.S. Treasury securities held with the Federal Reserve for U.S. dollars, which can then be made available to institutions in their jurisdictions. 

    The Fed notes that the extension “will allow approved FIMA account holders to continue to temporarily exchange their U.S. Treasury securities held with the Federal Reserve for U.S. dollars, which can then be made available to institutions in their jurisdictions.”

    Federal Issues Federal Reserve Covid-19 Of Interest to Non-US Persons

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  • DOJ sues companies for laundering funds for North Korean banks

    Financial Crimes

    On July 23, the DOJ announced it filed a complaint in the U.S. District Court for the District of Columbia, alleging that four companies engaged in a scheme to launder U.S. dollars on behalf of sanctioned North Korean banks and seeking forfeiture of $2,372,793. The DOJ claims that the North Korean banks illegally accessed the U.S. financial market and used the companies to make and receive U.S. dollar payments to and from North Korean front companies. According to the DOJ, the complaint “illuminates how a global money laundering network coordinates with front companies to move North Korean money through the [U.S.] and violate the sanctions imposed by [the] government on North Korea.” The DOJ further refers to a United Nations Panel of Experts statement that North Korean networks access formal banking channels by, among other things, maintaining correspondent bank accounts and representative offices abroad staffed by foreign nationals that make use of front companies, which permit North Korean banks “to conduct illicit procurement and banking activity.”

    Financial Crimes Courts DOJ Sanctions North Korea Of Interest to Non-US Persons

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  • OFAC sanctions individuals for supporting Maduro regime

    Financial Crimes

    On July 23, the U.S. Treasury Department’s Office of Foreign Assets Control announced sanctions against two individuals for allegedly assisting, sponsoring, or providing “financial, material, or technological support for, or goods or services to or in support of” either the previously designated son of Nicolás Maduro Moros, or to Venezuelan government senior officials. The individuals, sanctioned pursuant to Executive Order 13692, are allegedly central figures in Venezuela’s gold industry and “oversee the financial mechanism of [an] illicit gold scheme.” 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 the designated individuals, are also blocked.” U.S. persons are generally prohibited from dealing with any property or interests in property of blocked or designated persons.

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

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