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President Trump issues new Iran Executive Order targeting Iran's metal sector; OFAC publishes related FAQs
On May 8, President Trump issued Executive Order 13871 (E.O. 13871) authorizing the imposition of sanctions on persons determined to operate in Iran’s iron, steel, aluminum, and copper sectors. The order is intended to target sectors of the Iranian economy that OFAC has identified as providing “funding and support for the proliferation of weapons of mass destruction, terrorist groups and networks, campaigns of regional aggression, and military expansion.” Among other things, E.O. 13871 authorizes the Secretaries of Treasury and State to impose sanctions on a foreign financial institution if it is determined that it has knowingly conducted or facilitated any significant financial transactions in these sectors, or for or on behalf of a blocked person. These sanctions are intend to curtail such institutions’ access to the U.S. financial system by prohibiting the opening of, or impose strict conditions on maintaining, a correspondent account or payable-through account by such foreign financial institutions in the United States.
The same day, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) released a set of FAQs connected to the issuance of E.O. 13871, including a discussion of the relevant 90-day wind-down period for affected transactions as well as sanction exceptions.
Visit here for additional InfoBytes coverage of actions related to Iran.
Malaysian national extradited to the United States on embezzlement and FCPA charges in Malaysian fund scheme
On May 6, the DOJ announced that a Malaysian national was extradited to the United States from Malaysia on charges of conspiracy to embezzle and to violate the FCPA’s anti-bribery and accounting provisions in connection with a scheme relating to a Malaysia government-run strategic development fund. The Malaysian national was a former Managing Director at a financial institution. The indictment against him alleges that between 2009 and 2014, he conspired with others to launder billions of dollars embezzled from the development fund, including money from three bond offerings underwritten by the financial institution in 2012 and 2013, and that he conspired to bribe government officials in Malaysia and Abu Dhabi to obtain and retain business for the financial institution, including the bond transactions. DOJ alleges that the financial institution received approximately $600 million in fees and revenues from its work for the fund, and that he and his co-conspirators embezzled more than $2.7 billion from the fund's bond deals. In his first court appearance, he pleaded not guilty to the charges, and press coverage reported a federal magistrate judge’s statement that he and the DOJ are engaged in plea negotiations, but his defense counsel denied the judge’s characterization.
As detailed in prior FCPA Scorecard coverage, an alleged co-conspirator and former managing director of the same financial institution pleaded guilty in November 2018 to conspiracy to violate the FCPA and to commit money laundering. Another charged co-conspirator has not appeared in court.
OFAC lifts sanctions on former high-ranking Venezuelan official
On May 7, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced it removed sanctions imposed on a former high-ranking Venezuelan official in the Maduro regime after he broke ties with the regime. As previously covered by InfoBytes, the sanctions were imposed in February of this year pursuant to Executive Order (E.O.) 13692. As a result of the removal, any otherwise lawful transactions involving U.S. persons and the individual are no longer prohibited. OFAC emphasized that the action “demonstrates that U.S. sanctions need not be permanent and are intended to bring about a positive change of behavior,” and further “shows the good faith of the [U.S.] that removal of sanctions may be available for designated persons who take concrete and meaningful actions to restore democratic order, refuse to take part in human rights abuses, speak out against abuses committed by the illegitimate Maduro regime, or combat corruption in Venezuela.”
FINRA outlines red flags for suspicious activity monitoring and reporting
On May 6, the Financial Industry Regulatory Authority (FINRA) issued Regulatory Notice 19-18, which provides guidance to member firms regarding suspicious activity monitoring and reporting obligations under FINRA’s Anti-Money Laundering Compliance Program. Specifically, the Notice is intended to assist broker-dealers with their existing obligations under Bank Secrecy Act/Anti-Money Laundering (BSA/AML) requirements by providing a list of “money laundering red flags,” augmenting the red flags list from the 2002 Notice to Members 02-21 with additional red flags published by a number of U.S. government agencies and international organizations. The guidance lists potential red flags in a number of categories, including (i) customer due diligence and interactions with customers; (ii) deposits of securities; (iii) securities trading; (iv) money movements; and (v) insurance products. The Notice emphasizes that the list of 97 red flags “is not an exhaustive list and does not guarantee compliance with AML program requirements or provide a safe harbor from regulatory responsibility,” but rather provides examples for firms to consider incorporating into their AML programs, as may be appropriate in implementing a risk-based approach to BSA/AML compliance. The Notice also reminds firms to be aware of emerging areas of risk, such as those associated with activity in digital assets.
Updated FinCEN advisory warns of continued Venezuelan money laundering attempts
On May 3, the Financial Crimes Enforcement Network (FinCEN) issued an updated advisory to warn financial institutions of continued public corruption and attempted money laundering related to Venezuelan government agencies and political figures. The advisory updates a September 2017 advisory (previously covered by InfoBytes here) and renews the description of public corruption in Venezuela. The advisory also describes how “corrupt Venezuelan senior political figures exploit a Venezuelan government-administered food program by directing overvalued, no-bid contracts to co-conspirators that use ‘an over-invoicing trade-based money laundering’” scheme, which involves, among other things, front or shell companies, non-dollar denominated accounts, and nested accounts designed to evade sanctions and anti-money laundering/countering the financing of terrorism (AML/CFT) controls. The advisory also notes attempts by former President Maduro’s regime to evade sanctions and AML/CFT controls through the use of digital currency. The update provides revised financial red flags to assist with the identification and reporting of suspicious activity to FinCEN in connection with senior Venezuelan political figures.
FinCEN further emphasizes that financial institutions should continue to follow a risk-based approach and that normal transactions involving Venezuelan business and nationals are not necessarily reflective of the aforementioned risks.
See here for continuing InfoBytes coverage of actions related to Venezuela.
Special Alert: OFAC formalizes expectations for sanctions compliance programs
Buckley Special Alert
The U.S. Department of the Treasury’s Office of Foreign Assets Control last week issued a framework for OFAC Compliance Commitments, which, for the first time, outlines OFAC’s views on essential elements of a risk-based sanctions compliance program in a single document that can serve as a roadmap for organizations as they structure and evaluate these programs. The framework should be considered carefully by U.S. organizations with any significant foreign dealings, and foreign organizations that conduct business with the United States or that utilize U.S. goods, services, or financial systems.
The framework also makes clear that OFAC intends to target individual employees who are culpable for violations. That emphasis follows an action from earlier this year, where OFAC sanctioned an individual it deemed responsible for circumventing his employer’s compliance protocols.
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Click here to read the full special alert.
If you have questions about the OFAC’s new guidance or related issues, please visit our Bank Secrecy Act/Anti-Money Laundering & Sanctions practice page or contact a Buckley attorney with whom you have worked in the past.OFAC fines shipping company for apparent sanctions violations
On May 2, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $871,837 settlement with a New York global shipping and logistics company, as well as its subsidiaries and affiliates, for five alleged violations of the Weapons of Mass Destruction Proliferators Sanctions Regulations. The settlement resolves potential civil liability for the company’s alleged processing of five electronic funds transfers pertaining to payments associated with blocked vessels identified on OFAC’s Specially Designated Nationals List.
In arriving at the settlement amount, OFAC considered various aggravating factors, such as (i) the alleged violations constitute an egregious case and were not voluntarily self-disclosed; (ii) the company recklessly disregarded its obligations to comply with U.S. economic and trade sanctions; (iii) managers were aware of, and participated in, the conduct leading to the alleged violations; and (iv) the company is a global, commercially sophisticated company operating in a high-risk industry.
OFAC also considered numerous mitigating factors, including that the company has not received a penalty or finding of a violation in the five years prior to the transactions at issue, and the company cooperated with OFAC during the investigation and has undertaken remedial efforts to minimize the risk of similar violations from occurring in the future.
OFAC publishes A Framework for OFAC Compliance Commitments
On May 2, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced the publication of A Framework for OFAC Compliance Commitments to provide guidance on the essential components of a risk-based sanctions compliance program (SCP) for organizations subject to U.S. jurisdiction, along with foreign entities that conduct business in or with the U.S. or U.S. persons, or use U.S.-origin goods or services. The framework highlights five essential compliance components that should be incorporated into an effective SCP: (i) senior management commitment; (ii) risk assessment “identifying potential OFAC issues” likely to be encountered; (iii) internal controls; (iv) testing and auditing; and (v) training. The framework notes that should an entity be subject to a civil monetary penalty (CMP), the Office of Compliance and Enforcement will determine, as appropriate, what other elements should be added to the entity’s SCP. In additional, OFAC states it will “consider favorably” entities that are able to demonstrate the existence of an effective SCP at the time of an apparent violation, which may mitigate a CMP and contribute towards the determination as to whether the violations are “deemed ‘egregious.’”
OFAC regulations address foreign interference in U.S. elections
On April 26, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced regulations effective April 29 implementing Executive Order (E.O.) 13848. As previously covered by InfoBytes, E.O. 13848 was issued last September to authorize sanctions against foreign persons found to have engaged in, assisted, or otherwise supported foreign interference in U.S. elections. OFAC stated it intends to supplement the final rule with further regulations, “which may include additional interpretive and definitional guidance, general licenses, and statements of licensing policy.”
OFAC sanctions Venezuelan officials connected to Maduro regime
On April 26, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against the two individuals identified as current or former officials of the Government of Venezuela for providing support to former President Maduro’s regime. Financial Crimes Enforcement Network advisories FIN-2017-A006, FIN-2017-A003, and FIN-2018-A003 provide additional information concerning the efforts of Venezuelan government agencies and individuals to use the U.S. financial system and real estate market to launder corrupt proceeds, as well as human rights abuses connected to foreign political figures and their financial facilitators. As a result, all property and interests in property of the sanctioned individuals, and of any entities owned 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 entering into transactions with designated persons.
Visit here for continuing InfoBytes coverage of actions related to Venezuela.