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OFAC sanctions 15 international human rights abusers
On December 7, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13818 targeting fifteen actors across three countries under the Global Magnitsky Human Rights Accountability Act. According to OFAC, the sanctioned actors are associated with human rights abuse and repressive acts targeting civilians, political opponents, and peaceful protestors. As a result of the sanctions, all property and interests in property belonging to the sanctioned entities subject to U.S. jurisdiction 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 these persons, 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.”
SEC adopts HFCAA rules
On December 2, the SEC adopted a final rule regarding the submission and disclosure requirements in the Holding Foreign Companies Accountable Act (HFCAA). The final rule applies “to registrants the SEC identifies as having filed an annual report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that the Public Company Accounting Oversight Board (PCAOB) is unable to inspect or investigate (Commission-Identified Issuers).” Among other things, the final rule requires: (i) Commission-Identified Issuers to submit documentation to the SEC establishing that they are not owned or controlled by a governmental entity in the public accounting firm’s foreign jurisdiction, if indeed true; and (ii) disclosure in a foreign issuer’s annual report regarding the audit arrangements of, and governmental influence” on those who register. According to the final rule, the SEC will identify Commission-Identified Issuers for fiscal years starting after December 18, 2020. Additionally, if a registrant is identified as a Commission-Identified Issuer based on its annual report for the fiscal year ended December 31, 2021, the registrant will be required to comply with the submission or disclosure requirements in its annual report filing covering the fiscal year ended December 31, 2022.
The same day, SEC Chair Gary Gensler released a statement noting that, “[t]he finalized rules will allow investors to easily identify registrants whose auditing firms are located in a foreign jurisdiction that the [Public Company Accounting Oversight Board] cannot completely inspect.” The rule is effective on 30 days after publication in the Federal Register.
FinCEN issues ANPRM to curb real estate-related illicit finance
On December 6, the Financial Crimes Enforcement Network (FinCEN) issued an advanced notice of proposed rulemaking (ANPRM) seeking comments on potential requirements under the Bank Secrecy Act (BSA) to address vulnerabilities in the U.S. real estate market to money laundering and other illicit activity. Systemic money laundering vulnerabilities in this space, FinCEN cautioned, present opportunities for corrupt officials and illicit actors to launder criminal proceeds through the purchase of real estate and threaten U.S. national security and the integrity of the U.S. financial system. FinCEN stressed that, because of the real estate market’s opacity and gaps in industry regulation, “the U.S. real estate market continues to be used as a vehicle for money laundering and can involve businesses and professions that facilitate (even if unwittingly) acquisitions of real estate in the money laundering process.” Regulated financial institutions, such as banks that provide real estate transactions, are subject to federal anti-money laundering rules and are not as susceptible to money laundering because they must report suspicious activity to FinCEN, the agency stated. However, FinCEN reported that when real estate is purchased in other ways, beneficial ownership can be extremely difficult to trace. Currently FinCEN does not impose the BSA’s general recordkeeping and reporting requirements on persons involved in all-cash real estate transactions (although title insurance companies are subject to specific transaction reporting requirements through Geographic Targeting Orders—covered by InfoBytes here). To address these issues, the ANPRM seeks comments on ways to enhance the transparency of the U.S. residential and commercial real estate market on a nationwide basis while minimizing the burden on businesses. Comments are due within 60 days of publication in the Federal Register.
OFAC sanctions Houthi military commander
On November 18, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13611 against a key military official connected to the seizure of property in Yemen, who used a variety of unlawful tactics including extortion. According to OFAC, the sanctioned individual was the commander of the Houthi-controlled military logistics support organization, where he assisted the Houthis in acquiring smuggled weapons, and served as the officer responsible for managing assets and funds controlled by the Houthis. As a result of the sanctions, all property and interests in property belonging to the sanctioned individual, and “any entities that are owned, directly or indirectly, 50 percent or more” by the individual that are subject to U.S. jurisdiction are blocked and must be reported to OFAC. OFAC’s announcement further noted that OFAC regulations “generally prohibit” U.S. persons from participating in transactions with designated persons unless exempt or otherwise authorized by a general or specific license and warned foreign financial institutions that if they knowingly facilitate significant transactions for any of the designated persons, they may be subject to U.S. correspondent account or payable-through account sanctions.
OFAC amends Syrian Sanctions Regulations
On November 24, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced an amendment to the Syrian Sanctions Regulations, 31 CFR part 542, which expands an existing authorization related to certain activities of nongovernmental organizations (NGOs) in Syria. The final rule permits NGOs to engage in additional transactions and activities in support of the not-for-profit activities. Additionally, OFAC published two new FAQs (see 937 and 938), which provide further information on Syrian sanctions. The final rule takes effect November 26.
OFAC sanctions Iranians for attempting to influence 2020 U.S. presidential election
On November 18, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13848 against six Iranian individuals and one Iranian entity for allegedly attempting to influence the 2020 U.S. presidential election. According to OFAC, “state-sponsored Iranian cyber actors executed an online operation to intimidate and influence American voters, and to undermine voter confidence and sow discord” by obtaining or attempting to obtain U.S. voter information, sending threatening and intimidating emails to voters, crafting and disseminating “disinformation pertaining to the election and election security,” and illicitly accessing “content management accounts of several online U.S. media entities, which resulted in their ability to edit and create fraudulent content.” As a result, all property and interests in property of the sanctioned persons subject to U.S. jurisdiction are blocked, as well as any entities owned 50 percent or more by such persons. U.S. persons are also generally prohibited from entering into transactions with the sanctioned persons. Additionally, OFAC warned that “financial institutions and other persons that engage in certain transactions or activities with the sanctioned entity and individuals may expose themselves to sanctions or be subject to an enforcement action.”
The sanctions are part of a collective effort with the U.S. Department of State and the FBI. Concurrent with the designations, the DOJ unsealed an indictment against two of the sanctioned individuals. The DOJ charged the Iranian nationals with (i) conspiracy to commit computer fraud and abuse, voter intimidation, and transmission of interstate threats, (ii) voter intimidation, and (iii) transmission of interstate threats. One of the individuals was additionally charged with unauthorized computer intrusion and computer fraud.
OFAC extends Venezuela-related general license
On November 24, the U.S. Treasury Department’s Office of Foreign Assets Control issued Venezuela-related General License (GL) 8I, which extends the authorization of certain transactions that were in effect prior to July 26, 2019, involving Petróleos de Venezuela, S.A. that are necessary for the limited maintenance of essential operations in Venezuela or the wind-down of operations in Venezuela for certain entities that would otherwise be prohibited by Executive Order 13850 (as amended), as incorporated into the Venezuela Sanctions Regulations. (Covered by InfoBytes here.) Effective through June 1, 2022, GL 8I replaces GL 8H, which was issued June 1.
OFAC expands Belarusian human rights sanctions; restrict regime’s access to international capital markets
On December 2, OFAC impos[ed] restrictions on dealings in new issuances of Belarusian sovereign debt in the primary and secondary markets by issuing new Belarus-related Directive 1 under E.O. 14038, which “prohibits transactions in, provision of financing for, or other dealings by U.S. persons or within the United States in new debt with a maturity of greater than 90 days issued on or after December 2, 2021 by the Ministry of Finance of the Republic of Belarus or the Development Bank of the Republic of Belarus.” OFAC provided Guidance on Directive 1’s scope and implications through new Frequently Asked Questions 940, 941, 942, 943, 944, 945, 946, 947, 948 and updated FAQ 918. Additionally, OFAC issued Belarus General License 5, which authorizes limited transactions and activities necessary for the wind down of transactions involving certain identified entities. OFAC stated that these new restrictions reflect the close coordination between the U.S. and its partners and allies to restrict the Lukashenka regime’s access to international capital markets.
The same day, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order (E.O.) 13405 against 20 individuals and 12 entities for allegedly enabling the “Lukashenka regime’s blatant disregard for international norms and the wellbeing of its own citizens.” Additionally, OFAC identified three aircraft as blocked property pursuant to E.O.s 14038 and 13405. The action was taken in coordination with the EU, the UK, and Canada.
FFIEC updates BSA/AML examination manual
On December 1, the Federal Financial Institutions Examinations Council (FFIEC) published updated versions of three sections and one new section of the Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Examination Manual (Manual), which provides examiners with instructions for assessing a bank or credit union’s BSA/AML compliance program and adherence to BSA regulatory requirements. The new section is Introduction – Customers, and the revisions include the following updated sections: Charities and Nonprofit Organizations, Independent Automated Teller Machine Owners or Operators, and Politically Exposed Persons. The FFIEC noted that the “updates should not be interpreted as new instructions or as a new or increased focus on certain areas,” but rather are intended to “provide information and considerations related to certain customers that may indicate the need for bank policies, procedures, and processes to address potential money laundering, terrorist financing, and other illicit financial activity risks.” In addition, the Manual itself does not establish requirements for financial institutions, which are found in applicable statutes and regulations. (See also FDIC FIL-12-2021 and OCC Bulletin 2021-10.) As previously covered by InfoBytes, in June, the FFIEC updated the following sections of the Manual: International Transportation of Currency or Monetary Instruments Reporting, Purchase and Sale of Monetary Instruments Recordkeeping, Reports of Foreign Financial Accounts, and Special Measures.
OCC reminds banks of venture capital prohibitions
On November 23, the OCC sent banks a reminder that they are generally prohibited from making most equity investments in venture capital funds. The bulletin warned that simply because an investment in a fund qualifies for the venture capital fund exclusion under the Volcker Rule, it does not mean the fund is a permissible investment for a national bank, federal savings association, or federal branch and agency of a foreign bank. Prior to investing in a venture capital fund, banks must make a determination as to whether the investment is permissible and appropriate for the bank. The OCC reminded banks that engaging in impermissible and inappropriate investments may expose a bank and its institution-affiliated parties to enforcement actions and civil money penalties. Additionally, national bank directors may be held personally liable for losses attributed to impermissible investments. The OCC noted, however, that equity investments in venture capital funds may be allowed provided they are public welfare investments or investments in small business investment companies.