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  • OFAC issues new general licenses related to Russia and Venezuela sanctions

    Financial Crimes

    The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) recently released two general licenses relating to Russia and Venezuela. Newly issued Russia-related General License (GL) 69 authorizes certain debt securities servicing transactions issued by an identified bank that would otherwise be prohibited by Executive Order (E.O.) 14024. Interest or principal payments on the authorized transactions cannot be made to persons located in the Russian Federation, and any payments made to a blocked person must be done in accordance with the Russian Harmful Foreign Activities Sanctions Regulations regardless of where the person is located.

    Additionally, OFAC also issued GL 8L, which authorizes transactions involving Petróleos de Venezuela, S.A. (PdVSA) that are deemed necessary for the wind down of operations in Venezuela for certain entities. While authorizing some transactions, GL 8L also includes a comprehensive list of transactions that are not authorized, including “[a]ny loans to, accrual of additional debt by, or subsidization of PdVSA, or any entity in which PdVSA owns, directly or indirectly, a 50 percent or greater interest, including in kind, prohibited by E.O. 13808 of August 24, 2017, as amended by E.O. 13857, and incorporated into the [Venezuela Sanctions Regulations].”

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

  • 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

  • OFAC sanctions terror operatives and charcoal smugglers in Somalia

    Financial Crimes

    On May 24, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order (E.O.) 13536 and E.O. 13244, against 26 individuals and entities connected with terrorist group al-Shabaab. According to OFAC, the 15 financial facilitators and operatives, four charcoal smugglers, and seven of their associated companies are designated for financial facilitation, business activities, collection of funds on behalf of the terrorist group, proliferation of Improvised Explosive Devices (IEDs), and illegal charcoal smuggling from Somalia, all of which have exacerbated local conflicts and suffering. The 15 designated individuals have generated hundreds of thousands of dollars through illegal fee collections from local Somalis, to support al-Shabaab operations and weapons procurement in southern Somalia. Regarding the four charcoal smugglers, after 2012, Somali charcoal exports and imports were banned pursuant to United Nations Security Council Resolution 2036 due to its role in fueling instability in Somalia and funding criminal and terrorist organizations.

    As a result of the sanctions, all property and interests in property of the designated persons described above that are in the United States or in the possession or control of U.S. persons are blocked and must be reported to OFAC. In addition, any entities that are owned, directly or indirectly, individually or in the aggregate, 50 percent or more by one or more blocked persons are also blocked. OFAC further mentioned, “any foreign financial institution that knowingly facilitates a significant transaction or provides significant financial services for any of the individuals or entities designated today could be subject to U.S. correspondent or payable-through account sanctions.” Lastly, OFAC stressed that engaging in certain transactions with several the individuals and entities designated entails “risk of secondary sanctions pursuant to E.O. 13224, as amended. Pursuant to this authority, 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 knowingly conducted or facilitated any significant transaction on behalf of a Specially Designated Global Terrorist.”

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

  • OFAC sanctions DPRK cyber and IT workers

    Financial Crimes

    On May 23, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Order (E.O.) 13687 and E.O. 13810, against four entities and one individual, involved in obscure revenue generation and malicious cyber activities supporting the Democratic People’s Republic of Korea (DPRK) government. Through continued coordination with the Republic of Korea (ROK), one individual and one of the entities are concurrently being sanctioned by the ROK, while the other three entities OFAC designated were previously sanctioned by the ROK earlier in February. According to OFAC, the malicious cyber action and illicit IT worker revenue generation supports the DPRK’s unlawful weapons of mass destruction and ballistic missile programs. As a result of the sanctions, all property and interests in property of the designated persons that are in the United States, or in the possession or control of U.S. persons, are blocked and must be 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. OFAC further mentioned, “any foreign financial institution that knowingly facilitates a significant transaction or provides significant financial services for any of the individuals or entities designated today could be subject to U.S. correspondent or payable-through account sanctions.”

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

  • OFAC expands Russian sanctions

    Financial Crimes

    The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) recently announced several actions targeting Russia’s attempts to circumvent or evade sanctions and implemented other economic measures to degrade the country’s capacity to wage its war against Ukraine. In coordination with the G7 and other international partners, OFAC implemented several new commitments to cut Russia off from revenue streams and key inputs needed to equip its military. The sanctions target 22 individuals and 104 entities with touchpoints in more than 20 countries or jurisdictions with involvement in the technology, energy, and financial services sectors. OFAC also expanded sanctions authorities to target new sectors of Russia’s economy and sever the country’s access to several new categories of services. Additional sanctions-related measures include the designation or identification as blocked property of nearly 200 individuals, entities, vessels, and aircraft by the State Department. Concurrently, the Commerce Department significantly expanded the territorial reach and categories covered by its export controls and added 71 entities to its Entity List to prevent Russia from accessing goods needed for its war.

    OFAC noted that it also expanded its Russia-related sanctions authorities through the issuance of a determination that identifies the architecture, engineering, construction, manufacturing, and transportation sectors of the Russian economy pursuant to Executive Order (E.O.) 14024. The determination complements existing sanctions authorities and allows for additional economic costs to be imposed on Russia and for sanctions to be imposed on any person determined to operate of have operated in any of the sectors. OFAC issued a second determination pursuant to E.O. 14071 (effective June 18) to prohibit the “exportation, reexportation, sale, or supply, directly or indirectly, from the United States, or by a United States person, wherever located, of architecture services or engineering services to any person located in the Russian Federation.” (See new OFAC FAQs and general licenses here.)

    Additionally, OFAC amended Directive 4 under E.O. 14024 “to require U.S. persons to report to OFAC any property in their possession or control in which the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, or the Ministry of Finance of the Russian Federation has an interest.”

    Earlier in the month, OFAC also announced sanctions against a Russian ransomware actor for being complicit in cyberattacks against U.S. law enforcement, businesses, and critical infrastructure. OFAC commented that analysis conducted by FinCEN found that “75 percent of ransomware-related incidents reported between July and December 2021 were linked to Russia, its proxies, or persons acting on its behalf.”

    As a result of the sanctions, all property and interests in property of the designated persons that are in the U.S. or in the possession or control of U.S. persons must be blocked and 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’s announcement further noted that its regulations “generally prohibit” U.S. persons from participating in transactions with designated persons unless exempt or otherwise authorized by a general or specific license.

    Financial Crimes Of Interest to Non-US Persons OFAC Department of Treasury OFAC Sanctions OFAC Designations Russia Ukraine Ukraine Invasion Department of State Department of Commerce

  • IOSCO urges global harmonization of crypto oversight

    Federal Issues

    Earlier this month, the International Organization of Securities Commissions (IOSCO) released draft policy recommendations to support greater regulatory and oversight consistency within the crypto and digital assets markets. According to the global securities watchdog, regulators must strive for consistency in their oversight of crypto-asset activities given the cross-border nature of these markets and the varying approaches taken by individual jurisdictions. Seeking to optimize consistency in the way crypto-asset and securities markets are regulated, the IOSCO advised regulators to enhance cooperation efforts and attempt “to achieve regulatory outcomes for investor protection and market integrity that are the same as, or consistent with, those required in traditional financial markets in order to facilitate a level-playing field between crypto-assets and traditional financial markets and help reduce the risk of regulatory arbitrage.” Encouraging regulators to engage in rulemaking and information sharing, the IOSCO presented a comprehensive strategy for harmonizing the oversight of crypto companies, including standards on conflicts of interest and governance, fraud and market abuse, cross-border cooperation, custody of client monies and assets, and operational and technological risks. The IOSCO also suggested measures for reducing money laundering risks, explaining that crypto assets may be more appealing to criminals who want to avoid traditional financial system oversight. The IOSCO noted that its goal is to finalize its policy recommendations in early Q4 2023. Comments will be received through July 31.

    Federal Issues Fintech Digital Assets Of Interest to Non-US Persons Cryptocurrency

  • SEC fines Dutch medical supplier $62 million to settle FCPA charges

    Securities

    The SEC recently announced that a global Dutch manufacturer of health technology products agreed to pay more than $62 million to settle claims that it allegedly violated the FCPA with respect to the sale of medical diagnostic equipment in China. According to the SEC’s order, between 2014 and 2019, the manufacturer’s agents in China “engaged in improper conduct to influence foreign officials in connection with tender specifications in certain public tenders to increase the likelihood that [the manufacturer’s] products were selected.” Certain agents also allegedly engaged in a variety of improper bidding practices that unjustly enriched the manufacturer by $41 million. Special pricing discounts were given to distributors, which created a corruption risk that the increased distributor margins could be used to fund improper payments to government-owned hospital employees, the SEC claimed. During this time, the SEC found that the manufacturer lacked sufficient internal accounting controls to prevent and detect the conduct, and allegedly failed “to provide reasonable assurances” that transactions were accurately recorded in the Chinese agents’ books and records, which were consolidated into the manufacturer’s books and records.

    The SEC stated that the manufacturer was previously charged with similar misconduct in Poland between 1999 and 2007, and that despite taking remedial efforts, the manufacturer failed to implement sufficient internal accounting controls relating to its sales of health technology products in China. The manufacturer consented to the SEC’s order without admitting or denying allegations that it violated the books and records and internal accounting control provisions of the Securities Exchange Act and agreed to pay $15 million in civil penalties and more than $47 million in disgorgement and prejudgment interest. The SEC recognized the company’s cooperation and remedial efforts.

    Securities Financial Crimes Of Interest to Non-US Persons FCPA

  • OFAC reaches $3.3 million settlement with cosmetics company for Iranian sanctions violations

    Financial Crimes

    The U.S Treasury Department’s Office of Foreign Assets Control (OFAC) recently announced settlements with a California-based cosmetics company and a former senior company executive to resolve potential civil liability stemming from allegations that the company participated in a conspiracy to export goods and services from the United States to Iran over roughly an eight-year period. According to OFAC’s web notice, the company entered into an exclusive agreement with an Iranian distributor to sell products in the Middle East, specifically in Iran, without ever receiving a specific license or other applicable OFAC guidance to do so. OFAC maintained that these exported products (for which the company requested a license), were neither generally authorized nor exempt from prohibition. During a later acquisition, the company again applied for, but did not receive, a specific license to export products to Iran. The company knew that an OFAC license was required to lawfully export the products to Iran but continued to do so through departments generally overseen by the former senior company executive, OFAC said, adding that prior to the acquisition, the company did not disclosure the exports or its involvement with Iran, nor was this conduct discovered during pre-acquisition due diligence.  By conspiring to export approximately $11.1 million worth of goods to Iran over approximately eight years, the company allegedly violated the Iranian Transactions and Sanctions Regulations.

    In arriving at the settlement amount, OFAC considered, among other things, that the company willfully violated U.S. sanctions by exporting its products and services to Iran, despite having knowledge that such conduct was prohibited, and that senior company officials had actual knowledge of the alleged misconduct. The $3.3 million settlement (of which the former senior company executive is responsible for $175,000) reflects that while the company voluntarily self-disclosed the apparent violations, the violations constitute an egregious case. OFAC also considered several mitigating factors, including that: (i) the company has undertaking remedial measures to prevent future misconduct; (ii) the overall percentage represented by its sales to Iran is small; (iii) the company has not received a penalty notice from OFAC in the preceding five years; (iv) the company cooperated with OFAC during the investigation and agreed to toll the statute of limitations; and (v) the former senior company executive’s violations involved the export of benign consumer goods.

    Providing context for the settlement, OFAC said, among other things, that the “case highlights that U.S. sanctions on Iran encompass a wide range of potentially violative conduct, including the formation and execution of conspiracies to engage in prohibited activities such as exporting goods to Iran and causing such exports to occur.” OFAC reminded businesses that “placement of a U.S. entity under the compliance structure of a non-U.S. entity that may lack sufficient familiarity with U.S. sanctions laws could prevent the prompt identification of and response to potentially prohibited conduct.”

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

  • U.S. and EU enter bilateral sanctions partnership

    Financial Crimes

    On May 16, the United States and the European Union entered into a bilateral partnership to strengthen working relationships and share sanctions expertise to address foreign policy goals. The U.S.-EU partnership’s foundation is premised on a collaborative approach for financial sanctions, in which the U.S. Treasury Department’s Office of Foreign Assets Control, the European External Action Service, and the European Commission Directorate-General for Financial Stability, Financial Services and Capital Markets Union will continue to work closely with partners around the world to ensure financial sanctions are fully contributing to member countries’ policy goals. Emphasizing that “[s]anctions are most effective when coordinated with a broad range of international partners who can magnify the economic and political impact,” Treasury stressed the importance of multilateral implementation to maximize the effectiveness of sanctions while minimizing unintended costs and compliance burdens.

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

  • FinCEN, Commerce urge monitoring of attempts to evade Russian export controls

    Financial Crimes

    On May 19, FinCEN and the Department of Commerce’s Bureau of Industry and Security (BIS) issued a supplemental joint alert urging continued vigilance for potential Russian export control evasion attempts. The alert reinforces ongoing initiatives to further constrain and prevent Russia from accessing critical technology and goods to support its war-making efforts against Ukraine. It follows a joint alert issued last June which urged financial institutions to take a “risk-based approach” for identifying potentially suspicious activity, such as end-use certificates, export documents, or letters of credit-based trade financing. (Covered by InfoBytes here.) The supplemental alert provides information on new export control restrictions implemented since the last joint alert was issued, including evasion typologies, new high priority Harmonized System codes to inform U.S. financial institutions’ customer due diligence, and additional transactional and behavioral red flags to help identify suspicious transactions relating to possible export control evasion.

    Financial Crimes Of Interest to Non-US Persons FinCEN Department of Commerce Russia Ukraine Ukraine Invasion Customer Due Diligence

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