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On June 4, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced the issuance of regulations to implement Executive Order (E.O.) 13894: “Blocking Property and Suspending Entry of Certain Persons Contributing to the Situation in Syria.” E.O. 13894 was issued last October following the determination that the situation in and in relation to Syria “undermines the campaign to defeat [ISIS].” The final rule implementing the regulations, which was published in an abbreviated form to provide immediate guidance to the public, took effect June 5. OFAC states it “intends to supplement these regulations with a more comprehensive set of regulations, which may include additional interpretive and definitional guidance, general licenses, and statements of licensing policy.”
On June 2, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) sanctioned four companies for operating in the oil sector of the Venezuelan economy (which provides “financial resources to the illegitimate regime of President Maduro”) and identified four vessels as blocked property, pursuant to Executive Order 13850. As a result, all property and interests in property belonging to the identified 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.
On May 27, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), in response to the Department of State’s announcement of an end to certain Iran nuclear-related waivers, issued a new FAQ and added two individuals to the Specially Designated Nationals and Blocked Persons List (SDN List). FAQ 829 provides a 60-day wind-down period for persons currently engaged in activities permitted by these waivers; however, OFAC cautions that such activities should be wound down by July 27 or persons risk exposure to sanctions under U.S. law absent another waiver or exception. The FAQ notes that the Iran Freedom and Counter-Proliferation Act “provides for sanctions on persons determined to knowingly provide significant financial, material, technological, or other support to, or goods or services in support of any activity or transaction on behalf of or for the benefit of, an Iranian person on OFAC’s SDN List.”
OFAC designates Iran’s interior minister and senior law enforcement officials for human rights abuses
On May 20, the U.S. Treasury Department's Office of Foreign Assets Control (OFAC), pursuant to Executive Order 13553, sanctioned Iran’s interior minister, in addition to seven senior officials of Iran’s Law Enforcement Forces (LEF), a provincial commander of Iran’s Islamic Revolutionary Guard Corps, and a foundation along with its director and members of the board of trustees, for serious human rights abuses against Iranians. According to OFAC, the foundation is controlled by LEF and plays an active role in Iran’s energy, construction, services, technology, and banking industries. As a result of the sanctions, “all property and interests in property of these persons that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC.” OFAC further noted that its regulations “generally prohibit all dealings by U.S. persons or within (or transiting) the United States that involve any property or interests in property of blocked or designated persons,” and warned foreign financial institutions that knowingly facilitating significant transactions or providing significant financial services to the designated individuals may subject them to U.S. correspondent account or payable-through sanctions.
On May 19, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) designated a China-based company pursuant to Executive Order (E.O.) 13224 for allegedly acting as a general sales agent (GSA) for or on behalf of an Iranian airline. According to OFAC, this is the seventh time a GSA has been designated to the airline since 2018, which was previously designated under E.O.s 13224 and E.O, 13382 for providing support to Iran’s Islamic Revolutionary Guard Corps-Qods Force. OFAC emphasized that entities operating in the airline industry “should conduct due diligence to avoid performing services, including GSA services, for or on behalf of a designated person, which may be sanctionable,” and referred the industry to a 2019 advisory that outlined potential civil and criminal consequences for providing unauthorized support to or for designated Iranian airlines.
As a result of the sanctions, “all property and interests in property of [the GSA] that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC.” OFAC further noted that its regulations “generally prohibit all dealings by U.S. persons or within (or transiting) the United States that involve property or interests in property of blocked or designated persons,” and warned foreign financial institutions that knowingly facilitating significant transactions or providing significant financial services to designated individuals may subject them to U.S. correspondent account or payable-through sanctions.
On May 14, the U.S. Departments of State and Treasury, along with the U.S. Coast Guard, issued a global advisory warning the maritime industry of deceptive shipping practices used by Iran, North Korea, and Syria to evade economic sanctions. The “Sanctions Advisory for the Maritime Industry, Energy and Metals Sectors, and Related Communities” expands upon previously issued advisories and discusses due diligence approaches that entities, including financial institutions, should employ to monitor illicit activity and mitigate the risk of potentially engaging in prohibited activities or transactions. Among other things, the advisory provides a list of general compliance practices that may help entities “in more effectively identifying potential sanctions evasion.” These include: (i) institutionalizing sanctions compliance programs; (ii) establishing Automatic Identification System (AIS) best practices and contractual requirements to monitor for manipulations and disruptions, which may be an indication of potential illicit or sanctionable activity; (iii) monitoring ships throughout the entire transaction lifecycle, including those leased to third parties; (iv) knowing your customers and counterparties; (v) exercising supply chain due diligence; (vi) incorporating these best practices into contractual language; and (vii) engaging in industry information sharing of challenges, threats, and risk mitigation measures.
See here for previous InfoBytes coverage on global shipping advisories.
On May 18, the Financial Crimes Enforcement Network (FinCEN) issued an advisory and companion notice on medical scams related to the Covid-19 pandemic that provide detailed instructions for financial institutions filing reports of Covid-19-related suspicious activities. The advisory outlines numerous red flag indicators and case studies addressing Covid-19 medical-related fraudulent activity to assist financial institutions in detecting, preventing, and reporting suspicious transactions. FinCEN also encourages financial institutions to consider additional contextual information, such as a customer’s historical financial activity and whether a customer exhibits multiple indicators, before making a determination that a transaction is suspicious. FinCEN further advises financial institutions—when taking a risk-based approach to Bank Secrecy Act compliance—to perform additional inquiries and conduct investigations as necessary.
The companion notice provides, among other things, that suspicious activity reports (SAR) should only include Covid-19 statements tied to suspicious activity and that statements related to Covid-19’s impact on SAR filing abilities should not be included. However, FinCEN states that filers who previously included these references are not required to file corrected reports. For fraud schemes, including those that exploit the Covid-19 pandemic, FinCEN reiterates that full details related to SAR filings and supporting documentation should be submitted as quickly as possible. The notice also addresses information sharing among financial institutions and provides contact information for reporting Covid-19-related criminal activity to other agencies.
On May 13, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) provided clarifying text related to the modified North Korea Sanctions and Policy Enforcement Act (covered by InfoBytes here), which bars foreign subsidiaries of U.S. financial institutions from knowingly engaging in transactions with Specially Designated Nationals (SDNs) identified under North Korea-related authorities. OFAC added the following text to 490 SDN records to assist the private sector in identifying persons that have been so designated: “Transactions Prohibited For Persons Owned or Controlled by U.S. Financial Institutions: North Korea Sanctions Regulations section 510.214.”
On May 12, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued two new General Licenses (GL) Venezuela GL 3H, “Authorizing Transactions Related to, Provision of Financing for, and Other Dealings in Certain Bonds,” and GL 9G, “Authorizing Transactions Related to Dealings in Certain Securities.” OFAC removed and revoked GL13E. The changes reflect the need to remove Nynas AB. According to the announcement, Nynas AB “has undertaken a corporate restructuring that has resulted in Nynas AB no longer being blocked pursuant to the Venezuela Sanctions Regulations.” Therefore, U.S. persons can engage in transactions or activities with Nynas AB, “provided such activities do not involve blocked persons or otherwise prohibited activities.” OFAC also made conforming technical updates to two FAQs to reflect the issuance of the new GLs.
On May 8, the Financial Crimes Enforcement Network (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 November 2019 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 GTOs do not require reporting for purchases made by legal entities that are U.S. publicly-traded companies.
The renewed GTOs take effect May 10, will extend until November 5, 2020, 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.
- APPROVED Webcast: Remote examinations and complaints — The “new normal”
- Sasha Leonhardt to discuss "Privacy laws clarified" at the National Settlement Services Summit (NS3)
- Amanda R. Lawrence to discuss "New privacy legislation: Preparing for a major source of class action and enforcement activity going forward" at the American Conference Institute Consumer Finance Class Actions, Litigation & Government Enforcement Actions
- Sherry-Maria Safchuk and Lauren Frank to discuss "New CFPB interpretation on UDAAP" at a California Mortgage Bankers Association Mortgage Quality and Compliance Committee webinar
- Daniel P. Stipano to discuss "High standards: Best practices for banking marijuana-related businesses" at the ACAMS AML & Anti-Financial Crime Conference
- Daniel P. Stipano to discuss "Wait wait ... do tell me! Where the panelists answer to you" at the ACAMS AML & Anti-Financial Crime Conference
- Jonice Gray Tucker to discuss "The future of fair lending" at the Mortgage Bankers Association Regulatory Compliance Conference
- Jonice Gray Tucker to discuss "Consumer financial services" at the Practising Law Institute Banking Law Institute