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FinCEN renews GTOs covering 12 metropolitan areas
On April 29, FinCEN reissued the renewal of its Geographic Targeting Orders (GTOs). The GTOs require 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 the 12 major metropolitan areas covered by the orders. The renewed GTOs are identical to the October 2021 GTOs (covered by InfoBytes here). The purchase amount threshold for the beneficial ownership reporting requirement remains set at $300,000 for residential real estate purchased in the covered areas. The renewed GTOs take effect April 30 and end October 26, and cover 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.
FinCEN to issue second beneficial ownership NPRM later this year
On April 28, FinCEN acting Director Himamauli Das informed the House Financial Services Committee during a hearing on the oversight of the agency that FinCEN is currently developing a second notice of proposed rulemaking (NPRM) this year proposing “regulations governing access to beneficial ownership information by law enforcement, national security agencies, financial institutions and others.” The NPRM will be published this year and follows a previous proposal to implement the beneficial ownership information reporting provisions of the Corporate Transparency Act (CTA), which addresses who must report beneficial ownership information, when to report it, and what information must be provided (covered by InfoBytes here). In his written testimony, Das stated the agency also plans to issue a third and final proposal revising the Customer Due Diligence (CDD) regulation for financial institutions “no later than one year after the effective date of the final reporting rule,” as required by the statute. “The CTA directs that the revisions should bring the CDD regulation into conformance with the beneficial ownership rules under the CTA and reduce unnecessary or duplicative requirements, among other things,” Das said. “We are considering all options as we develop the Access Rule NPRM, and look forward to receiving public comments on our proposal when it is issued.” Das also noted that FinCEN is currently developing the beneficial ownership database, which will allow users to search and access certain beneficial ownership information. However, Das warned that limited resources “have presented significant challenges to meeting the implementation requirements of [FinCEN’s] expanded mandate under the Anti-Money Laundering Act, including the CTA’s beneficial ownership requirements . . . we are missing deadlines, and we will likely continue to do so.”
EU Court of Justice rules consumer protection agencies can sue companies for GDPR violations
On April 28, the Court of Justice of the European Union (CJEU) issued an opinion concluding that consumer protection associations are permitted to bring representative actions against infringements of personal data protection “independently of the specific infringement of a data subject’s right to the protection of his or her personal data and in the absence of a mandate to that effect.” According to the judgment, Germany’s Federal Union of Consumer Organisations and Associations brought an action for an injunction against a global social media company’s Ireland division for allegedly infringing on General Data Protection Regulation (GDPR) rules governing the protection of personal data, the combat of unfair commercial practices, and consumer protection when offering users free games provided by third parties. Germany’s Federal Court of Justice called into question whether a consumer protection association has standing to bring proceedings in the civil courts against infringements of the GDPR without obtaining a mandate from users whose data was misused. Germany’s Federal Court of Justice also observed that the GDPR could be inferred to read that “it is principally for the supervisory authorities to verify the application of the provisions of that regulation.”
In its ruling, CJEU concluded that consumer protection associations in the EU can bring representative actions against the social media company for alleged violations of the GDPR, writing that the GDPR “does not preclude national legislation which allows a consumer protection association to bring legal proceedings, in the absence of a mandate conferred on it for that purpose and independently of the infringement of specific rights of the data subjects, against the person allegedly responsible for an infringement of the laws protecting personal data . . . where the data processing concerned is liable to affect the rights that identified or identifiable natural persons derive from that regulation.” Permitting associations to bring representative actions is “consistent with the objective pursued by the GDPR . . . in particular, ensuring a high level of protection of personal data,” CJEU stated.
UK's FCA secures £2,000,000 account forfeiture order against fintech start up
On April 21, the UK’s Financial Conduct Authority (FCA) secured a £2,000,000 account forfeiture consent order against a fintech startup that purportedly offers due diligence and underwriting services. The FCA noted that the funds were supposedly an investment received from a software firm, but observed that the fintech company moved the money repeatedly to different bank accounts in several countries in transactions with no legitimate business purpose. The funds, which the FCA had already frozen in October and December 2020, were allegedly “the proceeds of illegal activity connected to criminal proceedings in the United States of America concerning an alleged conspiracy to commit wire fraud against banks, credit card companies and other financial service providers in the USA.” While the FCA is not alleging that the fintech company was involved in the conspiracy, it flagged concerns in response to the company’s application to become a regulated firm. The company has since withdrawn its application to be regulated by the FCA.
OFAC reaches multiple settlements to resolve Cuban sanctions violations
On April 21, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $141,442 settlement with a Colorado-based multinational mining firm for allegedly violating the Cuban Assets Control Regulations (CACR). According to OFAC’s web notice, between June 2016 to November 2017, a wholly-owned subsidiary of the firm purchased Cuban-origin explosives and explosive accessories from a third-party vendor to be used in a mine construction. The distributor, on the subsidiary’s behalf, imported Cuban-origin explosives and explosive accessories for the mine on at least four separate occasions, despite the subsidiary being “generally prohibited from dealing in Cuban-origin goods.” According to OFAC, shipping documents clearly identified that the goods were sourced from Cuba. In addition, purchase orders failed to contain express statements that items provided to the subsidiary may not originate from embargoed jurisdictions, nor did the subsidiary ask for country-of-origin information for the goods acquired from its suppliers. Additionally, OFAC contended that the subsidiary’s failure to provide appropriate export and trade sanctions training led to the apparent violations.
In arriving at the settlement amount, OFAC considered various aggravating factors, including that (i) the parent firm and subsidiary failed to exercise reasonable due diligence to ensure it complied with U.S. Cuba sanctions requirements; and (ii) the firm and its subsidiaries and affiliates are “a large and sophisticated organization operating globally as a leading gold producer with experience and expertise in international transactions.” OFAC also considered various mitigating factors, including that (i) the apparent violations were self-disclosed and constituted a non-egregious case; (ii) the firm and subsidiary have not received a penalty notice from OFAC in the preceding five years; (iii) the amount of payments were not significant compared to the total volume of transactions undertaken on an annual basis; and (iv) the firm and its subsidiary cooperated with the investigation, signed a tolling agreement, and are currently implementing remedial measures to prevent future violations.
Separately, OFAC also announced a $45,908 settlement with a Florida-based company affiliated with a distributor of explosives and accessories for mining operations. According to the web notice issued in this action, on four occasions in 2016 and 2017, the company and certain affiliates procured Cuban-origin explosives and related accessories from a third-party vendor originating from Cuba on behalf of a U.S. company for the U.S. company’s mining project in Suriname in violation of the CACR. OFAC contended that the company was responsible for overseeing the processing of purchase orders and invoices for these transactions, and that in 2018, after the U.S. company customer learned of the goods’ Cuban origins, it was asked to no longer procure goods from Cuba. According to OFAC, the apparent violations occurred primarily because of the company’s failure “to understand U.S. prohibitions on dealings in Cuban property or engaging in transactions related to merchandise of Cuban origin outside the United States,” adding that the company did not have a compliance program in place when the four transactions occurred, nor did it realize the transactions were prohibited until they were flagged by the customer. The company immediately ceased all activities involving Cuba after learning of the sanctions implications but did not voluntarily self-disclose the violations, which OFAC deemed non-egregious.
In arriving at the settlement amount, OFAC considered various aggravating factors, including that (i) the company failed to “exercise a minimal degree of caution or care” when procuring Cuban-origin goods from its supplier; (ii) the company “had actual knowledge that it was financing the provision of Cuban-origin goods for export to Suriname”; and (iii) the company’s actions harmed the U.S. sanctions program. Mitigating factors included that the company is (i) small and largely overseen by one individual; (ii) the company has not received a penalty notice from OFAC in the preceding five years; and (iii) the company provided timely information and entered into a tolling agreement. Providing context for the settlement, OFAC stated that “[t]his case illustrates the risks facing companies of any size operating internationally that do not develop or maintain basic awareness of sanctions risks and do not institute appropriate measures to identify and prevent potential violations.”
OFAC issues new Ukraine-/Russia-related general licenses and updated FAQs
On April 25, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued Ukraine-/Russia-related General License (GL) 13R, “Authorizing the Wind Down of Certain Transactions Necessary to Divest or Transfer Debt, Equity, or Other Holdings in GAZ Group,” which authorizes all transactions ordinarily incident and necessary to the wind down of certain transactions by a non-U.S. person to another non-U.S. person through May 25, provided certain criteria are met. OFAC also issued GL 15L, “Authorizing the Wind Down of Transactions Involving GAZ Group,” which also authorizes certain transactions ordinarily incident and necessary to the wind down of transactions involving the GAZ Group, or any entity in which the GAZ Group owns, directly or indirectly, a 50 percent or greater interest. This wind down period also goes through May 25. Additionally, OFAC updated several related frequently asked questions about Ukraine-/Russia-related sanctions.
OFAC reaches $6 million settlement with logistics company
On April 25, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a roughly $6 million settlement with a freight forwarding and logistics company for allegedly processing transactions in violation of Iran-Related Sanctions Regulations, among others. According to OFAC’s web notice, between approximately January 2013 and February 2019, the company processed payments through the U.S. financial system in connection with sea, air, and rail shipments to the Democratic People’s Republic of Korea (DPRK), Iran, and Syria, involving the property or interests in property of an entity on OFAC’s Specially Designated Nationals and Blocked Persons List (SDN List) in apparent violation of OFAC sanctions. Specifically, in processing such payments, the company allegedly “failed to adopt or implement policies and controls that prevented it from conducting transactions that involved designated parties or persons in sanctioned jurisdictions.”
In arriving at the settlement amount, OFAC considered various aggravating factors, including, among other things, that (i) the company “acted with reckless disregard for U.S. economic sanctions laws when, over the period of six years, it caused at least 2,958 payments involving shipments from, to, or through sanctioned jurisdictions or the blocked property or an interest in blocked property of entities on the SDN List to be routed through U.S. financial institutions”; (ii) the company had knowledge “of the apparent violations”; and (iii) nearly “14 percent of the apparent violations were for transactions involving entities blocked by OFAC for terrorism or [weapons of mass destruction (WMD)] concerns.” OFAC also considered various mitigating factors, including that the company (i) has not received a penalty notice from OFAC in the preceding five years; (ii) “voluntarily self-disclosed the apparent violations to OFAC and cooperated with OFAC’s investigation”; and (iii) “ultimately took extensive actions to remedy its compliance gaps.”
Providing context for the settlement, OFAC stated that this “action highlights the importance of instituting strong internal controls and procedures to govern payments involving affiliates, subsidiaries, agents, or other counterparties when any of them conduct business with sanctioned jurisdictions or persons.”
International medical waste provider agrees to $84 million FCPA settlement
On April 20, the DOJ entered into a deferred prosecution agreement (DPA) with an Illinois-based international medical waste management company, in which the company agreed to pay a fine of approximately $52.5 million related to a conspiracy to violate the FCPA’s anti-bribery provision and books and records provisions. Together with a related resolution with the SEC, and with various foreign authorities, the total resolution will reach over $84 million.
According to the DOJ, between 2011 and 2016, the company participated in a scheme to bribe officials at government agencies and instrumentalities in Brazil, Mexico, and Argentina to obtain and retain business and to secure improper advantages in connection with providing waste management services. An executive at the company’s Latin America division directed employees in the company’s offices in Brazil, Mexico, and Argentina to pay bribes, typically in cash, that were calculated as a percentage of the underlying contract payments owed to the company from government customers.
As part of the DPA, the company agreed to cooperate with the DOJ’s ongoing or future investigations, to improve its compliance program, and to retain an independent compliance monitor for two years, followed by self-reporting for the remainder of the term.
The DOJ noted that in addition to cooperation and remediation the resolution reflects a number of factors including, the company’s (i) “failure to voluntarily and timely disclose the conduct that triggered the investigation”; and (ii) “the nature, seriousness, and pervasiveness of the offense.”
The SEC simultaneously announced a resolution of a related matter, in which the company consented to a cease-and-desist order finding violations of the FCPA’s anti-bribery, books and records, and internal accounting controls provisions. According to the SEC, the scheme also included sham third-party vendors who used false invoices to conceal cash payments to government clients. In addition, the company failed to have sufficient internal accounting controls in place to prevent or detect the misconduct and failed to implement its FCPA policies or procedures prior to 2016. Under the terms of the order, the company agreed to pay $28.2 million in disgorgement and prejudgment interest, of which up to $4.2 million will be offset by disgorgement paid to foreign authorities.
OFAC sanctions facilitators of Russian sanctions evasion
On April 20, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 14024 against several entities and numerous individuals for attempting to evade sanctions imposed by the U.S. and its international partners on Russia. Included in the designations are a Russian commercial bank, a global network comprised of more than 40 individuals and entities led by a previously designated Russian oligarch (“including organizations whose primary mission is to facilitate sanctions evasion for Russian entities”), and several companies operating in Russia’s virtual currency mining industry. According to OFAC, this is the first time a virtual currency mining company has been sanctioned. In coordination with OFAC’s sanctions, the Department of State took further action by imposing visa restrictions on 635 Russian nationals and three Russian Federation officials for their involvement in human rights abuses, as well as 17 individuals responsible for undermining democracy in Belarus.
As a result of the sanctions, all property and interests in property belonging to the sanctioned entities in the U.S. 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.” OFAC noted that U.S. persons are prohibited from participating in transactions with the sanctioned persons unless authorized by a general or specific license.
On the same day, OFAC issued new frequently asked question guidance clarifying obligations for credit card operators with regard to payment cards issued by sanctioned Russian financial institutions. OFAC also published two Russia-related general licenses: (i) General License 28 authorizes certain transactions involving a public joint stock company that are “ultimately destined for or originating from Afghanistan”; and (ii) General License 29 authorizes the wind down of transactions involving the same public joint stock company.
Find continuing InfoBytes coverage on the U.S. sanctions response to Russia’s invasion of Ukraine here.
Treasury releases fact sheet on providing food and humanitarian support to persons impacted by Russian invasion of Ukraine
On April 19, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued a Fact Sheet for “Preserving Agricultural Trade, Access to Communication, and Other Support to Those Impacted by Russia’s War Against Ukraine” following an event on the topic held by OFAC. The Fact Sheet, among other things, highlights Treasury’s humanitarian-related or other general licenses (GL) issued to support of the people impacted by Russia’s war related to: (i) telecommunications and internet-based communications; (ii) Covid-19 and clinical trials; (iii) NGO activities; (iv) personal remittances; (v) personal maintenance of U.S. individuals; (vi) emergency medical services; (vii) government and international organization official business; (viii) overflight payments, emergency landings, and air ambulance services; (ix) civil maritime services in the Donetsk and Luhansk regions; and (x) journalistic activities.
The same day, OFAC issued a new Russia-related GL 27, “Certain Transactions in Support of Nongovernmental Organizations’ Activities,” to authorize transactions related to certain activities of NGOs in Russia and Ukraine.