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On November 25, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $466,912 civil settlement with a California-based technology company to resolve alleged violations of the Foreign Narcotics Kingpin Sanctions Regulations (FNKSR). According to OFAC, the company voluntarily disclosed that it hosted a sanctioned Slovenian software developer on its platform and collected more than $1 million in payments from customers who downloaded the developer’s apps. The company’s actions—which included hosting, selling, and facilitating the transfer of the developer’s software and associated content, as well as processing 47 payments between 2015 and 2017—were in violation of the FNKSR because OFAC’s List of Specially Designated Nationals and Blocked Persons identified the developer as a significant foreign narcotics trafficker (SDNTK).
In arriving at the settlement amount, OFAC considered various mitigating factors, including that (i) the company voluntarily disclosed the violations and continued to cooperate by promptly responding to information requests; (ii) the volume and payment amounts were not significant when compared to the company’s annual total volume of transactions; (iii) OFAC has not issued a violation against the company in the five years preceding the earliest date of the transactions at issue; and (iv) the company has strengthened its compliance program to minimize the risk of recurrence.
OFAC also considered various aggravating factors, including that (i) the alleged conduct demonstrated a “reckless disregard for U.S. sanctions requirements”; (ii) the company’s processing of payments conferred a significant economic benefit to the developer; and (iii) the company failed to timely take corrective actions after identifying the developer as a SDNTK and continued to process payments.
On December 3, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced additions to the Specially Designated Nationals List (SDN List) pursuant to Executive Order 13884, which blocks the property of the Venezuelan government. OFAC identified six tankers of Venezuela’s state-owned oil company as property of the Venezuelan Government and therefore as blocked property, after all the vessels recently transported petroleum to Cuba. A seventh tanker also was identified as a blocked property, pursuant to Executive Order 13850 for operating in the oil sector of the Venezuelan economy, after delivering Venezuelan petroleum to Cuba. According to the press release, the vessel’s name had been changed to circumvent sanctions as it moved Venezuelan oil to Cuba. The SDN List was updated to link the new name of the vessel to its former name. OFAC reiterated that its “regulations generally prohibit all transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of blocked or designated persons.”
On November 27, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) updated two existing Iran-related FAQs: FAQ 303, which discusses insurance, reinsurance, and underwriting activities; and FAQ 804, which discusses whether sanctions on certain shipping tankers apply to their corporate parent and affiliates. Additionally, OFAC issued three new Iran-related FAQs (FAQ 805-807) covering the sanctions exposure of non-U.S. persons, the types of activities considered “maintenance” in General License K, and the processing of transactions involving a specific shipping tanker under General License K.
On November 22, the DOJ announced that it entered into a deferred prosecution agreement with a South Korean engineering company, in which the company agreed to pay more than $75 million in criminal penalties to resolve an investigation into alleged violations of the FCPA’s anti-bribery provisions. Half of the penalty amount will be paid to the DOJ, and the remaining half will be paid either to Brazilian authorities or also to the United States. According to the DOJ announcement, between 2007 and 2013, the company allegedly paid approximately $20 million in commissions to a Brazilian intermediary, “knowing that portions of the money would be paid as bribes to officials” at Brazil’s state-owned and controlled oil and energy firm. The bribes were allegedly intended to ensure that the state-owned entity entered into a contract to charter a drill ship from a separate Houston-based offshore oil drilling company, which would then be able to purchase that vessel from the Korean company.
As part of the deferred prosecution agreement, the company agreed to cooperate with the DOJ’s ongoing investigations and prosecutions, to improve its compliance program, and to report to the DOJ on those improvements. The company received partial credit for cooperating with the investigation and taking remedial measures, including (i) enhancing its compliance program; (ii) hiring additional compliance staff; (iii) “implementing enhanced anti-corruption policies and heightened due diligence controls over third party vendors”; (iv) instituting mandatory anti-corruption training; and (v) improving its whistleblower policies.
On November 21, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced that the Venezuela Sanctions Regulations (Regulations) have been amended to incorporate additional Executive Orders (E.O.s), a new general license, and a new interpretive provision. Specifically, since the Regulations were published in July 2015, six E.O.s have been issued pursuant to E.O. 13692, “Blocking Property and Suspending Entry of Certain Persons Contributing to the Situation in Venezuela.” OFAC is amending the Regulations to specify that the prohibitions include all transactions prohibited by E.O. 13692 or any further E.O issued pursuant to the national emergency declared in E.O. 13692. Moreover, OFAC is amending the Regulations to incorporate a general license, which authorizes the U.S. Government to engage in certain activities related to Venezuela (see previous InfoBytes coverage on actions related to Venezuela, including general licenses here). Lastly, an interpretive provision has been added to clarify that “the entry into a settlement agreement or the enforcement of any lien, judgment, arbitral award, decree, or other order through execution, garnishment, or other judicial process purporting to transfer or otherwise alter or affect property or interests in property blocked pursuant to [the Regulations] is prohibited unless authorized pursuant to a specific license issued by OFAC pursuant to this part.” The amendments were effective November 22.
On November 15, Financial Crimes Enforcement Network (FinCEN) Director Kenneth Blanco delivered remarks at the Chainalysis Blockchain Symposium to discuss, among other things, the agency’s focus on convertible virtual currency (CVC) and remind attendees—particularly financial institutions—of their compliance obligations. Specifically, Blanco emphasized that FinCEN applies a “technology-neutral regulatory framework to any activity that provides the same functionality at the same level of risk, regardless of its label.” As such, money transmissions denominated in CVC, Blanco stated, are money transmissions. Blanco discussed guidance issued by FinCEN in May (previously covered by InfoBytes here) that reminded persons subject to the Bank Secrecy Act (BSA) how FinCEN regulations relating to money services businesses apply to certain business models involving money transmissions denominated in CVC. Blanco also highlighted the agency’s recent collaboration with the CFTC and the SEC to issue joint guidance on digital asset compliance obligations. (Previous InfoBytes coverage here.) Highlights of Blanco’s remarks include (i) suspicious activity reporting related to CVC has increased, including “filings from exchanges identifying potential unregistered, foreign-located money services businesses”; (ii) compliance with the “Funds Travel Rule” is mandatory and applies to CVC; (iii) for anti-money laundering/combating the funding of terrorism purposes, accepting and transmitting activity denominated in stablecoins falls within FinCEN's definition of “money transmission services” under the BSA; and (iv) administrators of stablecoins must register as money services businesses with FinCEN.
On November 18, 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) procurement agents based in Turkey and four ISIS-linked entities operating in Syria, Turkey, and across the Gulf and Europe for allegedly providing financial and logistical support to ISIS. OFAC also took action against an Afghanistan-based organization, as well as two affiliated senior officials, for “using false charitable pretenses as a cover to facilitate the transfer of funds and support the activities of the terrorist group’s branch in Afghanistan, ISIS – Khorasan.” OFAC noted that these sanctions coincide with the twelfth 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 entities and individuals within U.S. jurisdiction are blocked and must be 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 facilitate significant transactions for any Specially Designated Global Terrorists, they may be subject to U.S. correspondent account or payable-through account sanctions.
On November 12, the Financial Crimes Enforcement Network (FinCEN) issued an advisory on the Financial Action Task Force (FATF)-identified jurisdictions with “strategic deficiencies” in their anti-money laundering and combating the financing of terrorism (AML/CFT) regimes. As previously covered by InfoBytes, in October, FATF updated the list of jurisdictions to include the Bahamas, Botswana, Cambodia, Ghana, Iceland, Mongolia, Pakistan, Panama, Syria, Trinidad and Tobago, Yemen, and Zimbabwe. At the time, FATF noted that several jurisdictions had not yet been reviewed, and that it “continues to identify additional jurisdictions, on an ongoing basis, that pose a risk to the international financial system.”
The FinCEN advisory reminds financial institutions of the FATF October updates and emphasizes that financial institutions should consider both the FATF Public Statement and the Improving Global AML/CFT Compliance: On-going Process documents when reviewing due diligence obligations and risk-based policies, procedures, and practices. Moreover, the advisory includes public statements on the status of, and obligations involving, the Democratic People’s Republic of Korea (DPRK) and Iran, in particular. The advisory reminds jurisdictions of the actions the United Nations and the U.S. have taken with respect to sanctioning the DPRK and Iran and emphasizes that financial institutions must comply “with the extensive U.S. restrictions and prohibitions against opening or maintaining any correspondent accounts, directly or indirectly, with foreign banks licensed by the DPRK or Iran.”
Jury convicts former French power company executive of multiple FCPA, money laundering and conspiracy offenses
On November 8, the DOJ announced that a jury had returned a guilty verdict against a British national and former French power and transportation company executive who was accused of bribing Indonesian officials to secure a power contract. Following a two-week trial, the jury convicted the former executive on six counts of violating the FCPA, three counts of money laundering, and two counts of conspiracy. As previously covered by InfoBytes, while the French company pleaded guilty in 2014, and three other executives—each of whom worked for the French company’s U.S.-based subsidiary—entered guilty pleas, the trial for the former executive (originally indicted in 2013) was delayed as he challenged the reach of the FCPA. The U.S. Court of Appeals for the Second Circuit held in 2018 that a non-resident foreign national lacking sufficient ties to a U.S. entity could not be charged with conspiring or aiding and abetting something that he could not be directly charged with, because he was “not an agent, employee, officer, director, or shareholder of an American issuer or domestic concern” within the scope of the FCPA’s jurisdictional provision and had not himself committed a crime inside the U.S. The 2nd Circuit also determined, however, that the former executive could still be charged with FCPA offenses, as the DOJ had signaled its intention to prove he “was an agent of a domestic concern,” which would place him “squarely within the terms of the statute.”
According to the DOJ’s press release, it presented evidence at the trial to show that the former executive violated the FCPA by overseeing and supporting the U.S.-based subsidiary’s efforts to win the contract with the bribery scheme, including pressing the U.S. subsidiary to structure the payment terms to a consultant used as an intermediary in the scheme to “get the right influence.” The former executive and his co-conspirators allegedly helped arrange the payment of bribes to Indonesian officials by assisting in the U.S. subsidiary’s retention of two consultants, purportedly to provide legitimate consulting services on behalf of the subsidiary but with the intention of employing them to pay and conceal the bribes. The DOJ observed in its release that the former executive and his co-conspirators were successful in securing the contract from Indonesia’s state-owned and state-controlled electricity company and “subsequently made payments to the consultants for the purpose of bribing the Indonesian officials.”
Sentencing is scheduled for January 31, 2020 in the U.S. District Court for the District of Connecticut.
FinCEN renews GTOs covering 12 metropolitan areas; legal entities that are U.S. publicly-traded companies not required to report
On November 8, the Financial Crimes Enforcement Network (FinCEN) announced the renewal of its Geographic Targeting Order (GTO), which requires U.S. title insurance companies to identify the natural persons behind shell companies that pay “all cash” (i.e., the transaction does not involve external financing) for residential real estate in 12 major metropolitan areas. While the purchase amount threshold for the beneficial ownership reporting requirement remains set at $300,000 for residential real estate purchased in the 12 covered areas, FinCEN modified the renewed GTO to note that it “will not require reporting for purchases made by legal entities that are U.S. publicly-traded companies. Real estate purchases by such entities are identifiable through other business filings.”
The renewed GTO takes effect November 12 and covers certain counties within the following areas: Boston; Chicago; Dallas-Fort Worth; Honolulu; Las Vegas; Los Angeles; Miami; New York City; San Antonio; San Diego; San Francisco; and Seattle.
FinCEN FAQs regarding GTOs are available here.
- Daniel P. Stipano to discuss “Beneficial Ownership: You have questions – We have quick answers” at the ABA/ABA Financial Crimes Enforcement Conference
- Moorari K. Shah to discuss "Legal & regulatory issues – Next wave of regulatory policy" at the Marketplace Lending & Alternative Financing Summit
- Daniel P. Stipano to discuss "Risk management in enforcement actions: Managing risk or micromanaging it" at an American Bar Association webinar
- Kari K. Hall and Christopher M. Walczyszyn to speak on the "Understanding updates to Regulation CC to ensure effective check processing" at a National Association of Federal Credit Unions webinar
- Daniel P. Stipano to discuss "ACAMS Moneylaundering.com Year-End Compliance Review and 2020 Outlook" at an ACAMS webinar
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- Daniel P. Stipano to discuss "A 20/20 view on 2020’s legislative and regulatory outlook" at the ACAMS Anti-Financial Crime and Public Policy Conference