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  • OFAC expands Venezuelan and Iranian sanctions

    Financial Crimes

    On January 5, the Treasury Department’s Office of Foreign Assets Control (OFAC) imposed additional sanctions against four current or former officials of the Venezuelan government. The designations, issued pursuant to Executive Order 13692, identify officials who are “associated with corruption and repression in Venezuela” and have “forsaken the professional republican mission of the military institution, which . . . is to be ‘with no political orientation … and in no case at the service of any person or political partisanship.’” All assets belonging to the identified individuals subject to U.S. jurisdiction are frozen, and U.S. persons are generally prohibited from dealing with them. See here for previous InfoBytes coverage of Venezuelan sanctions.

    Separately on January 4, OFAC designated five Iranian entities, pursuant to Executive Order 13382 (E.O. 13382), for their ties to Iran’s ballistic missile program. The five entities identified in the designation are either owned or controlled by an Iranian group that is “responsible for the development and production of Iran's solid-propellant ballistic missiles, is listed in the Annex to E.O. 13382 and is currently sanctioned by the U.S., UN, and EU.” In addition to freezing assets subject to U.S. jurisdiction and prohibiting U.S. persons from engaging in transactions with the entities, “foreign financial institutions that knowingly facilitate significant transactions for, or persons that provide material or certain other support to, the entities designated today risk exposure to sanctions that could sever their access to the U.S. financial system or block their property and interests in property under U.S. jurisdiction.” See here for previous InfoBytes coverage of Iranian sanctions.

    Financial Crimes Department of Treasury OFAC Sanctions International Executive Order

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  • OFAC Amends Iraq Stabilization and Insurgency Sanctions Regulations, Sanctions Additional North Koreans

    Financial Crimes

    On December 27, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) released amendments to its Iraq Stabilization and Insurgency Sanctions Regulations (ISISR) to implement Executive Order 13668 (“Ending Immunities Granted to the Development Fund for Iraq and Certain Other Iraqi Property and Interests in Property Pursuant to Executive Order 13303, as Amended”). Previously, the ISISR prohibited and deemed null and void “any attachment, judgment, decree, lien, execution, garnishment, or other judicial process” related to (i) the sale and marketing of petroleum and petroleum products involving U.S. persons; and (ii) “any accounts, assets, investments, or any other property of any kind owned by, belonging to, or held by the Central Bank of Iraq, or held, maintained, or otherwise controlled by any financial institution of any kind in the name of, on behalf of, or otherwise for the Central Bank of Iraq.” OFAC’s amendments remove these prohibitions, and also implement technical and conforming changes. The amendments took effect December 28.

    Separately, on December 26, OFAC announced that two North Korean individuals have been added to the Specially Designated Nationals List. Assets belonging to individuals on the list are blocked, and transactions by U.S. persons involving these individuals or that are otherwise subject to U.S. jurisdiction are also generally prohibited. See here for previous InfoBytes coverage on North Korean sanctions.

    Financial Crimes Department of Treasury OFAC Sanctions International

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  • FinCEN Updates Bank Secrecy Act FAQs

    Financial Crimes

    Recently, the Financial Crimes Enforcement Network (FinCEN) updated its “Answers to Frequently Asked Bank Secrecy Act (BSA) Questions.” The December update provided the following, among other things: (i) “depository institutions are not required to file a Designation of Exempt Person form . . . with respect to the transfer of currency to or from any of the 12 Federal Reserve Banks” (in accordance with amended 31 CFR 1020.315); (ii) guidelines for filing the Designation of Exempt Person form; and (iii) guidance concerning the types of identifying information financial institutions should obtain when a federal, state or local government official engages in a transaction over a certain amount in an official capacity. FinCEN stated that “the answers are not meant to be comprehensive, apply to all factual situations, or to replace or supersede the BSA regulations.”

    Financial Crimes FinCEN Bank Secrecy Act Department of Treasury Federal Reserve

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  • FSOC Publishes 2017 Annual Report, Highlights Cybersecurity and Financial Innovation Risks


    On December 14, the Financial Stability Oversight Council (FSOC) released its 2017 annual report. The report reviews financial market developments, identifies emerging risks, and offers recommendations to enhance financial stability. Highlights include:

    • Cybersecurity.  The report notes that financial institutions need to work with regulators to improve cybersecurity resilience and better understand risks. FSOC encourages the creation of a private sector council of senior executives to work with government officials and focus on ways cyber incidents may affect business operations.
    • Marketplace Lending. FSOC acknowledges that marketplace lending is still an evolving model with potential risks, such as the misalignment of incentives. However, the report notes the platform’s potential to reduce costs and expand access to credit.
    • New Technology. The report discusses challenges for supervision and regulation of virtual currencies and distributed ledger technology. FSOC observes that current regulatory practices were designed for more centralized systems, in comparison to the decentralization of data storage in this new landscape.

    Fintech Virtual Currency FSOC Bitcoin Department of Treasury Marketplace Lending Third-Party Distributed Ledger

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  • OFAC Issues License and Guidance on Amended Ukrainian/Russian Sanctions

    Financial Crimes

    On November 28, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) released General License 1B to address amendments made to Directives 1 and 2 (Directives) of its Ukrainian/Russian-related Sectoral Sanctions. The amendments were made in accordance with the Countering America’s Adversaries Through Sanctions Act of 2017 (CAATSA). (See previous InfoBytes coverage on Directives here.) The Directives prohibit U.S. persons from dealings in certain equity and debt of persons determined by OFAC to be part of the Russian financial and energy sectors. According to a Treasury press release, General License 1B addresses the decrease in the maturity dates of debt transactions prohibited by Directive 1 from 30 days to 14 days, and the decrease in the maturity dates of debt transactions prohibited by Directive 2 from 90 days to 60 days. General License 1B authorizes transactions by U.S. persons, wherever located, and transactions within the United States that involve derivative products whose value is linked to an underlying asset that constitutes prohibited debt issued by person subject to Directives 1, 2 or 3 of the Sectoral Sanctions, including those issued on or after November 28 that have the reduced maturity dates targeted by CAATSA. OFAC also released updated FAQs to answer questions related to the Ukrainian-/Russian-related amended directives. 

    Financial Crimes OFAC Sanctions Department of Treasury CAATSA

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  • OFAC Penalizes Dental Supply Company for Violations of the Iranian Transactions and Sanctions Regulations

    Financial Crimes

    The U.S. Treasury Department’s Office of Foreign Asset Control (OFAC) announced that it entered into a $1.2 million settlement with a U.S. dental supply company for alleged violations of the Iranian Transactions and Sanctions Regulations (ITSR). According to the December 6 announcement, between November 2009 and July 2012, two of the company’s subsidiaries exported 37 shipments of dental supplies to distributors in other countries with “knowledge or reason to know that the goods were ultimately destined for Iran.” OFAC determined that the alleged violations were non-egregious.

    In determining the settlement amount, OFAC considered multiple factors, including that (i) the subsidiaries acted willfully in violation of the ITSR because employees concealed their knowledge that the goods were destined for Iran; (ii) subsidiary supervisory personnel actively concealed their awareness of the apparent violations from their U.S. parent company; and (iii) the U.S. company is “commercially sophisticated” with knowledge of OFAC’s regulations. OFAC also considered numerous mitigating factors, including (i) the fact that the U.S. company has not received a penalty from OFAC in the previous five years; (ii) the harm to the ITSR program was limited; and (iii) the U.S. company cooperated with the investigation and took remedial steps. 

    Financial Crimes OFAC Sanctions Settlement Department of Treasury

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  • OFAC Penalizes Credit Card Issuer for Violations of Cuban Assets Control Regulations

    Financial Crimes

    On November 17, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced that it had reached a $204,277 settlement with a U.S. financial institution for alleged violations of the Cuban Assets Control Regulations (CACR). The settlement involves actions taken by an international credit card company which, at the time of the apparent violations, was a wholly owned subsidiary of an entity that was itself 50 percent owned by the U.S. financial institution. According to the announcement, between 2009 and 2014, credit cards that the company issued to over 100 corporate customers were used to make purchases in Cuba or otherwise involved Cuba. OFAC asserts that the company failed to implement controls to prevent this even though it had policies and procedures in place to review transactions for compliance with CACR.

    In determining the settlement amount, OFAC considered that (i) employees within the company had reason to know of the conduct that led to the alleged violations; (ii) none of the entities involved appeared to appreciate the risk that the credit cards might be used in Cuba; (iii) at the time they occurred, the actions resulted in harm to the US sanctions program objectives; (iv) the U.S. financial institution is a large and sophisticated financial entity; and (v) during the investigation, the entities provided “verifiably inaccurate or incomplete, including material omissions.” OFAC also considered the fact that the entities voluntarily self-disclosed the alleged violations and the U.S. financial institution took “swift and appropriate remedial action” upon discovery.

    OFAC recently announced updates to CACR, covered by InfoBytes here.

    Financial Crimes OFAC Department of Treasury Enforcement Settlement Credit Cards

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  • OFAC Sanctions Ten Additional Venezuelan Officials Connected to Venezuela’s Electoral Process

    Financial Crimes

    On November 9, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced sanctions against ten current or former officials of the government of Venezuela for “undermining electoral processes, media censorship, or corruption in government-administered food programs in Venezuela.”  The designation follows October 15, 2017 state elections in Venezuela, which were “marked by numerous irregularities that strongly suggest fraud helped the ruling party unexpectedly win a majority of governorships.”  Under the sanctions, issued pursuant to Executive Order 13692 (see previous InfoBytes coverage here), all assets belonging to the identified individuals subject to U.S. jurisdiction are frozen, and U.S. persons are prohibited from having any dealings with them.

    See additional InfoBytes coverage on previously issued Venezuelan sanctions here and here.

    Financial Crimes Department of Treasury OFAC Sanctions

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  • Third Treasury Report Calls on HUD to Reconsider Application of Disparate Impact Rule to the Insurance Industry

    Federal Issues

    On October 26, the U.S. Treasury Department published a report outlining a number of recommendations for ways to manage systemic risk primarily within the asset management and insurance industry.  A section of the report, however, also discusses HUD’s potential application of the disparate impact rule to the insurance industry—specifically related to homeowner’s insurance. The report, “A Financial System That Creates Economic Opportunities—Asset Management and Insurance,” is the third in a series of four the Treasury plans to issue in response to President Trump’s Executive Order 13772 (EO), which mandated a review of financial regulations for inconsistencies with promoted “Core Principles.” (See Buckley Sandler Special Alert on the EO here and InfoBytes coverage on the first two reports here.)

    HUD is authorized to adjudicate housing discrimination claims and issue rules relating to the Fair Housing Act. According to the report, Treasury recommends that HUD reconsider the use of the disparate impact theory to the insurance industry. The report notes a number of problems and challenges that would arise from applying disparate impact to the insurance industry. In particular, the report identifies potential challenges because (i) “state insurance regulations ordinarily prohibit the consideration of protected characteristics in the evaluation and pooling of risk” and at least one state expressly prohibits the collection of this data; (ii) the rule could impose unnecessary burdens on insurers and lead to actions that are not actuarially sound in an effort to avoid underwriting practices that may result in disparate outcomes; and (iii) it may be inconsistent with the McCarran-Ferguson Act and other existing state laws.

    The report also recommends, among other things, that Congress clarify the “business of insurance” exception that generally excludes these services from the CFPB’s jurisdiction. The report recommends clarification to this exception to eliminate uncertainty about the CFPB’s jurisdiction and the potential overlap between the Bureau and state insurance regulators. A fact sheet accompanying the report further highlights Treasury’s recommendations to evaluate systemic risk, streamline regulations, rationalize international engagement, and promote economic growth.

    Federal Issues Department of Treasury FHA Asset Management HUD Disparate Impact CFPB Systemic Risk Insurance

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  • Treasury Department Issues New Sanctions, Launches Terrorist Financing Targeting Center in Middle East

    Financial Crimes

    On October 25, Treasury Secretary Steven Mnuchin spoke before the Future Investment Initiative Conference about the newly established Terrorist Financing Targeting Center initiative (Center), co-chaired by the U.S. and Saudi Arabia. Mnuchin praised the new Center, stating, “The creation of this Center is a major step forward in our ability to disrupt the finances and operations of terrorist organizations” and calling the Center “a catalyst for additional multilateral actions against terrorist financiers. The Center is a result of a strategic agreement, signed in May, between Saudi Arabia, the United Arab Emirates, the State of Kuwait, the Sultanate of Oman, the Kingdom of Bahrain, the State of Qatar, and the U.S.

    Additionally, the Treasury Department also announced the imposition of sanctions against “nine individuals and entities that finance and facilitate terrorism” and aid other transnational threats in the Middle East.

    Financial Crimes Sanctions Department of Treasury Combating the Financing of Terrorism

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