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  • Federal Reserve fines Taiwanese bank $29 million for anti-money laundering compliance deficiencies

    Financial Crimes

    On January 17, the Federal Reserve Board (Fed) ordered a Taiwanese bank to pay a $29 million penalty in connection with alleged Bank Secrecy Act and anti-money laundering (BSA/AML) violations. According to the Fed’s Order, examinations conducted in 2016 identified “significant deficiencies” in three of the bank’s U.S. branches’ BSA/AML compliance and risk management controls. In addition to assessing a penalty, the Order required the bank and its New York, Chicago, and San Jose branches to, among other things, (i) submit a written plan from the board of directors for improving senior management oversight, including building a sustainable governance framework for BSA/AML compliance; (ii) submit compliance plans for enhanced internal controls, independent testing, risk assessment, and employee training; (iii) submit a revised program designed to conduct customer due diligence; (iv) ensure timely, accurate, and complete suspicious activity monitoring and reporting; (v) engage an independent third-party to review the identification and reporting of suspicious activity “involving high risk customers or transactions”; (vi) comply with Office of Foreign Assets Control regulations; and (vii) submit periodic progress reports to the branches’ applicable Federal Reserve Banks detailing actions taken to comply with the provisions of the order.

    Financial Crimes Federal Reserve Anti-Money Laundering Bank Secrecy Act Bank Compliance International OFAC SARs

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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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  • OCC Recent Enforcement Actions Target BSA/AML Compliance Programs and National Flood Insurance Act Violations

    Federal Issues

    On December 14, the OCC released a list of recent enforcement actions taken against national banks, federal savings associations, and individuals currently and formerly affiliated with such parties. The new enforcement actions include cease and desist orders, civil money penalty orders, removal/prohibition orders, and restitution orders. The list also includes recently terminated enforcement actions.

    Cease and Desist Order. On November 9, the OCC issued a consent order (2017 Order) two days after converting a Japanese bank’s two New York branches under the supervision of the New York Department of Financial Services (NYDFS) to federally licensed branches under the supervision of the OCC. As part of the OCC’s approval process, the bank’s federal branches and New York branches agreed to the issuance of the 2017 Order, which requires adherence to “remedial provisions . . . substantively the same as those” in consent orders entered into in 2013 and 2014 with NYDFS. The previously issued consent orders addressed deficiencies related to the bank’s Bank Secrecy Act/Anti-Money Laundering (BSA/AML) sanctions compliance programs, specifically concerning the removal of key warnings to regulators on transactions with sanctioned countries.

    The 2017 Order, among other things, requires the bank to: (i) submit an action plan on enhancing internal controls and updating policies and procedures to correct BSA/AML deficiencies, address provisions applicable under the Office of Foreign Assets Control’s requirements, and implement requirements outlined in the 2013 and 2014 consent orders; (ii) ensure adherence to the action plan and 2017 Order under the direction of the bank’s general manager; (iii) submit a management oversight plan designed to improve and enhance the bank’s sanctions compliance programs; and (iv) prevent the retention or future engagement of any individual identified and “barred by the 2014 Consent Order from engaging, directly or indirectly, in any duties, responsibilities, or activities at or on behalf of the [b]ank or the [b]ank’s affiliates that involve their banking business in the [U.S.].” The 2017 Order does not require the bank to pay a civil monetary penalty.

    Civil Monetary Penalty. On October 10, the OCC assessed a $452,000 civil monetary penalty against a national bank lender for alleged violations of the National Flood Insurance Act and/or the Flood Disaster Protection Act. The bank agreed to pay the penalty without admitting or denying any wrongdoing. 

    Federal Issues OCC Enforcement Compliance Bank Secrecy Act Anti-Money Laundering OFAC NYDFS Financial Crimes Flood Insurance Sanctions

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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 Expands North Korean Sanctions

    Financial Crimes

    On November 21, the day after President Trump placed North Korea back on the list of State Sponsors of Terrorism, the Treasury Department’s Office of Foreign Assets Control (OFAC) imposed additional sanctions in an action to “disrupt North Korea’s illicit funding of its unlawful nuclear and ballistic missile programs.” The sanctions were issued against one individual, 13 entities, and 20 vessels pursuant to Executive Order 13810 and Executive Order 13722. The sanctioned entities have commercial ties to North Korea or operate transportation networks in the country, and the sanctioned individuals are “involved in the exportation of workers from North Korea, including exportation to generate revenue for the Government of North Korea.” All property held by the sanctioned individuals and entities within U.S. jurisdiction was frozen, and transactions between the sanctioned individuals and entities and Americans are also “generally prohibited.” 

    See here for previous InfoBytes coverage on North Korean sanctions.

    Financial Crimes OFAC Sanctions International

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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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  • District Court Upholds $60 Million Jury Verdict for Credit Reporting Agency’s Use of OFAC Alert

    Courts

    On November 7, the Northern District Court of California upheld a $60 million jury verdict against a credit reporting agency regarding the use of its OFAC Alert (previously covered by InfoBytes). The verdict stems from a 2012 class action lawsuit in which the plaintiffs alleged that the defendant had failed to distinguish law-abiding citizens from drug traffickers, terrorists, and other criminals with similar names found on the Treasury Department’s OFAC database. Following the defendant's motion for judgment as a matter of law or a new trial, the district court agreed with the jury’s findings that the defendant (i) “willfully fail[ed] to follow reasonable procedures to assure the maximum possible accuracy of the OFAC information it associated with members of the class’’; (ii) “willfully failed to clearly and accurately disclose OFAC information in the written disclosures it sent to members of the class”; and (iii) “failed to provide class members a summary of their FCRA rights with each written disclosure made to them.”

    Courts FCRA OFAC Credit Reporting Agency Consumer Finance

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