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Treasury says banks need to collaborate to combat corruption
On February 3, U.S. Treasury Department Assistant Secretary for Terrorist Financing and Financial Crimes Elizabeth Rosenberg spoke before the Union of Arab Banks Conference to discuss the importance of working with member institutions in the Middle East and Africa to fight corruption. While noting that countering terrorist financing remains a crucial priority, Rosenberg pointed out that terrorist financing is not the only threat affecting the financial system. “In countries across the region, we have seen trends in which some politically exposed persons have sought to hide their ill-gotten gains through transfers to secondary jurisdictions under both themselves as well as family members’ and associates’ names,” Rosenberg said. “This is something that banks have a responsibility, indeed an obligation, to identify and halt,” she added, emphasizing that “[w]e will all be stronger, more secure, if every bank represented here builds and maintains strong compliance programs” designed to “identify and disrupt the onboarding of customers and the processing of transactions involv[ing] bribes or expropriated government funds.” Rosenberg encouraged the banks to share information on corruption with each other and to ensure enhanced due diligence, especially when dealing with politically exposed persons. “Nearly every act of corruption flows through the formal financial system, the system we are all a part of, which means all of us have the ability—and the responsibility—to stop it,” Rosenberg noted, highlighting the “global corruption boom” in recent decades resulting from individuals seeking to conceal assets and ownerships though shell companies or transactions involving art, real estate, and cryptocurrencies. Rosenberg also informed the banks that as part of the Biden Administration anti-corruption strategy, Treasury “will soon require many U.S. and foreign companies to report their true beneficial owners and to update that information when those beneficial owners change.”
OFAC sanctions Indonesian NGO
On February 3, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13224 against a non-governmental organization established by an Indonesia-based designated terrorist group for the purpose of providing financial support to extremists in Syria under the cover of humanitarian aid. According to Under Secretary of the Treasury for Terrorism and Financial Intelligence, Brian E. Nelson, “[t]he United States is taking this action to expose and disrupt [the terrorist group’s] deceptive efforts to use a purported ‘humanitarian organization’ for illicit purposes as a front for collecting and transferring funds.” Nelson added that “Treasury will continue to work with foreign partners to protect the non-profit sector from abuse by terrorist groups that disguise illicit finance flows as humanitarian activity.” As a result of the sanctions, all property and interests in property of the sanctioned entity subject to U.S. jurisdiction are blocked and must be reported to OFAC. U.S. persons are generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons, unless exempt or authorized by a general or specific OFAC license. OFAC further warned that the agency “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.”
OFAC issues counter terrorism FAQs
On February 2, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) published seven new Counter Terrorism-related frequently asked questions (FAQs). Among other things, the FAQs note that: (i) cash shipments to Afghanistan may be authorized under General Licenses (GL) 14, GL 18, or GL 19, provided that certain circumstances are met; (ii) nongovernmental organizations and international organizations may provide support to municipal water systems; (iii) both U.S. and non-U.S. companies may ship food to Afghanistan; and (vi) banks may process financial transfers and other transactions associated with food shipments to Afghanistan.
FINRA fines securities firm $20,000 for AML violations
On January 20, the Financial Industry Regulatory Authority (FINRA) entered into a Letter of Acceptance, Waiver, and Consent (AWC), which requires a securities firm to pay a $20,000 fine for allegedly failing to: (i) establish and implement anti-money laundering (AML) policies and procedures reasonably expected to detect and cause the reporting of suspicious activity; (ii) conduct an independent AML test; and (iii) obtain the signature of a principal at the firm evidencing supervisory review and approval of the opening of customer accounts. According to the AWC, in 2018, “following a change in majority ownership, the firm’s business model shifted, and it began to service high-net worth international customers, many of whom were citizens or residents of jurisdictions that posed a heightened risk of money laundering or were considered bank secrecy havens.” The firm allegedly “failed to tailor its AML program to the firm’s new, higher-risk business model,” FINRA stated. The firm did not admit nor deny the findings as part of the AWC but agreed to a censure, among other things.
OFAC sanctions officials and entities connected to Burmese military
On January 31, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 14014 against seven individuals and two entities connected to Burma’s military regime. The sanctions coincide with the one-year anniversary of the military coup d’etat of Burma’s democratically elected government, and are part of a joint action taken with the UK and Canada. Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson stated that the U.S. “will continue to target those responsible for the coup and ongoing violence, enablers of the regime’s brutal repression, and their financial supporters.” As a result of the sanctions, all property and interests in property belonging to the identified persons 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.” U.S. persons are generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated individuals, unless exempt or authorized by a general or specific license. Prohibitions “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.”
Agencies issue Burma advisory
On January 26, OFAC, along with Departments of State, Commerce, Homeland Security, Labor, and the Office of the U.S. Trade Representative, published a business advisory titled Risks and Considerations for Businesses and Individuals with Exposure to Entities Responsible for Undermining Democratic Processes, Facilitating Corruption, and Committing Human Rights Abuses in Burma (Myanmar), which informs the public of the heightened risks associated with conducting business in Burma, specifically business that involves the military regime. According to the announcement, since the military coup in 2021, the military has engaged in serious human rights abuse against the people of Burma. The specific entities and sectors of greatest concern for corruption and other illicit finance risks include, among other things, state owned enterprise and real-estate and construction projects.
OFAC amends Ukraine-related general licenses and publishes FAQs
On January 24, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued General License (GL) 13Q, “Authorizing Certain Transactions Necessary to Divest or Transfer Debt, Equity, or Other Holdings in GAZ Group,” which replaces and supersedes GL 13P. (Covered by InfoBytes here.) Additionally, OFAC issued GL 15K, “Authorizing Certain Activities Involving GAZ Group,” which replaces and supersedes GL 15J. Both licenses were extended through April 27. OFAC also published seven Ukraine-related FAQs.
OFAC sanctions additional Hizballah financiers
On January 21, the U.S. Treasury Department’s Office of Foreign Assets Control announced sanctions pursuant to Executive Order 13224 against a Hizballah-affiliated financial facilitator, along with members of an international network of facilitators and companies connected to both the designated individual and a Hizballah-linked financial facilitator sanctioned by OFAC on January 18 (covered by InfoBytes here). According to OFAC, the designated persons evaded sanctions efforts in order to help Hizballah gain access to the international financial system and raise funds to support acts of terrorism and other illicit activities. “Today’s action exposes and targets Hizballah’s misuse of the international financial system to raise and launder funds for its destabilizing activities as the Lebanese people suffer during an unprecedented economic crisis in Lebanon,” Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson stated. “Treasury is committed to disrupting Hizballah’s illicit activity and attempts to evade sanctions through business networks while the group doubles down on corrupt patronage networks in Lebanon.”
As a result of the sanctions, all transactions by U.S. persons or in the U.S. that involve any property or interests in property of designated or otherwise blocked persons are generally prohibited. Additionally, “any entities that are owned, directly or indirectly 50 percent or more by them, individually, or with other blocked persons, that are in the United States or in the possession or control of U.S. persons, must be blocked and reported to OFAC.” U.S. persons are generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons, unless exempt or authorized by a general or specific OFAC license. OFAC further warned that the agency “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.”
FinCEN proposes SAR pilot program
On January 24, FinCEN issued a Notice of Proposed Rulemaking (NPRM) to establish a limited-duration pilot program for financial institutions to share suspicious activity reports (SARs), pursuant to Section 6212 of the Anti-Money Laundering Act of 2020. The pilot program would allow financial institutions with SAR reporting obligations to share SARs and related information (subject to certain restrictions) with their foreign branches, subsidiaries, and affiliates for the purpose of combating illicit finance risks. The NPRM would expand guidance that previously only permitted SARs to be shared internally with foreign head offices, controlling companies (domestic or foreign), and domestic affiliates, and seeks input on the expected costs and benefits, technical challenges, merits of quarterly reporting, and SAR confidentiality protections. According to FinCEN, the pilot program is intended to provide feedback as the agency considers longer-term approaches towards SAR sharing with foreign affiliates. Comments are due March 28.
OFAC issues amended Venezuela-related general license and FAQ and other notices
On January 20, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued Venezuela-related General License (GL) 5I, which supersedes GL 5H 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 January 20, 2023. Concurrently, OFAC updated a Venezuela-related frequently asked question regarding GL 5I. Additionally, OFAC amended the definition of “applicable schedule amount” contained in appendix A to 31 CFR part 501. The amendment became effective January 21.