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  • OFAC sanctions persons connected to Nicaragua President Ortega; amends Nicaragua sanctions regulations and Ukraine-related general licenses

    Financial Crimes

    On July 17, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13851 against one of Nicaraguan President Ortega’s sons, as well as a second individual and two companies used to allegedly “distribute regime propaganda and launder money.” According to OFAC, the second sanctioned individual created shell companies to launder money from businesses that he operated on behalf of another one of the president’s sons previously designated by OFAC. OFAC also cited to the individual’s alleged involvement on behalf of a chain of sanctioned gas stations controlled by the Ortega family, designating the individual “for being responsible for or complicit in, or for having directly or indirectly engaged or attempted to engage in, a transaction or series of transactions involving deceptive practices or corruption by, on behalf of, or otherwise related to the [Government of Nicaragua (GoN)] or a current or former official of the GoN.” As a result, all property and interests in property of the sanctioned individuals and entities, and of any entities owned 50 percent or more by such persons subject to U.S. jurisdiction, are blocked and must be reported to OFAC. U.S. persons are also generally prohibited from entering into transactions with the sanctioned persons. 

    Separately, on July 16, OFAC announced amendments (effective July 17) to the Nicaragua Sanctions Regulations, which incorporate the Nicaragua Human Rights and Anticorruption Act of 2018, and, among other things, update the authority citation as well as the prohibited transactions and delegation sections. A general license previously posted on OFAC’s website authorizing certain U.S. government activities related to Nicaragua also has been incorporated. The final rule is effective July 17.

    The announcement also extends the expiration date of two Ukraine-related general licenses (GLs). Both GL 13O, which supersedes GL 13N, and GL 15I, which supersedes GL 15H, now expire January 22, 2021, and authorize certain transactions necessary to divest or transfer debt, equity, or other holdings, or wind down operations or existing contracts with a Russian manufacturer previously sanctioned by OFAC in April 2018 (covered by InfoBytes here).

    Financial Crimes OFAC Department of Treasury Sanctions DOJ Nicaragua Ukraine Of Interest to Non-US Persons

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  • UAE manufacturer settles OFAC, DOJ charges for apparent North Korean sanctions violations

    Financial Crimes

    On July 16, a United Arab Emirates cigarette filter and tear tape manufacturer settled OFAC and DOJ charges for apparent violations of the North Korea Sanctions Regulations (NKSR) 31 C.F.R. part 510 and the International Emergency Economic Powers Act (IEEPA). According to OFAC’s release, the company allegedly violated the NKSR by (i) engaging in deceptive practices in order to export cigarette filters to North Korea through a network of front companies in China and other countries; and (ii) receiving three wire transfers totaling more than $330,000 in accounts at a U.S. bank’s foreign branch as payment for exporting the filters. OFAC noted that the conduct leading to the apparent violations included aggravating factors such as (i) the company’s senior manager and customer-facing employee willfully violated the NKSR by agreeing to, among other things, transact with non-North Korean front companies to conceal the North Korea connection despite a company policy that “warned that its banks would not handle transactions with sanctioned jurisdictions” including North Korea; and (ii) the senior manager and customer-facing employee were aware that the filters would be sent to North Korea. OFAC also considered various mitigating factors, including that the company substantially cooperated with OFAC’s investigation and agreed to provide ongoing cooperation. Under the terms of the settlement agreement, the company is required to pay a $665,112 civil monetary penalty to OFAC, which will be deemed satisfied by payment of the fine assessed by the DOJ arising out of the same conduct.

    In the parallel criminal enforcement action, the company entered into a deferred prosecution agreement with the DOJ, accepting responsibility for its criminal conduct and agreeing to pay a $666,543.88 fine. According to the DOJ, this is the Department’s first corporate enforcement action for violations of the IEEPA. In addition, the company agreed to, among other things, fully cooperate with any investigation, implement a compliance program designed to prevent and detect any future violations of U.S. economic sanctions regulations, provide quarterly reports to the DOJ regarding the status of compliance improvements, provide OFAC-related training, and annually certify to OFAC that it has implemented and has continued to uphold its compliance-related commitments.

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

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  • FinCEN warns of virtual currency social media scam

    Financial Crimes

    On July 16, the Financial Crimes Enforcement Network (FinCEN) issued an alert warning financial institutions about a scam using social media accounts to solicit fraudulent payments denominated in convertible virtual currency (CVC). According to FinCEN, high-profile social media accounts were compromised and used to solicit payments to CVC accounts, with claims that any CVC sent would be “doubled and returned to the sender.” The alert reminds financial institutions to report suspicious transactions involving this type of activity as soon as possible, and that “[a]ny data or information that helps identify the activity as suspicious can be included as an indicator” on their Suspicious Activity Report (SAR) form. The alert notes several indicators to assist financial institutions in identifying activity related to the scam, including (i) communications soliciting payments with misspellings; (ii) social media posts soliciting donations from unverified accounts; and (iii) multiple accounts communicating the same message soliciting funds for an unknown purpose.

    Financial Crimes FinCEN SARs Of Interest to Non-US Persons Virtual Currency

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  • Terrorist Financing Targeting Center designates ISIS-affiliated financial facilitators and money services businesses

    Financial Crimes

    On July 15, the U.S. Treasury Department announced that the seven member nations of the Terrorist Financing Targeting Center (TFTC) have jointly designated six targets affiliated with the Islamic State of Iraq and Syria (ISIS), including three key money services businesses. Four targets are designated for providing “a critical financial and logistical lifeline to ISIS, its branches, and its global facilitation networks,” while two targets are designated for “abus[ing] the goodwill of the international community under the auspices of charitable giving to facilitate the transfer of funds for and to support the activities of ISIS’s branch in Afghanistan, ISIS-Khorasan (ISIS-K).” Since 2017, the participating TFTC members—Saudi Arabia, Bahrain, Kuwait, Oman, Qatar, the United Arab Emirates, and Treasury’s Office of Foreign Assets Control (OFAC)—have issued five rounds of joint designations against 60 terrorist targets globally, in an effort to challenge ISIS’s ability to finance its operations through money service businesses and charities operating under false pretenses.

    As a result of the sanctions, “all property and interests in property of these targets that are or come within the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC.” OFAC noted that its regulations “generally prohibit all dealings by U.S. persons or within the United States that involve any property or interests in property of blocked persons.” OFAC further warned that persons that engage in transactions with one of the designated individuals maybe be exposed to sanctions or subject to an enforcement action. Additionally, foreign financial institutions that knowingly facilitate significant transactions to the designated entities may be subject to prohibitions or strict conditions by OFAC.

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

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  • OFAC issues sanctions for supporting Russian financier

    Financial Crimes

    On July 15, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Orders 13848, 13694, and 13661 against three individuals and five entities located in Sudan, Hong Kong, and Thailand, for allegedly enabling a Russian financier to evade U.S. sanctions. According to OFAC, the financier supported the Internet Research Agency (IRA), a Russian “troll farm” designated by OFAC in 2018, and is believed to be the financier behind Private Military Company, a “designated Russian Ministry of Defense proxy force.” OFAC alleged that this operation “advocated for the use of social media-enabled disinformation campaigns similar to those deployed by the IRA, and the staging of public executions to distract protestors seeking reforms.” Additionally, OFAC alleged that the individual and Thailand and Hong Kong-based entities “facilitated over 100 transactions exceeding $7.5 million that were sent in the interest of [the financier].” As a result, all property and interests in property belonging to, or owned by, the identified individuals and entities subject to U.S. jurisdiction are blocked, and “any entities that are owned, directly or indirectly, 50 percent or more by the designated entities, are also blocked.” U.S. persons are generally prohibited from dealing with any property or interests in property of blocked or designated persons.

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

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  • OFAC issues amended Venezuela-related general license and FAQ

    Financial Crimes

    On July 15, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued Venezuela General License (GL) 5D, which supersedes GL 5C and authorizes certain transactions otherwise prohibited under Executive Orders 13835 and 13857 related to, or that provide financing for, dealings in the Petróleos de Venezuela, S.A. 2020 8.5 Percent Bond on or after October 20, 2020. Concurrently, OFAC issued a new Venezuela-related frequently asked question regarding GL 5D.

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

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  • FinCEN updates FATF-identified jurisdictions with AML/CFT deficiencies

    Financial Crimes

    On July 14, the Financial Crimes Enforcement Network (FinCEN) issued an advisory to inform financial institutions of updates to the Financial Action Task Force (FATF)-identified jurisdictions with “strategic deficiencies” in their anti-money laundering and combating the financing of terrorism (AML/CFT) and counter-proliferation financing deficiencies. FATF notes that in response to measures taken by countries in response to the Covid-19 pandemic, it has temporarily paused reviewing most counties with strategic deficiencies. The advisory reminds members that its February 2020 statement High-Risk Jurisdictions Subject to a Call for Action remains in effect and urges “all jurisdictions to impose countermeasures on Iran and the Democratic People’s Republic of Korea (DPRK) to protect the international financial system from significant strategic deficiencies in their AML/CFT regimes.” The advisory also emphasizes that financial institutions should consider the Jurisdictions under Increased Monitoring document and consult the list of identified countries when reviewing due diligence obligations and risk-based policies, procedures, and practices. The advisory also outlines AML program risk assessment considerations, as well as suspicious activity report filing guidance.

    Financial Crimes FinCEN Anti-Money Laundering Combating the Financing of Terrorism Of Interest to Non-US Persons FATF

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  • OFAC sanctions persons for human rights violations in China’s Xinjiang region

    Financial Crimes

    On July 9, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13818 against a Chinese government entity and four current or former government officials for alleged corruption violations of the Global Magnitsky Human Rights Accountability Act. According to OFAC, the sanctioned persons are connected to serious human rights abuse against ethnic monitories in the Xinjiang region. The sanctions follow an advisory issued by the U.S. Departments of State, Treasury, Commerce, and Homeland Security advising “[b]usinesses with potential exposure in their supply chain to entities that engage in human rights abuses in Xinjiang or to facilities outside Xianjiang. . .[to consider] the reputational, economic, and legal risks of involvement with such entities.” As a result of the sanctions, all property and interests in property of the designated persons within U.S. jurisdiction must be blocked and reported to OFAC. OFAC notes that its regulations “generally prohibit” U.S. persons from participating in transactions with these individuals and entities. The prohibitions also “include 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.”

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

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  • DOJ and SEC release second edition of FCPA resource guide

    Financial Crimes

    On July 3, the DOJ and SEC released an update to its longstanding joint FCPA guidance, A Resource Guide to the US. Foreign Corrupt Practices Act, Second Edition (the Guide), which was first released in 2012. The newest edition has been updated to reflect recent case law, insights into DOJ and SEC enforcement policies and practices, and examples of enforcement actions. While many aspects of the Guide remain the same, revisions were made to include new case law addressing the definition of a “foreign official” under the FCPA, as well as the FCPA’s jurisdictional reach and the foreign written laws affirmative defense. The agencies also incorporated their more recent policy statements designed to encourage cooperation and voluntary disclosures. 

    Recent case law is also discussed in the updated Guide, including the U.S. Court of Appeals for the Second Circuit’s decision in United States v. Hoskins (covered by InfoBytes here and here), which rejected the government’s argument for a broad interpretation of personal jurisdiction in FCPA cases and held that a non-resident foreign national lacking sufficient ties to a U.S. entity cannot be charged with conspiracy to violate the FCPA or with aiding and abetting an FCPA violation. Addressed as well are the U.S. Supreme Court’s recent decisions in Kokesh v. SEC and Liu v. SEC (covered by InfoBytes here and here) regarding the SEC’s forfeiture and disgorgement authority, and the statute of limitations.

    Financial Crimes DOJ SEC FCPA Agency Rule-Making & Guidance

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  • OFAC settles with global e-commerce, digital service provider over multiple sanctions violations

    Financial Crimes

    On July 8, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $134,523 settlement with a Washington-based company that provides retail, e-commerce, and digital services worldwide. According to OFAC, due to deficiencies in the company’s sanctions screening process, between 2011 and 2018, the company provided goods and services to OFAC sanctioned persons; to persons located in the sanctioned region or countries of Crimea, Iran, and Syria; and “for persons located in or employed by the foreign missions of Cuba, Iran, North Korea, Sudan, and Syria.” Additionally, the company allegedly accepted and processed orders that primarily consisted of low-value retail goods and services from persons listed on OFAC’s List of Specially Designated Nationals and Blocked Persons who were blocked pursuant to sanctions regulations involving the Democratic Republic of Congo, Venezuela, Zimbabwe, among others. These apparent violations occurred “primarily because [the company’s] automated sanctions screening processes failed to fully analyze all transaction and customer data relevant to compliance with OFAC’s sanctions regulations,” OFAC stated, claiming the company also “failed to timely report several hundred transactions conducted pursuant to a general license issued by OFAC that included a mandatory reporting requirement, thereby nullifying that authorization with respect to those transactions.”

    In arriving at the settlement amount, OFAC considered various mitigating factors, including that the apparent violations were non-egregious and (i) the company voluntarily disclosed the violations and cooperated with the investigation; and (ii) the company has undertaken significant remedial efforts to address the deficiencies and to minimize the risk of similar violations from occurring in the future.

    OFAC also considered various aggravating factors, including that the company failed to exercise due caution or care to ensure its sanctions screening process was able to properly flag transactions involving blocked persons and sanctioned jurisdictions. “This case demonstrates the importance of implementing and maintaining effective, risk-based sanctions compliance controls,” OFAC stated. “[G]lobal companies that rely heavily on automated sanctions screening processes should take reasonable, risk-based steps to ensure that their processes are appropriately configured to screen relevant customer information and to capture data quality issues.”

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

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