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Fed approves establishment of federally-licensed branch of Dutch payment company
On May 24, the Federal Reserve Board announced its approval of the application of a Dutch- based payment company to establish a federally-licensed branch in San Francisco. According to the order, since the company currently does not have a U.S. banking presence, its U.S. payment processing business will rely on third-party banks. Upon establishment of the San Francisco branch, the company’s operations would be transferred to the branch, and it would be eligible to engage in a wide range of payments processing and related banking activities in the U.S., thus reducing its dependence on third-party banks. Through the establishment of the branch, “the company proposes to bring its U.S. activities and operations in line with those conducted under its European Central Bank (ECB) license,” the Fed noted. The order also pointed out that “managerial and other financial resources of the company are considered consistent with approval, and the company appears to have the experience and capacity to support the proposed branch.” In addition, the company has initiated controls and procedures for its proposed branch to guarantee compliance with U.S. law and for its operations in general.
U.S.-UK financial regulators discuss bilateral issues
On May 24, the U.S. Treasury Department issued a joint statement covering the recently held fourth meeting of the U.S.-UK Financial Regulatory Working Group (Working Group). Participants included officials and senior staff from both countries’ treasury departments, as well as regulatory agencies including the Federal Reserve Board, CFTC, FDIC, OCC, SEC, the Bank of England, and the Financial Conduct Authority. The Working Group discussed, among other things, (i) financial sector implications of the UK’s withdrawal from the EU; (ii) “cooperative efforts to promote the free flow of cross-border financial services data crucial for effective financial sector regulation and supervision”; (iii) regulatory fragmentation and data localization risks; (iv) the Financial Stability Board’s work on non-bank financial intermediation, which involves active engagement from both U.S. and UK authorities; and (v) the management of climate-related financial risks and other sustainable finance issues. Working Group participants will continue to engage bilaterally on these issues and others ahead of the next meeting planned for this fall.
OFAC sanctions Houthi military official
On May 21, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13611 against a key senior military official connected to the Ansarallah, sometimes referred to as the Houthis, for allegedly arranging attacks impacting Yemeni civilians. According to OFAC, the sanctioned individual recently led the offense against Yemeni government-held territory in the Marib province, which “puts approximately one million already vulnerable internally displaced people (IDP) at risk, threatens to overwhelm an already stretched humanitarian response, and is triggering broader escalation.” 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 authorizes certain PEESA transactions and activities
On May 21, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued Protecting Europe’s Energy Security Act of 2019 (PEESA) General License (GL) 1, which authorizes certain activities otherwise prohibited involving the Federal State Budgetary Institution Marine Rescue Service (MRS). However, GL 1 does not authorize any transactions or activities involving any vessels identified on OFAC’s Non-SDN Menu-Based Sanctions List “as blocked property of MRS or of any entity in which MRS owns, directly or indirectly, a 50 percent or greater interest,” or any PEESA prohibited transactions or activities. OFAC also issued related FAQs 894 and 895 and added entities and vessels to its Non-SDN Menu-Based Sanctions List. Furthermore, OFAC added two vessels to the Specially Designated National List, and reiterated in FAQ 895 that “property and interests in property of persons on the SDN List are blocked and any entity owned 50 percent or more, individually or in the aggregate, directly or indirectly, by one or more blocked persons is itself blocked.”
Agencies to proceed with Call Report revisions
On May 24, the FDIC, Federal Reserve Board, and the OCC published a joint notice and request for comments on information collections published last December and this February (covered by InfoBytes here). The proposed reporting changes would revise and extend three versions of the Call Report—FFIEC 031, FFIEC 041, and FFIEC 051—as well as FFIEC 002, “Report of Assets and Liabilities of U.S. Branches and Agencies of Foreign Banks,” and FFIEC 002S, “Report of Assets and Liabilities of a Non-U.S. Branch that is Managed or Controlled by a U.S. Branch or Agency of a Foreign (Non-U.S.) Bank.” After considering comments received on the information collections, the agencies announced their intention to proceed with the proposed revisions and will submit a request to Office of Management and Budget for approval. The proposed revisions to the reporting forms, along with revised instructions related to FDIC amendments to the deposit insurance assessment system, will be effective with the June 30, 2021, report date. Additionally, the agencies noted that the exclusion of sweep deposits and certain other deposits from reporting as brokered deposits will be effective with the September 30, 2021, report date. Comments on the joint notice must be received by June 23.
OFAC amends Terrorism List Governments Sanctions Regulations
On May 19, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued a final rule to amend the Terrorism List Governments Sanctions Regulations to implement changes resulting from the Secretary of State’s December 14, 2020 rescission of the designation of Sudan as a State Sponsor of Terrorism. The amendments relate to “removing one general license in full and amending another general license to remove references to the Government of Sudan and Sudanese nationals because financial transactions with the Government of Sudan are no longer prohibited by the Terrorism List Governments Sanctions Regulations.” The rule went into effect on May 20 immediately upon publication in the Federal Register.
OFAC amends security investment-related general license
On May 18, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued General License (GL) 1B, “Authorizing Transactions Involving Securities of Certain Communist Chinese Military Companies.” GL 1B authorizes through June 11 (9:30 a.m. eastern daylight time) certain transactions and activities that involve “publicly traded securities, or any securities that are derivative of, or are designed to provide investment exposure to such securities, of an entity whose name closely matches, but does not exactly match, the name of a Communist Chinese military company as defined by section 4(a) of E.O. 13959.” However, GL 1B does not authorize “[a]ny transactions or activities involving publicly traded securities, or any securities that are derivative of, or are designed to provide investment exposure to such securities of entities identified in the Office of Foreign Assets Control’s Non-SDN Communist Chinese Military Companies List (NS-CCMC List) pursuant to section 4(a)(iii) of E.O. 13959, as amended, as a subsidiary of a person determined to be a Communist Chinese military company, including entities added to the NS-CCMC List on January 8, 2021.” GL 1B immediately replaces and supersedes GL 1A, dated January 26.
OFAC sanctions ISIS financial facilitators in Syria and Turkey
On May 17, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13224 against three individuals and one entity connected to the Islamic State of Iraq and Syria (ISIS) for allegedly helping ISIS access the financial system in the Middle East through a network of international donors. OFAC noted that these sanctions coincide with the fourteenth 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 belonging to the sanctioned persons, and “any entities that are owned, directly or indirectly, 50 percent or more” by them 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 the 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 sanctions Burmese governing body and numerous individuals
On May 17, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 14014 against 16 individuals connected to Burma’s military regime and one entity, the State Administration Council (SAC), which is the official name of the military government in Burma formed by Burma’s military on February 2, 2021. As a result of the sanctions, all property and interests in property belonging to the SAC and the identified individuals subject to U.S. jurisdiction are blocked and must be reported to OFAC. According to Andrea Gacki, Director of OFAC, these sanctions “promote accountability for those responsible for the coup and ongoing violence.” Additionally, “any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons are also blocked.” The sanctions also generally prohibit U.S. persons from engaging in any dealings involving the property or interests in property of the SAC or the identified individuals.
OFAC amends narcotics trafficking and kingpin-related sanctions regulations
On May 14, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued a final rule to amend the Narcotics Trafficking Sanctions Regulations (NTSR) and Foreign Narcotics Kingpin Sanctions Regulations (FNKSR). The amendments relate to “general licenses for payments for legal services, certain transactions for personal maintenance, certain transactions for maintenance of blocked tangible property, and emergency medical services.” In addition, the final rule updates regulatory provisions prohibiting transactions involving blocked property and clarifies the terms “evasions,” “attempts,” and “conspiracies” in the NTSR and the FNKSR so that they are consistent with the definitions of those terms in other OFAC sanctions regulations.