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  • FinCEN advises banks to detect foreign corrupt activity

    Financial Crimes

    On April 14, FinCEN issued an advisory on kleptocracy and foreign public corruption, urging financial institutions to direct their efforts on detecting the proceeds of foreign public corruption. The advisory provides typologies and potential indicators of kleptocracy and other forms of foreign public corruption, including bribery, embezzlement, extortion, and the misappropriation of public assets, and highlights financial red-flag indications of kleptocracy and foreign public corruption to assist banks in preventing, detecting, and reporting suspicious transactions. The announcement also refers to the U.S. Treasury Department’s Kleptocracy Asset Recovery Rewards Program, which offers rewards for information leading to seizure, restraint, or forfeiture of assets linked to foreign government corruption, including the Government of the Russian Federation (covered by InfoBytes here).

    Financial Crimes FinCEN Department of Treasury Of Interest to Non-US Persons Corruption Russia SARs

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  • OFAC issues Russian general license

    Financial Crimes

    On April 12, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued Russia-related General License (GL) 26, “Authorizing the Wind Down of Transactions Involving Joint Stock Company SB Sberbank Kazakhstan or Sberbank Europe AG,” which authorizes all transactions ordinarily incident and necessary to the wind down of transactions involving Joint Stock Company SB Sberbank Kazakhstan or Sberbank Europe AG, or any entity that Sberbank subsidiaries owns, through July 12, provided certain criteria are met. The GL was issued in the wake of Russia’s Sberbank being placed on the SDN list, which prohibits all transactions with Sberbank by U.S. persons, on April 6.

    Financial Crimes OFAC Department of Treasury Of Interest to Non-US Persons Russia Ukraine Ukraine Invasion

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  • OFAC sanctions Russian diamond mining and shipbuilding companies, and issues general licenses

    Financial Crimes

    On April 7, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Order 14024, against a Russian state-owned enterprise (SOE) and the world’s largest diamond mining company, which is also responsible for 90 percent of Russia’s diamond mining capacity. Additionally, the Department of State redesignated a Russian SOE open joint stock company, as well as its subsidiaries and board members. According to OFAC, the company develops and constructs most of the Russian military’s warships, likely including those used in Ukraine. OFAC further noted that it is “cutting off additional sources of support and revenue for the Government of the Russian Federation (GoR) to wage its unprovoked war against Ukraine.” As a result of the sanctions, all property and interests in property belonging to the sanctioned entities in the U.S. 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.” OFAC noted that U.S. persons are prohibited from participating in transactions with the sanctioned 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.”

    On the same day, OFAC issued several Russia-related general licenses: (i) General License 9C authorizes “transactions related to dealings in certain debt or equity”; (ii) General License 10C authorizes “certain transactions related to derivative contracts”; (iii) General License 21A authorizes “the wind down of Sberbank CIB USA, Inc. and Alrosa USA, Inc.”; (vi) General License 24 authorizes “the wind down of transactions involving public joint stock company Alrosa”; and (v) General License 25 authorizes “transactions related to telecommunications and certain internet-based communications.”

    Find continuing InfoBytes coverage on the U.S. sanctions response to Russia’s invasion of Ukraine here.
     

    Financial Crimes Department of Treasury OFAC OFAC Sanctions OFAC Designations Ukraine Russia Ukraine Invasion Of Interest to Non-US Persons SDN List

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  • OFAC prohibits new investment in Russia and blocks Russia’s largest bank, executive order foreshadows more Russian export bans

    Financial Crimes

    On April 6, OFAC announced that President Biden issued a new E.O., Prohibiting New Investment in and Certain Services to the Russian Federation in Response to Continued Russian Federation Aggression, which bans “all new investment in the Russian Federation by U.S. persons, wherever located, as well as the exportation, reexportation, sale, or supply, directly or indirectly, from the U.S., or by a U.S. person, wherever located, of any category of services as may be determined by the Secretary of the Treasury, in consultation with the Secretary of State, to any person located in the Russian Federation.” According to OFAC, the prohibitions come after recently issued E.O. 14066 and 14068 that prohibit certain imports and exports involving Russia, and are consistent with commitments made by the G7 leaders to ensure that their citizens are not underwriting Putin’s war.

    OFAC also announced full blocking sanctions, pursuant to Executive Order (E.O.) 14025, on Sberbank, Russia’s largest state-owned bank and Alfa-Bank, Russia’s largest private bank, in addition to targeting family members of President Vladimir Putin and Foreign Minster Sergey Lavrov, as well as Russian Security Council members who are complicit in the war against Ukraine. 

    Earlier this week, OFAC also announced sanctions, in collaboration with the DOJ, FBI, Drug Enforcement Administration, Internal Revenue Service Criminal Investigation, and Homeland Security Investigations, against the world’s largest and most prominent darknet market. According to OFAC, the designation was enhanced by international collaboration with the German Federal Criminal Police, who seized the designated entity’s servers in Germany and $25 million worth of bitcoin. Additionally, OFAC identified more than 100 virtual currency addresses connected to the entity’s operations that have been used to conduct illicit transactions. OFAC also noted that Treasury will publish an updated National Strategy to Combat Illicit Finance, which will highlight planned Treasury efforts to continue to combat the virtual currency misuse. As a result of the sanctions, all property and interests in property belonging to the sanctioned entities in the U.S. 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.” OFAC noted that U.S. persons are prohibited from participating in transactions with the sanctioned 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.”

    Additionally, OFAC issued several Russia-related general licenses: (i) General License 8B authorizes certain “transactions related to energy” through June 24; (ii) General License 9B authorizes “transactions related to dealings in certain debt or equity”; (iii) General License 10B authorizes “certain transactions related to derivative contract”; (iv) General License 21 authorizes “the wind down of Sberbank CIB USA, Inc”; (v) General License 22 authorizes “the wind down of transactions involving public joint stock company Sberbank of Russia”; and (vi) General License 23 authorizes the wind down of transactions involving joint stock company Alfa-Bank.”

    Find continuing InfoBytes coverage on the U.S. sanctions response to Russia’s invasion of Ukraine here.

    Financial Crimes OFAC Department of Treasury Of Interest to Non-US Persons OFAC Sanctions OFAC Designations Russia Ukraine Ukraine Invasion Biden

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  • OFAC sanctions Russian technology companies

    Financial Crimes

    On March 31, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced several new sanctions in response to Russia’s invasion of Ukraine. The new sanctions, issued pursuant to Executive Order 14024, target 21 entities and 13 individuals connected to the Russian Federation “as part of its crackdown on the Kremlin’s sanctions evasion networks and technology companies.” Additionally, OFAC has determined that three additional sectors of the Russian Federation’s economy are subject to sanctions, which permits OFAC to impose sanctions on any individual or entity determined to operate or have operated in any of those sectors. According to OFAC, one of the sanctioned entities is a technology company that exports over 50 percent of Russian microelectronics and is Russia’s largest chipmaker. This action follows OFAC’s March 24 designation of dozens of companies in Russia’s defense-industrial base that are directly involved in Russia’s invasion of Ukraine (covered by InfoBytes here). OFAC also expanded sanctions authorities to include the Russian aerospace, marine, and electronics sector. As a result of the sanctions, all property and interests in property belonging to the sanctioned persons that are in the U.S. or in the possession or control of U.S. persons, and “any entities that are owned, directly or indirectly, individually or in the aggregate, 50 percent or more” by the targeted persons are blocked and must be reported to OFAC. Additionally, U.S. persons are prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons and entities, unless exempt or authorized by a general or specific OFAC license.

    Financial Crimes SDN List OFAC Department of Treasury Of Interest to Non-US Persons Russia Ukraine Ukraine Invasion OFAC Sanctions OFAC Designations

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  • OCC’s Hsu discusses managing tail risks

    On March 31, acting Comptroller of the Currency Michael J. Hsu spoke before the American Bankers Association Risk 2022 Conference to discuss managing low probability, high impact risk events, or tail risks. In particular, Hsu highlighted the connection between Russia’s invasion of Ukraine and heightened tail risks associated with geopolitical risk, cyber risk, and inflation risk. Hsu warned that multiple possible events stemming from the conflict, including cyber-attacks from Russia, broader conflict in Europe, and increased inflation could materialize simultaneously increasing the chances that tail risks materialize that could trigger a recession. Hsu noted that the increase of sanctions to oil and gas would put upward pressure on fuel prices, and “Ukraine’s role as a producer of wheat, neon, platinum, and palladium is also beginning to affect global prices in certain markets.” Despite the elevated risks, Hsu noted that enhanced stress testing has positioned large banks to absorb a range of shocks, but warned that “nonetheless, greater caution and risk management vigilance is warranted today, perhaps more than any time in recent memory.” Hsu also singled out risks associated with crypto assets and said that the OCC is collaborating with other agencies on “how to maintain a consistent, careful and cautious” approach to bank involvement in cryptocurrency. Hsu cautioned that in light of “limited or unreliable price histories” of crypto-assets, financial institutions should “carefully consider” the tail risks associated with factoring cryptocurrency positions into the overall risk management process. Hsu discussed his worry regarding the potential for crypto derivatives to create “wrong-way risk” in which a leveraged party use trades to “double-down” at the same time it is experiencing financial stress. Hsu stated that the OCC has engaged with government agencies in the U.K. and U.S. on “how to maintain a consistent, careful, and cautious approach to bank involvement in crypto.”

    Bank Regulatory Federal Issues OCC Risk Management Russia Ukraine Ukraine Invasion Digital Assets Cryptocurrency Of Interest to Non-US Persons

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  • OFAC sanctions Russian defense companies, political leaders, and Sberbank CEO

    Financial Crimes

    On March 24, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced several new sanctions in response to Russia’s invasion of Ukraine. The new sanctions, issued pursuant to Executive Order (EO) 14024, target dozens of Russian defense companies, 328 members of the Russian State Duma, and the CEO of Sberbank, Russia’s largest financial institution. According to OFAC, the sanctions target “companies that are part of Russia’s defense-industrial base and that produce weapons that have been used in Russia’s assault against Ukraine’s people, infrastructure, and territory,” and are intended to prevent 48 companies from accessing western technological and financial resources. The sanctions imposed against the Russian Duma members (political and national security leaders who have supported Russia’s invasion of Ukraine) expand on previous sanctions taken against other Duma members (covered by InfoBytes here) and expand designations to now include the State Duma itself as an entity. OFAC further noted that the sanctioned CEO of Sberbank is a close Putin associate who oversees a large number of companies owned by Sberbank in other industries. As a result of the sanctions, all property and interests in property belonging to the sanctioned persons that are in the U.S. or in the possession or control of U.S. persons, and “any entities that are owned, directly or indirectly, 50 percent or more” by the targeted persons are blocked and must be reported to OFAC. Additionally, U.S. persons are 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. 

    The same day, OFAC also published one new Frequently Asked Question clarifying the impact of EO 14024 and other Russia-related sanctions on gold-related transactions or persons participating in the gold market.

    Find continuing InfoBytes coverage on the U.S. sanctions response to Russia’s invasion of Ukraine here.

    Financial Crimes Of Interest to Non-US Persons Department of Treasury OFAC OFAC Sanctions OFAC Designations Russia Ukraine Ukraine Invasion SDN List

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  • OFAC issues Ukraine general license and Russian FAQ

    Financial Crimes

    On March 24, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced three Russia-related General Licenses (GL). GL 6A authorizes transactions related to the exportation or reexportation of agricultural commodities, medicine, medical devices, replacement parts and components, or software updates, research activities related to the Covid-19 pandemic, or clinical trial activities. GL 17A authorizes the import of existing purchases of prohibited products that are under pre-existing contract by Executive Order (E.O.) 14068. And GL 20 authorizes third-country diplomatic and consular funds transfers. The same day, OFAC issued Ukraine/Russia-related GL 25, which authorizes news reporting organizations to engage in certain transactions related to their work in the Crimea, Donetsk People’s Republic, and Luhansk People’s Republic regions of Ukraine. OFAC also announced that it updated two frequently asked questions regarding E.O. 14068, which prohibits the importation into the United States of fish, seafood, and preparations thereof; alcoholic beverages; and non-industrial diamonds of Russian Federation origin.

    Find continuing InfoBytes coverage on the U.S. sanctions response to Russia’s invasion of Ukraine here.

    Financial Crimes Department of Treasury Of Interest to Non-US Persons OFAC Ukraine Russia Ukraine Invasion

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  • Treasury official says it’s time to reconsider “culture of compliance”

    On March 21, the U.S. Treasury Department’s Assistant Secretary for Terrorist Financing and Financial Crimes Elizabeth Rosenberg delivered remarks before the Association of Certified Anti-Money Laundering Specialists (ACAMS) Hollywood Conference, asking attendees to consider “[w]hat must a culture of compliance look like in a world where autocracy is on the rise” and how financial institutions should adapt their Bank Secrecy Act/anti-money laundering (AML) obligations to ensure they are effective. Rosenberg praised the quick responses taken by financial institutions and financial service providers in implementing the growing list of sanctions against Russia and Russian President Vladimir Putin’s support structure in light of the recent invasion of Ukraine. “Russia’s war has meaningfully expanded AML and sanctions obligations,” Rosenberg cautioned, stressing it was time for an updated approach to considering and managing risk. “Geopolitical events are evolving fast, and we need financial institutions more than ever to act swiftly as we in the government are pushing out new designations and advisories almost daily.” She instructed attendees to “think about risk and enhanced due diligence when it comes to Russian oligarchs and kleptocrats who may not have been priorities for [entities’] compliance efforts in early February but are now crucial players, supporting Putin’s power structure.”

    Rosenberg further noted that Treasury’s efforts would be aided if public and private sectors were faster about sharing information and if information sharing was improved “across borders, between financial institutions, and with the government.” Closing money laundering and global passport loopholes through which sanctioned actors can move funds and assets around the globe is also critical, Rosenberg stated. She also highlighted the U.S. government’s recent collaboration with foreign partners to help countries effectively take measures to “find, restrain, freeze, and where appropriate, to confiscate the assets of those who have been sanctioned in connection with Russia’s invasion of Ukraine.” These multilateral efforts include the recent launch of the Russian Elites, Proxies, and Oligarchs multilateral task force, and Treasury’s Kleptocracy Asset Recovery Rewards Program, as well as recently issued FinCEN advisories to help compliance officials better identify Russian sanctions evasion and suspicious financial activity including through real estate, luxury goods, and other high-value assets. (Covered by InfoBytes here.)

    Find continuing InfoBytes coverage on the U.S. sanctions response to Russia’s invasion of Ukraine here.

    Financial Crimes Of Interest to Non-US Persons Department of Treasury OFAC OFAC Sanctions OFAC Designations Russia Ukraine Ukraine Invasion Bank Secrecy Act Anti-Money Laundering Compliance

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  • Biden urges private-sector businesses to strengthen cyber defenses

    Federal Issues

    On March 21, President Biden issued a fact sheet warning private-sector businesses of potential retaliatory Russian cyberattacks. Biden reiterated previous “warnings based on evolving intelligence that the Russian Government is exploring options for potential cyberattacks” against the U.S. in “response to the unprecedented economic costs [] imposed on Russia alongside our allies and partners.” The fact sheet urges companies to execute specific measures to strengthen their cyber defenses such as (i) mandating multi-factor authentication to make it harder for attackers to access systems; (ii) deploying modern security tools on computers and devices to continuously look for and mitigate threats; (iii) patching and protecting systems against known vulnerabilities and changing passwords so previously stolen credentials cannot be used by malicious actors; (iv) backing up and encrypting data so it cannot be used if stolen; (v) educating employees on common tactics used by attackers and encouraging the reporting of “unusual behavior”; and (vi) engaging proactively with the FBI or the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency (CISA) “to establish relationships in advance of any cyber incidents” (see CISA’s “Shields Up” guidance here). “I urge our private-sector partners to harden your cyber defenses immediately by implementing the best practices we have developed together over the last year,” Biden stated. “You have the power, the capacity, and the responsibility to strengthen the cybersecurity and resilience of the critical services and technologies on which Americans rely.”

    Federal Issues Privacy/Cyber Risk & Data Security Biden Russia Ukraine Ukraine Invasion

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