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FinCEN Exchange discusses BSA suspicious activity reporting statistics
On March 23, FinCEN convened a virtual FinCEN Exchange event with representatives from depository institutions, money services businesses, and law enforcement to discuss Bank Secrecy Act (BSA) filing statistics for certain low-dollar, voluntarily-filed suspicious activity reports containing a transaction nexus to Arizona, New Mexico, Texas, Oklahoma, and Louisiana. As previously covered by InfoBytes, FinCEN launched the exchange program in 2017 to create opportunities for regular briefings between FinCEN, law enforcement, and financial institutions, and to assist financial institutions meet their BSA compliance obligations while filing “high-quality BSA reports,” which aid law enforcement in detecting, preventing, and prosecuting criminals and other bad actors.
FinCEN announces upcoming rulemaking on beneficial ownership reporting requirements
On March 22, FinCEN Director Kenneth A. Blanco spoke at the Florida International Bankers Association AML Compliance Conference, and discussed the upcoming advance notice of proposed rulemaking (ANPRM) concerning new beneficial ownership reporting requirements of the Anti-Money Laundering Act of 2021 (AML Act). As previously covered by InfoBytes, the AML Act was enacted in January as part of the National Defense Authorization Act for Fiscal Year 2021, and made significant changes to BSA and AML laws. Included within the AML Act is the Corporate Transparency Act (CTA), which defines a beneficial owner as an entity or individual “who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise. . .exercises substantial control over the entity” or “owns or controls not less than 25 percent of the ownership interests of the entity,” with limited exceptions. Blanco did not provide a timeline for when the ANPRM would be issued, but emphasized that implementing the AML Act is FinCEN’s “number one priority.” Blanco also noted, among other things, that FinCEN is taking steps to develop a secure database to house collected beneficial ownership information, and is currently in the process of developing the use and confidentiality protocols that will control access to the database.
OFAC sanctions additional individuals and entities connected to Burmese military coup
On March 22, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 14014 against two individuals and two entities connected to the Burmese military’s “repression of pro-democracy protests.” The sanctions follow previous actions taken by OFAC earlier this year against several individuals and entities (covered by InfoBytes here and here). 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, individually, or with other blocked persons,” 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 license.
OFAC sanctions Chinese government officials for human rights violations
On March 22, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13818 against two current Chinese 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 minorities, including Uyghurs, in the Xinjiang region. The sanctions follow previous OFAC designations taken against several other Chinese government entities and current or former government officials for similar corruption violations (covered by InfoBytes here and here). 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, subject to U.S. jurisdiction are blocked and must be reported to OFAC. OFAC notes that its regulations generally prohibit U.S. persons from participating in transactions with these persons, which includes “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.”
OFAC announces Hong Kong-related designations
On March 17, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) added several Chinese citizens and Hong Kong nationals to the Specially Designated Nationals List. The individuals were designated under Executive Order (E.O.) 13936, which, among other things, authorizes the imposition of sanctions on persons who are determined to be responsible for or complicit in actions or policies that threaten the peace, security, stability, or autonomy of Hong Kong. Under E.O. 13936, “[a]ll property and interests in property that are in the United States, that hereafter come within the United States, or that are or hereafter come within the possession or control of any United States person, . . .are blocked and may not be transferred, paid, exported, withdrawn, or otherwise dealt in” with any foreign person identified to have engaged in the aforementioned activities.
OFAC issues FAQs on sanctioned Chinese military companies
On March 14, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) published FAQs related to two Chinese military companies sanctioned pursuant to Executive Order (E.O.) 13959, “Addressing the Threat from Securities Investments that Finance Communist Chinese Military Companies.” FAQ 880 states that, following a court order preliminarily enjoining the implementation of E.O. 13959 against a previously sanctioned company, the prohibitions are no longer applicable pending further order of the court. FAQ 881 clarifies when prohibitions in E.O. 13959 will take effect with respect to a company that was initially erroneously named, then delisted, and then correctly named.
OFAC settles with manufacturer for violating Iranian Transactions and Sanctions Regulations
On March 15, the U.S. Treasury Department’s Office of Foreign Assets Control announced a $216,464 settlement with an Ohio-based manufacturer for alleged violations of the Iranian Transactions and Sanctions Regulations (ITSR). According to OFAC’s web notice, between 2013 and 2017, the company allegedly failed to act on multiple apparent warning signs and exported multiple shipments of goods to two European companies despite having “reason to know that the goods were intended specifically for supply, transshipment, or reexportation to Iran by the two European companies.” OFAC noted that the company voluntarily self-disclosed the apparent violations and acknowledged that it “had actual knowledge” that some of the transactions were intended specifically for reexportation to Iran.
In arriving at the settlement amount, OFAC considered various aggravating factors, including that (i) the company failed to follow up on multiple warning signs that the European companies were reexporting goods to Iran; (ii) senior leadership knew or should have known the goods were being reexported to Iran; and (iii) the company and senior leadership “had actual knowledge” that the two final shipments were to be reexported to an Iranian end-user.
OFAC also considered various mitigating factors, including that the company (i) has had no prior sanctions history with OFAC; (ii) ceased all shipments to the European companies when it made its disclosure and requested that the goods be returned; (iii) cooperated with OFAC’s investigation and entered into tolling agreements; and (iv) strengthened its trade compliance and export policies and procedures to minimize the risk of similar violations from occurring in the future.
OFAC sanctions additional individuals and entities connected to designated Burmese military coup leader
On March 10, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order (E.O.) 14014 against two individuals along with six of their companies. The individuals are the adult children of a previously designated Commander-in-Chief of the Burmese military forces (covered by InfoBytes here)—an individual OFAC claims is “the leading actor in the overthrow of Burma’s democratically elected government.” Under E.O. 14014, foreign persons may be sanctioned who are the spouses or adult children of a person whose property and interests in property are blocked. As a result of the sanctions, all property and interests in property belonging to the sanctioned individuals and entities, and “any entities that are owned, directly or indirectly, 50 percent or more by them,” 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 license.
FinCEN issues antiquities and art warning
On March 9, the Financial Crimes Enforcement Network (FinCEN) issued an advisory notice alerting financial institutions with existing Bank Secrecy Act (BSA) obligations about illicit activity associated with trade in antiquities and art. As previously covered by InfoBytes, the Anti-Money Laundering Act of 2020 (AML Act) was enacted in January as part of the National Defense Authorization Act (NDAA) for Fiscal Year 2021, and made significant changes to BSA and AML laws, including amending the definition of “financial institution” under the BSA to include persons “engaged in the trade of antiquities.” Among other things, FinCEN’s advisory notice updates financial institutions on AML Act measures related to the regulation of antiquities, noting in particular that the Department of Treasury, in coordination with the FBI, the U.S. Attorney General, and Homeland Security, “will perform a study of the facilitation of money laundering and the financing of terrorism through the trade in works of art.” The notice further warns financial institutions that crimes related to the trade of antiquities “may involve their institution” and could include the “sale of stolen or counterfeit objects,” as well as money laundering and sanctions violations. The advisory notice also provides suspicious activity report filing instructions related to trade in antiquities and art.
FinCEN updates AML/CFT deficiencies list
On March 11, the Financial Crimes Enforcement Network (FinCEN) issued an advisory identifying updates to the Financial Action Task Force’s (FATF) list of jurisdictions with strategic anti-money laundering and combating the financing of terrorism (AML/CFT) and counter-proliferation financing deficiencies. The advisory notes that in response to the Covid-19 pandemic, FATF “prioritized its review by focusing on jurisdictions with expired or expiring action plan deadlines,” and provided jurisdictions identified under “increased monitoring” the option to provide a status report. FinCEN’s 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 notes that last month FATF updated its Jurisdictions under Increased Monitoring document, adding Burkina Faso, Cayman Islands, Morocco, and Senegal. Further, the advisory provides AML program risk assessment considerations and suspicious activity report filing guidance.