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  • Multinational efforts target Russian sanctions evasion, illicit assets of Russian oligarchs

    Federal Issues

    On March 16, the U.S. Treasury Department, along with representatives from Australia, Canada, Germany, France, Italy, Japan, the United Kingdom, and the European Commission, announced the first meeting of the Russian Elites, Proxies, and Oligarchs (REPO) multilateral task force, which was formed in February 2022. According to the announcement, the task force (consisting of the Finance Ministry and Justice or Home Ministry in each member jurisdiction) is “committed to using their respective authorities in concert with other appropriate ministries to collect and share information to take concrete actions, including sanctions, asset freezing, and civil and criminal asset seizure, and criminal prosecution.” Topics discussed among the REPO task force included, among other things: (i) ensuring coordination and effective implementation of the group’s collective financial sanctions relating to Russia and assisting other nations with locating and freezing assets found within their jurisdictions; (ii) preserving evidence and determining whether these frozen assets, or other assets linked to these sanctioned individuals or entities, are subject to forfeiture; and (iii) ensuring that enablers and gatekeepers “who have facilitated the movement of sanctioned assets or other illicit funds” are brought to justice. The announcement also noted that it launched the Kleptocracy Asset Recovery Rewards Program, offering monetary awards for information leading to seizure, restraint, or forfeiture of assets linked to foreign government corruption, including the Government of the Russian Federation. Member countries released a joint statement following the launch of the REPO task force encouraging other countries to take action to “hunt down the assets of key Russian elites and proxies and to act against their enablers and facilitators” in order “to isolate them from the international financial system and impose consequences for their actions.”

    In other international efforts, the DOJ launched Task Force KleptoCapture, “an interagency law enforcement task force dedicated to enforcing the sweeping sanctions, export restrictions, and economic countermeasures that the United States has imposed, along with allies and partners,” in order to “isolate Russia from global markets.” (Covered previously by InfoBytes here.)

    Also on March 16, the Financial Crimes Enforcement Network (FinCEN) released a statement with counterparts in task force member countries and others stating their intent to increase information sharing.

    Federal Issues Financial Crimes Department of Treasury FinCEN DOJ Of Interest to Non-US Persons Russia Ukraine Ukraine Invasion OFAC Sanctions Bank Secrecy Act SARs

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  • OFAC sanctions Russians connected to human rights violations and Belarusian leader engaged in corruption

    Financial Crimes

    On March 15, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to the Russia Magnitsky Act against four individuals and one entity. According to OFAC, the sanctioned individuals and entity were involved in concealing events surrounding the death of renowned Russian whistleblower, Sergei Magnitsky, or were connected to gross violations of human rights against a Russian human rights defender. OFAC also re-designated, pursuant to Executive Order 13405, the head of a corrupt government in Belarus who used his authorities to benefit his inner circle and regime, and newly designated his wife for being a senior level official engaged in public corruption.

    As previously covered by InfoBytes, President Biden issued E.O 13405, “Blocking Property of Additional Persons Contributing to the Situation in Belarus,” which expanded the scope addressing the national emergency declared in E.O. 13405, “finding that the Belarusian regime’s harmful activities and long-standing abuses aimed at suppressing democracy and the exercise of human rights and fundamental freedoms in Belarus—including illicit and oppressive activities stemming from the August 9, 2020, fraudulent Belarusian presidential election and its aftermath, such as the elimination of political opposition and civil society organizations and the regime’s disruption and endangering of international civil air travel—constitute an unusual and extraordinary threat to the national security and foreign policy of the United States.” As a result of the sanctions, all property and interests in property belonging to the sanctioned entities 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.” OFAC noted that U.S. persons are prohibited 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.”

    Financial Crimes Department of Treasury OFAC Biden SDN List Of Interest to Non-US Persons Russia Belarus

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  • OFAC sanctions Russians for supporting DPRK’s WMD programs

    Financial Crimes

    On March 11, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13687 against two individuals and three entities based in Russia for allegedly supporting the Democratic People’s Republic of Korea’s (DPRK) “ongoing development of its weapons of mass destruction (WMD) and ballistic missile programs in violation of multiple United Nations Security Council resolutions.” The action specifically “targets a group of foreign individuals and companies that aid a DPRK defense industry-related procurement agent in Russia.” As a result of the sanctions, all property and interests in property of the sanctioned persons subject to U.S. jurisdiction are blocked and must be reported to OFAC. OFAC noted that its regulations generally prohibit U.S. persons from participating in transactions with the designated persons. OFAC’s announcement further warned that any foreign financial institution that knowingly facilitates significant transactions or provides significant financial services for any of the designated individuals may be subject to U.S. correspondent account or payable-through account sanctions, and that persons found to have engaged in certain transactions with the designated persons “may themselves be exposed to designation.”

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

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  • OFAC sanctions Russians, issues guidance on sanctions evasion through virtual currency, general licenses, and FAQs

    Financial Crimes

    On March 11, the U.S. Department of the Treasury’s Office of Foreign Assets Control issued guidance, in line with the G7 leaders' statement, to guard against possible attempts to use virtual currency to evade U.S. sanctions imposed on Russia. According to OFAC, the public guidance “further cut[s] off avenues for potential sanctions evasion by Russia” and “continues to make clear that Treasury’s expansive sanctions actions against Russia require all U.S. persons to comply with OFAC regulations, regardless of whether a transaction is denominated in traditional fiat currency or virtual currency.

    Additionally, OFAC announced sanctions against Russian and Kremlin elites, and Russia’s political and national security leaders who have supported Russia’s invasion of Ukraine. As a result of the sanctions, all property and interests in property belonging to the sanctioned individuals and entities 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 individuals and/or entities are blocked and must be reported to OFAC. The sanctions complement an Executive Order (E.O) issued by President Biden that imposes new import and export restrictions on Russia, including the export of U.S. banknotes to Russia. Among other things, this E.O. prohibits the importation into the U.S. of certain products of Russian Federation origin. Additionally, the E.O. bans the exportation, reexportation, sale, or supply, directly or indirectly, from the U.S., or by a U.S. person, wherever located, of U.S. dollar-denominated banknotes to the Russian government or to any person located in the Russian Federation.

    OFAC also issued Russia-related General License 17 to authorize the import of existing purchases of prohibited products that are under pre-existing contract until March 25, 2022, and General License 18 and General License 19 to authorize certain activities regarding U.S. dollar-denominated banknotes as they pertain to personal remittances and U.S. persons, respectively. OFAC also issued Ukraine-related General License 23, “Blocking Property of Certain Persons and Prohibiting Certain Transactions With Respect to Continued Russian Efforts to Undermine the Sovereignty and Territorial Integrity of Ukraine,” “to authorize certain transactions that are ordinarily incident and necessary to nongovernmental organizations’ activities in the so-called Donetsk People’s Republic (DNR) or Luhansk People’s Republic (LNR) regions of Ukraine, including activities related to humanitarian projects to meet basic human needs, democracy building, education, non-commercial developments projects, and environmental and natural resource protection,” and published new Frequently Asked Questions and amended one Frequently Asked Question regarding Russia sanctions.

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

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

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  • DFPI reminds financial institutions of their sanctions compliance obligations

    State Issues

    On March 4, the California Department of Financial Protection and Innovation (DFPI) issued guidance, in light of the evolving situation in Ukraine, to remind financial institutions of their sanctions compliance obligations under state and federal law. Licensees are reminded that they are prohibited from participating in financial transactions with individuals and entities listed on the SDN List, and encouraged to review specific, more limited sanctions that have been placed on several Russian entities. This information can be found on OFAC's website.

    Additionally, licensees are strongly encouraged to immediately ensure their systems, programs, and processes comply with OFAC regulations, and review and monitor all transactions (particularly trade finance transactions and funds transfers) to identify and block transactions subject to sanctions. Licensees should also follow OFAC directions related to blocked funds.

    DFPI further warned that Russia’s invasion of Ukraine increases the risk that listed individuals and entities will attempt to evade sanctions by using virtual currency transfers, and encouraged licensees to review OFAC Guidance to protect against these risks. Licensees engaged in transactions involving virtual currencies are instructed to implement policies, procedures, and processes to protect against the unique risks posed by virtual currencies and should “consider virtual currency-specific control measures including sanctions lists, geographic screening, and any other measures appropriate to the licensee’s specific risk profile.”

    Additionally, DFPI cautioned that the “Russian invasion significantly elevates the cyber risk for the U.S. financial sector,” and licensees are instructed to take measures to mitigate cybersecurity threats, including adopting core cybersecurity hygiene measures, eliminating any non-essential networking protocols, ensuring procedures are able to address a ransomware attack, and reevaluating “plans to maintain essential services, protect critical data, and preserve customer confidence considering the realistic threat of extended outages.” Licensees are encouraged to track alerts from the Cybersecurity and Infrastructure Security Agency.

    Licensees conducting business in Ukraine and/or Russia should also “take increased measures to monitor, inspect, and isolate traffic from Ukrainian or Russian offices and service providers,” and “segregate networks for Ukrainian or Russian offices from the global network.”

    NYDFS also recently issued similar guidance for New York state regulated entities on its cybersecurity and virtual currency regulations in response to the Russian invasion and recently imposed sanctions. (Covered by a Buckley Special Alert.)

    State Issues Digital Assets Financial Crimes State Regulators DFPI California NYDFS OFAC Department of Treasury OFAC Sanctions OFAC Designations Ukraine Ukraine Invasion Russia Privacy/Cyber Risk & Data Security

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  • Treasury releases guidance on E.O. banning Russian imports

    Financial Crimes

    On March 8, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) released a General License (GL) and several Frequently Asked Questions (FAQs) following President Biden’s announcement banning the import of Russian oil, liquefied natural gas, and coal to the U.S. President Biden announced an Executive Order earlier in the week, which prohibits certain imports and new investments with respect to continued Russian federation efforts in Ukraine. (Covered by a Buckley Special Alert.) According to the announcement, the guidance is “to aid in the wind-down of deliveries of existing purchases that have already been contracted for.” GL 16, Authorizing Transactions Related to Certain Imports Prohibited by Executive Order of March 8, 2022 Prohibiting Certain Imports and New Investments With Respect to Continued Russian Federation Efforts to Undermine the Sovereignty and Territorial Integrity of Ukraine, prohibits certain imports from Russia from March 8 to April 22. The FAQs, which feature a new FAQ and several updated FAQs, provide guidance regarding the E.O.

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

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

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  • FinCEN warns financial institutions about Russian sanctions evasion

    Financial Crimes

    On March 7, FinCEN issued an alert advising financial institutions to be vigilant against potential attempts to evade sanctions levied against Russian individuals, banks, and other entities in response to the situation in Ukraine. FinCEN provided several examples of red flag indicators that could help identify attempted sanctions evasions, including actions by state actors and oligarchs, and reminded financial institutions of their Bank Secrecy Act (BSA) reporting obligations.

    The alert stressed that all financial institutions, including those with visibility into convertible virtual currency (CVC) flows identify and promptly report associated suspicious activity, and conduct appropriate, risk-based customer due diligence or enhanced due diligence as required. This includes CVC exchangers and administrators within or outside of Russia (which are generally considered to be money services businesses under the BSA) that retain at least some access to the international financial system. FinCEN noted that “[w]hile large scale sanctions evasion using [CVC] by a government such as the Russian Federation is not necessarily practicable, CVC exchangers and administrators and other financial institutions may observe attempted or completed transactions tied to CVC wallets or other CVC activity associated with sanctioned Russian, Belarusian, and other affiliated persons.”

    Financial institutions are instructed to specifically watch for (i) transactions initiated from IP addresses located in Russia, Belarus, FATF-identified jurisdictions with anti-money laundering/countering the financing of terrorism/counter-proliferation deficiencies, or other sanctioned jurisdictions; (ii) transactions connected to CVC addresses listed on OFAC’s Specially Designated Nationals and Blocked Persons List; and (iii) customers’ use of a CVC exchanger or foreign-located money service businesses in high-risk jurisdictions, including those with inadequate “know-your-customer” or customer due diligence measures. FinCEN also warned financial institutions of the dangers posed by Russian-related ransomware campaigns and encouraged financial institutions to refer to FinCEN and OFAC resources to help detect, prevent, and report potential suspicious activity.

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

    Financial Crimes Digital Assets FinCEN Of Interest to Non-US Persons Department of Treasury OFAC OFAC Sanctions OFAC Designations Russia Ukraine Ukraine Invasion Bank Secrecy Act Virtual Currency Money Service Business Fintech CVC

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  • Special Alert: Latest developments in OFAC sanctions against Russia

    Financial Crimes

    Beginning February 21, the U.S. Department of the Treasury’s Office of Foreign Assets Control has issued significant sanctions in response to the Russian Federation’s military invasion of Ukraine and its recognition of Ukraine’s separatist regions.

    Since Buckley’s last update on February 25, there have been a number of developments in the sanctions against Russia, which include:

    Financial Crimes Digital Assets OFAC Department of Treasury OFAC Sanctions OFAC Designations Ukraine Ukraine Invasion Russia Special Alerts DOJ FinCEN Biden NYDFS Of Interest to Non-US Persons Cryptocurrency

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  • NYDFS will take expedited measures to enforce Russian sanctions

    State Issues

    On March 2, New York Governor Kathy Hochul announced that NYDFS will increase its sanctions enforcement actions against Russia, including taking measures to expedite the procurement of blockchain analytics tools to detect exposure among regulated licensed virtual currency businesses to Russian individuals, banks, and other entities sanctioned by the Biden administration. “Accelerating the procurement process is a critical step to strengthen the Department's ability to enforce anti-money laundering and Bank Secrecy Act laws in this immediate crisis and beyond,” the announcement stated, explaining that “[l]everaging purpose-built technologies and service providers for virtual currency protects the financial system from illicit activity including money laundering, terrorist financing and ransomware activity.” NYDFS Superintendent Adrienne A. Harris added that monitoring transactions and exposure in real-time is imperative for preventing actors from attempting to evade sanctions through the transmission of virtual currency. The announcement follows NYDFS guidance on cybersecurity and virtual currency issued last week, which raised the specter of elevated cyber risk due to ongoing cyberattacks against Ukraine that could spill over to other networks, as well as potential direct attacks against U.S. critical infrastructure. (Covered by a Buckley Special Alert.) Governor Hochul also issued an Executive Order at the end of February, which directed all New York State agencies and authorities to review and divest public funds from Russia. 

    State Issues Digital Assets State Regulators NYDFS Bank Regulatory Ukraine Ukraine Invasion Russia OFAC Sanctions Anti-Money Laundering Bank Secrecy Act

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  • OFAC, DOJ measures aim for stronger compliance with Russian sanctions

    Financial Crimes

    On March 2, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) and the DOJ announced new measures to strengthen compliance with Russia-related sanctions in response to the situation in Ukraine. OFAC observed that in the past few days, Russia has taken measures “to use exporters to act as their agents and help them raise resources to prop up their currency and fund their priorities.” In response, OFAC reiterated that such actions taken on behalf of Russia’s Central Bank are prohibited. Newly issued and updated frequently asked questions address enhanced sanctions compliance measures and further explain recent sanctions, including prohibitions imposed pursuant to Directive 4 under Executive Order (E.O.) 14024, “Prohibitions Related to Transactions Involving the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation, and the Ministry of Finance of the Russian Federation.” (Covered by InfoBytes here.) Additionally, the updated FAQs clarify, among other things, that energy payments can and should continue. As explained in OFAC’s announcement, General License (GL) 8A permits “U-turn transactions” so that energy payments may be processed through non-sanctioned, third-country financial institutions to allow the continuation of transactions that support the flow of energy to the market. OFAC also issued new FAQs and general licenses (see GLs 9A, 10A, 13, and 14) related to E.O. 14065, “Blocking Property of Certain Persons and Prohibiting Certain Transactions With Respect to Continued Russian Efforts to Undermine the Sovereignty and Territorial Integrity of Ukraine” to further clarify the stipulated prohibitions.

    The same day, the DOJ launched Task Force KleptoCapture, “an interagency law enforcement task force dedicated to enforcing the sweeping sanctions, export restrictions, and economic countermeasures that the United States has imposed, along with allies and partners,” in order to “isolate Russia from global markets.” “The Justice Department will use all of its authorities to seize the assets of individuals and entities who violate these sanctions,” Attorney General Merrick B. Garland stated. The Task Force will be staffed with DOJ prosecutors, agents, analysts, and professional staff with expertise in sanctions and export control enforcement, anticorruption, asset forfeiture, anti-money laundering, tax enforcement, national security investigations, and foreign evidence collection. According to the announcement, the Task Force will use data analytics, cryptocurrency tracing, foreign intelligence sources, and information from financial regulators and private sector partners to investigate and prosecute violations of new and future sanctions (both those related to the Ukraine invasion as well as those imposed for prior instances of Russian aggression and corruption), and “combat[] unlawful efforts to undermine restrictions taken against Russian financial institutions,” including prosecuting persons who attempt to evade know-your-customer and anti-money laundering measures. The Task Force will also target efforts to use cryptocurrency to launder foreign corruption proceeds and sanctions evasion and “us[e] civil and criminal asset forfeiture authorities to seize assets belonging to sanctioned individuals or assets identified as the proceeds of unlawful conduct.”

    Financial Crimes Digital Assets Of Interest to Non-US Persons Department of Treasury OFAC OFAC Sanctions OFAC Designations Russia Ukraine Ukraine Invasion DOJ Cryptocurrency

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