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OFAC amends Venezuela-related general license
On July 20, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued Venezuela-related General License (GL) 5G, “Authorizing Certain Transactions Related to the Petróleos de Venezuela, S.A. 2020 8.5 Percent Bond on or After October 21, 2021,” which replaces and supersedes GL 5F. GL 5G, however, does not authorize any transactions or activities otherwise prohibited by the Venezuela Sanctions Regulations. OFAC also amended related FAQ 595, which reminds parties that, until October 21, 2021, “transactions related to the sale or transfer of CITGO shares in connection with the PdVSA 2020 8.5 percent bond are prohibited, unless specifically authorized by OFAC.”
OFAC issues advisory for China and Hong Kong
On July 16, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), along with the Departments of State, Treasury, Commerce, and Homeland Security, issued an advisory on the risks associated with actions carried out by the Government of the People’s Republic of China and the Government (PRC) of the Hong Kong Special Administrative Region (SAR) that may impact U.S. companies operating in the Hong Kong SAR of the People’s Republic of China. The advisory divides risks into four categories: (i) risks for businesses following the imposition of the NSL; (ii) data privacy risks; (iii) risks regarding transparency and access to critical business information; and (iv) risks for businesses with exposure to sanctioned Hong Kong or PRC entities or individuals. As previously covered by InfoBytes, OFAC issued regulations implementing Executive Order (E.O.) 13936 issued last July. E.O. 13936, among other things, targets and authorizes the imposition of sanctions on persons who materially assist, sponsor, or provide financial, material, or technological support to activities contributing to the undermining of Hong Kong’s democracy and autonomy (covered by InfoBytes here). In addition to the advisory, OFAC added several individuals and entities to its Specially Designated Nationals List.
FinCEN announces second exchange on ransomware
On July 15, the Financial Crimes Enforcement Network (FinCEN) announced it will host a “FinCEN Exchange” in August with representatives from financial institutions, other key industry stakeholders, and federal government agencies to discuss continuing concerns regarding ransomware. According to FinCEN, the exchange builds upon FinCEN’s November 2020 event regarding ransomware and “will assist its government and private sector partners to inform next steps to address ransomware and focus resources to mitigate the threat.” FinCEN also notes that ransomware attacks are a growing concern and efforts to detect and report ransomware payments are “vital to prevent and deter ransomware attacks.” Recent efforts by FinCEN to do just that include issuing two advisories in October 2020 to aid U.S. individuals and businesses in combating ransomware scams and attacks (covered by InfoBytes here) and issuing the first government-wide priorities for anti-money laundering and countering the financing of terrorism policy pursuant to the Anti-Money Laundering Act of 2020 in June (covered by InfoBytes here).
OFAC issues advisory for China’s Xinjiang region
On July 13, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), along with the Departments of State, Commerce, Homeland Security, and Labor, as well as the Office of the U.S. Trade Representative, issued an updated advisory on the risks for businesses with possible exposure in their supply chain to entities involved in human rights abuses in the Xinjiang Region. The recent advisory updates the original version released in July 2020 (covered by InfoBytes here), which was issued after 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. The updated advisory outlines risks to be considered when “assessing business partnerships with, investing in, sourcing from, or providing other support to companies operating in Xinjiang, linked to Xinjiang, or with laborers from Xinjiang.”
OFAC issues new general license and related FAQs involving Venezuela
On July 12, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued General License (GL) 40, “Authorizing Certain Transactions Involving the Exportation or Reexportation of Liquefied Petroleum Gas to Venezuela.” GL 40 permits transactions and activities otherwise prohibited by Executive Order 13884 (covered by InfoBytes here) involving “the Government of Venezuela, Petróleos de Venezuela, S.A. (PdVSA), or any entity in which PdVSA owns, directly or indirectly, a 50 percent or greater interest.” OFAC also published two new FAQs, 914 and 915, related to GL 40.
OFAC sanctions officials and family connected to Burmese military
On July 2, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 14014 against 22 individuals connected to Burma’s military regime. The designations include seven key military members, along with 15 individuals identified as either the spouses or adult children of previously sanctioned senior military officials “whose financial networks have contributed to military officials’ ill-gotten gains.” The sanctions complement new restrictions imposed on four entities that have provided support for the Burmese military by the U.S. Department of Commerce’s Bureau of Industry and Security. As a result of the sanctions, all property and interests in property belonging to the identified individuals subject to U.S. jurisdiction are blocked and must be reported to OFAC. Additionally, “any entities that are owned, directly or indirectly, in the aggregate, 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.
OFAC removes sanctions on International Criminal Court
On July 2, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued a final rule removing the International Criminal Court-Related Sanctions Regulations from the Code of Federal Regulations. The final rule is issued pursuant to Executive Order (E.O.) 14022, which was published in April and terminated a national emergency declared in E.O. 13928, “Blocking Property of Certain Persons Associated with the International Criminal Court,” which, among other things, authorized the federal government to block the assets and suspend entry into the United States of certain International Criminal Court (ICC) officials, employees, and agents, as well as their immediate family members. President Biden issued E.O. 14022 to revoke E.O. 13928, finding that, “although the United States continues to object to the [ICC’s] assertions of jurisdiction over personnel of such non-States Parties as the United States and its allies absent their consent or referral by the United Nations Security Council and will vigorously protect current and former United States personnel from any attempts to exercise such jurisdiction, the threat and imposition of financial sanctions against the Court, its personnel, and those who assist it are not an effective or appropriate strategy for addressing the United States’ concerns with the ICC.” As such, OFAC’s final rule formally rescinds the sanctions regulations effective July 6.
FATF updates statements concerning jurisdictions with AML/CFT/CPF deficiencies
On July 1, the Financial Crimes Enforcement Network (FinCEN) announced updates to the Financial Action Task Force (FATF) statements concerning jurisdictions with strategic anti-money laundering, countering the financing of terrorism, and combating weapons of mass destruction proliferation financing (AML/CFT/CPF) deficiencies. Specifically, to ensure compliance with international standards, the FAFT updated the following two statements: (i) High-Risk Jurisdictions Subject to a Call for Action, which identifies jurisdictions with significant strategic deficiencies in their AML/CFT/CPF regimes and instructs FATF members to apply enhanced due diligence, and in the most serious cases, apply counter-measures to protect the international financial system from such risks; and (ii) Jurisdictions under Increased Monitoring, which “publicly identifies jurisdictions with strategic deficiencies in their AML/CFT/CPF regimes that have committed to, or are actively working with, the FATF to address those deficiencies in accordance with an agreed upon timeline.” Notably, Haiti, Malta, the Philippines, and South Sudan have been added to the Jurisdictions under Increased Monitoring, while Ghana has been removed from the list. Among other things, through the announcement, FinCEN further instructs financial institutions to comply with U.S. prohibitions against the opening or maintaining of any correspondent accounts, whether directly or indirectly, for North Korean or Iranian financial institutions, which are already prohibited under existing U.S. sanctions and FinCEN regulations.
FinCEN plans to undertake future no-action letter rulemaking
On June 30, the Financial Crimes Enforcement Network (FinCEN) announced the completion of a report on whether to establish a process for issuing no-action letters in response to inquiries concerning the application of the Bank Secrecy Act (BSA) and other anti-money laundering and countering the financing of terrorism laws to specific conduct, “including a request for a statement as to whether FinCEN or any relevant Federal functional regulator intends to take an enforcement action with respect to such conduct.” As required pursuant to Section 6305 the Anti-Money Laundering Act of 2020 (included as part of the National Defense Authorization Act for Fiscal Year 2021 and covered by InfoBytes here), FinCEN submitted its no-action letter assessment to Congress. The assessment involved consultation with the Attorney General and other entities including the federal functional regulators, state bank and credit union supervisors, and other federal agencies.
The agency analyzed various issues when conducting its assessment, including “whether a formal no-action process would help to mitigate or accentuate illicit finance risks in the United States.” Among other things, the report concluded that the majority of the consulting parties agreed that FinCEN should implement a no-action letter policy. “The primary benefits identified by those in favor of a no-action letter process are that it could promote a robust and productive dialogue with the public, spur innovation among financial institutions, and enhance the culture of compliance and transparency in the application and enforcement of the BSA,” FinCEN stated. According to FinCEN acting Director Michael Mosier, the agency concluded “that a no-action letter process would be a useful complement to its current forms of regulatory guidance and relief.” The agency stated it intends to undertake a future rulemaking “subject to resource limitations and competing priorities” to establish a process for issuing no-action letters that will supplement its current forms of regulatory guidance and relief. However, FinCEN noted that the no-action letter process would be most effective and workable if it were limited to the agency’s exercise of its own enforcement authority, instead of also addressing other regulators’ exercise of their own enforcement authorities.
FinCEN issues first government-wide AML/CFT priorities
On June 30, the Financial Crimes Enforcement Network (FinCEN) issued the first government-wide priorities for anti-money laundering and countering the financing of terrorism (AML/CFT) policy (AML/CFT Priorities) pursuant to the Anti-Money Laundering Act of 2020 (AML Act). The AML/CFT Priorities were established in consultation with the Treasury Department’s Office of Foreign Assets Control, SEC, CFTC, IRS, state financial regulators, law enforcement, and national security agencies, and highlight key threat trends as well as informational resources to assist covered institutions manage their risks and meet their obligations under laws and regulations designed to combat money laundering and counter terrorist financing. According to the AML/CFT Priorities, the most significant AML/CFT threats currently facing the U.S. (in no particular order) are corruption, cybercrime, domestic and international terrorist financing, fraud, transnational criminal organization activity, drug trafficking organization activity, human trafficking and human smuggling, and proliferation financing. FinCEN further noted it will update the AML/CFT Priorities to highlight new or evolving threats at least once every four years as required under the AML Act, and issued a separate statement providing additional clarification for covered institutions.
Separately, the Federal Reserve Board, FDIC, NCUA, OCC, state bank and credit union regulators, and FinCEN also issued a joint statement providing clarity for banks on the AML/CFT Priorities. The statement emphasized that the publication of the AML/CFT Priorities “does not create an immediate change to Bank Secrecy Act (BSA) requirements or supervisory expectations for banks.” Rather, within 180 days of the establishment of the AML/CFT Priorities, FinCEN will promulgate regulations, as appropriate, in consultation with the federal functional regulators and relevant state financial regulators. The federal banking agencies noted that they intend to revise their BSA regulations as needed to address how the AML/CFT priorities will be incorporated into BSA requirements for banks, adding that banks will not be required to incorporate the AML/CFT Priorities into their risk-based BSA compliance programs until the effective date of the final revised regulations. However, banks may choose to begin considering how they intend to incorporate the AML/CFT Priorities, “such as by assessing the potential related risks associated with the products and services they offer, the customers they serve, and the geographic areas in which they operate.” Moreover, the statement confirmed that federal and state examiners will not examine banks for the incorporation of the AML/CFT Priorities into their risk-based BSA programs until the final revised regulations take effect.