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  • OFAC sanctions target Russian financial facilitators

    Financial Crimes

    On April 12, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), in coordination with the United Kingdom, announced sanctions targeting Russian financial facilitators to curb the country’s access to the international financial system. The sanctions, issued pursuant to Executive Order 14024, target 25 individuals and 29 entities with touchpoints in 20 jurisdictions, and include the facilitation network of one of Russia’s wealthiest billionaires who is subject to sanctions in multiple jurisdictions, OFAC said. The designations also serve to reinforce existing measures and further disrupt Russia’s ability to import critical technologies for use in its war against Ukraine. Concurrently, the State Department designated several entities operating in Russia’s defense sector, as well as entities supporting Russia’s war efforts against Ukraine and entities associated with the country’s energy exports. (See also State Department’s fact sheet here.) The Commerce Department also added 28 entities to its entity list. “Today’s action underscores our dedication to implementing the G7 commitment to impose severe costs on third-country actors who support Russia’s war,” Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson said in the announcement.

    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 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.” U.S. persons are generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons, unless authorized by a general or specific OFAC license, or otherwise exempt.

    In conjunction with the sanctions, OFAC issued several Russia-related general licenses (see GLs 62, 63, 64, and 65), revoked GL 15, and published new FAQ 1122.

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

  • Multinational tech company to pay $3.3 million for OFAC and BIS violations

    Financial Crimes

    On April 6, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), in consultation with the Department of Commerce’s Bureau of Industry and Security (BIS), announced a $3.3 million settlement with a multinational technology company to resolve potential civil liabilities stemming from the exportation of services or software from the United States to sanctioned jurisdictions and to Specially Designated Nationals (SDNs) or blocked persons. The settlement comprised an agreement with OFAC to pay a civil penalty of $2,980,264.86 and an administrative penalty of $624,013 with BIS. In light of the related OFAC action, the company was given a $276,382 credit by BIS contingent upon the company fulfilling its requirements under the OFAC settlement agreement, resulting in a combined overall penalty amount of $3,327,896.86.

    According to OFAC’s web notice, the conduct underlying the administrative penalty imposed by BIS stemmed from certain conduct involving the company’s Russian subsidiary. The conduct underlying the settlement with OFAC took place between July 2012 and April 2019, when the company and certain subsidiaries allegedly “sold software licenses, activated software licenses, and/or provided related services from servers and systems located in the United States and Ireland to SDNs, blocked persons, and other end users located in Cuba, Iran, Syria, Russia, and the Crimea region of Ukraine.” The total value of the 1,339 apparent violations was more than $12 million. OFAC alleged that the causes of these apparent violations stemmed from a lack of complete or accurate information on end customers for the company’s products, and that during the relevant time period, there were shortcomings in the company’s restricted-party screening controls. Among other things, OFAC alleged that the company’s screening architecture did not aggregate identifying information across its various databases to identify SDNs or blocked persons, failed to screen and evaluate pre-existing customers in a timely fashion, and missed common variations of restricted party names.

    In arriving at the $2,980,265.86 settlement amount, OFAC considered various mitigating factors, including that (i) evidence did not show that persons located in U.S. offices or management were aware of the alleged activity at the time (the apparent violations were revealed during a self-initiated look back); (ii) upon identifying the apparent violations, the company self-disclosed the matter to OFAC, conducted a retrospective review of thousands of past transactions, cooperated with OFAC throughout the investigation, terminated the accounts of the SDNs or blocked persons, and updated internal procedures to disable access to products or services upon discovery of a sanctioned party; and (iii) the company “undertook significant remedial measures and enhanced its sanctions compliance program through substantial investment and structural changes.” OFAC outlined several compliance considerations for companies conducting business through foreign-based subsidiaries, distributors, and resellers, and reminded businesses that OFAC’s SDN List is dynamic, and that when changes to the list are made, “companies should evaluate their pre-existing trade relationships to avoid dealings with prohibited parties.”

    Financial Crimes Of Interest to Non-US Persons OFAC Department of Treasury OFAC Sanctions OFAC Designations Enforcement Settlement Department of Commerce Cuba Iran Syria Ukraine Russia

  • OFAC sanctions former Haitian politician

    Financial Crimes

    On April 5, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Order 13818, against the former President of the Haitian Chamber of Deputies “for his extensive involvement in corruption in Haiti.” OFAC explained that the designated individual “is a current or former government official, or a person acting for or on behalf of such an official, who is responsible for or complicit in, or has directly or indirectly engaged in, corruption, including the misappropriation of state assets, the expropriation of private assets for personal gain, corruption related to government contracts or the extraction of natural resources, or bribery.” The sanctions follow the designation of two Haitian politicians last December for their involvement in activities or transactions that have materially contributed to, or pose a significant risk of materially contributing to, the international proliferation of illicit drugs or their means of production. (Covered by InfoBytes here.)

    As a result of the sanctions, all property and interests in property belonging to the sanctioned individual subject to U.S. jurisdiction are blocked and must be reported to OFAC. Additionally, “any entities that are owned, directly or indirectly, individually or in the aggregate, 50 percent or more by one or more blocked persons are also blocked.” U.S. persons are also generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons unless authorized by a general or specific license, or exempt. Financial institutions and persons that engage in certain transactions with the designated individual may themselves be exposed to sanctions or subject to enforcement.

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

  • OFAC sanctions politically connected Lebanese individuals

    Financial Crimes

    On April 4, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Order 13441, against two politically connected Lebanese brothers who engaged in corrupt practices that contributed to the undermining of Lebanon’s democratic process. As a result of the sanctions, “all property and interests in property of the individuals named above, and of any entities that are owned, directly or indirectly, 50 percent or more by them, individually, or with other blocked persons, that are in the United States or in the possession or control of U.S. persons, must be blocked and reported to OFAC.” U.S. persons are generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons.

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

  • NYDFS, crypto payment company reach AML/cybersecurity settlement

    State Issues

    On March 16, NYDFS issued a consent order against a payment service provider for allegedly failing to comply with the state’s virtual currency and cybersecurity regulations. The company was licensed to engage in virtual currency business activity in the state pursuant to 23 NYCRR Part 200. Licensees under Part 200 are required to, among other things, comply with federal and state laws mandating effective controls to guard against money laundering and certain other illegal activities. A 2022 NYDFS examination revealed that, although the company made improvements to address deficiencies within its AML and cybersecurity compliance programs that were identified during a 2018 examination, the programs still required additional improvements to achieve regulatory compliance. NYDFS concluded that the company violated sections of Part 200 by allegedly failing to develop adequate internal policies and controls to maintain compliance with applicable AML laws or to develop procedures to ensure compliance with necessary risk management requirements under applicable OFAC regulations. Furthermore, the company violated the state’s cybersecurity regulation (23 NYCRR Part 500) by failing to conduct periodic cybersecurity risk assessments and failing to timely appoint a designated chief information security officer responsible for overseeing, implementing, and reporting on the company’s cybersecurity program. Under the terms of the consent order, the company agreed to pay a $1 million civil monetary penalty and submit an action plan to NYDFS within 180 days detailing its remediation efforts. The company also agreed to conduct a comprehensive cybersecurity risk assessment within 150 days and to continue to strengthen its controls, policies, and procedures to prevent future violations.

    State Issues Digital Assets Privacy, Cyber Risk & Data Security State Regulators NYDFS Anti-Money Laundering Cryptocurrency Virtual Currency Payments Fintech Settlement 23 NYCRR Part 200 23 NYCRR Part 500 OFAC Risk Management

  • National bank fined $98 million by OFAC, Fed for sanctions violations

    Financial Crimes

    On March 30, the U.S. Treasury Department’s Office of Foreign Assets (OFAC) announced a $30 million settlement with a national bank to resolve potential civil liabilities stemming from trade insourcing software that the bank and its predecessor bank provided to a foreign European bank between 2008 and 2015. According to OFAC’s web notice, at the direction of a mid-level manager, the predecessor bank customized the software for general use by the European bank, which the predecessor bank “knew or should have known would involve engaging in trade-finance transactions with sanctioned jurisdictions and persons.” The European bank used the software to manage 124 non-OFAC compliant transactions totaling approximately $532 million involving parties in jurisdictions subject at the time of the transactions to sanctions regulations.

    OFAC noted that the national bank inherited the trade insourcing relationships when it acquired the predecessor bank, claiming that the national bank “did not identify or stop the European bank’s use of the software platform for trade-finance transactions involving sanctioned jurisdictions and persons for seven years despite potential concerns raised internally” following the acquisition. OFAC also noted, however, that the national bank’s alleged failure to stop the violations “was not a result of a systemic compliance breakdown within the broader [] organization,” which OFAC acknowledged has “a historically strong overall sanctions-compliance program.”

    In arriving at the settlement amount, OFAC considered various mitigating factors, including that (i) the majority of the 124 apparent violations related to agriculture, medicine, and telecommunications and therefore may have been eligible for a general or specific license, thus mitigating the harm to sanctions policy objectives; (ii) the legacy business unit at the predecessor bank was relatively small and that there was no indication that senior management either directed or had actual knowledge that the predecessor bank provided the software to the European bank for such purpose; and (iii) upon identifying the alleged violations, the bank promptly terminated the European bank’s access, voluntarily disclosed the matter to OFAC, conducted an extensive internal investigation, produced the results to OFAC, cooperated with OFAC throughout the investigation, agreed to toll the statute of limitations, and took remedial measures.

    Concurrently, the Federal Reserve Board issued an order fining the bank holding company in the amount of $67.8 million for allegedly engaging in unsafe or unsound practices related to its oversight of sanctions compliance risks at the national bank. The Fed noted that the national bank “no longer offers the trading platform to foreign banks” and has “strengthened firmwide compliance with OFAC regulations.”

    Financial Crimes Of Interest to Non-US Persons OFAC Department of Treasury Enforcement OFAC Sanctions OFAC Designations Settlement

  • OFAC settles with digital platform on sanctioned transactions

    Financial Crimes

    On March 31, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $72,230 settlement with a global digital trading platform to resolve allegations that it processed transactions for customers who self-identified as being located in Iran or Cuba, or were employees of the Government of Venezuela (GoV). OFAC’s web notice stated that between March 2017 and May 2022, the company, or certain of its non-U.S. affiliates, allegedly maintained accounts for customers who submitted information showing their locations were in a sanctioned jurisdiction. OFAC further maintained that the company violated the Venezuela Sanctions Regulations by processing transactions on behalf of two customers who self-identified as employees of the GoV. OFAC claimed, among other things, that the company implemented inadequate compliance processes to identify, analyze, and address risks.

    In its web notice, OFAC stated that it determined that “the violations were voluntarily self-disclosed and were non-egregious.” OFAC also considered various mitigating factors, including that the company has not received a penalty notice from OFAC in the preceding five years. Additionally, the company undertook numerous remedial measures upon learning of the alleged violations, cooperated with OFAC throughout the investigation, and agreed to toll the statute of limitations, the notice said.

    The company issued the following response: “We appreciate that OFAC recognized our full cooperation and remediation of the issues involved in this matter. These were self-identified and self-reported matters that reflect the rigor of our compliance review processes.”

    Orrick represented the company in this matter.

    Financial Crimes Of Interest to Non-US Persons OFAC Department of Treasury OFAC Sanctions OFAC Designations Enforcement Iran Cuba Venezuela

  • OFAC sanctions arms facilitator for attempted North Korea-Russia deals

    Financial Crimes

    On March 30, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Order 13551, against a Slovakian national for attempting to facilitate arms deals between Russia and the Democratic People’s Republic of Korea (DPRK) to aid Russia’s war against Ukraine. “Schemes like the arms deal pursued by this individual show that Putin is turning to suppliers of last resort like Iran and the DPRK,” Secretary of the Treasury Janet L. Yellen said. “We remain committed to degrading Russia’s military-industrial capabilities, as well as exposing and countering Russian attempts to evade sanctions and obtain military equipment from the DPRK or any other state that is prepared to support its war in Ukraine.”

    As a result of the sanctions, all property and interests in property of the sanctioned individual that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC, as well as “any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons.” Persons that engage in certain transactions with the designated individual may themselves be exposed to sanctions, and “any foreign financial institution that knowingly facilitates a significant transaction or provides significant financial services for the individual designated today could be subject to U.S. correspondent or payable-through account sanctions.”

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

  • OFAC sanctions individuals involved in Syria’s drug production and trafficking

    Financial Crimes

    On March 28, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) designated key individuals for supporting the regime of Syrian President Bashar al-Assad and the regime’s billion-dollar illicit drug production and trafficking enterprise. Taken in coordination with the UK, the designations, issued pursuant to Executive Orders 13572, 13582, and 13224, “also highlight the important role of Lebanese drug traffickers—some of whom maintain ties to Hizballah—in facilitating the export of Captagon[,]” the dangerous amphetamine at issue. As a result of the sanctions, all property and interests in property belonging to the sanctioned persons 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.” U.S. persons are also generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons. Persons that engage in certain transactions with the designated individuals or entities may themselves be exposed to sanctions or subject to an enforcement action, OFAC warned.

    Financial Crimes Of Interest to Non-US Persons OFAC Department of Treasury OFAC Sanctions OFAC Designations Syria SDN List UK

  • OFAC sanctions Belarusian state-owned enterprises and government officials; amends Belarus Sanctions Regulations

    Financial Crimes

    On March 24, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against Belarusian state-owned enterprises and government officials. In so doing, OFAC designated three entities and nine individuals, and identified one presidential aircraft as blocked property, pursuant to Executive Order 14038. The announcement noted that the designations build on previously issued sanctions taken against individuals and entities in Belarus in response to efforts by the Lukashenka regime to suppress democracy and support the Russian Federation’s war against Ukraine. “The authoritarian Lukashenka regime relies on state-owned enterprises and key officials to generate substantial revenue that enables oppressive acts against the Belarusian people,” Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian Nelson said in the announcement. Concurrently, the State Department imposed visa restrictions on 14 additional individuals, “including regime officials involved in policies to threaten and intimidate the Belarusian people, for their involvement in undermining democracy under Presidential Proclamation 8015.”

    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 are blocked and must be reported to OFAC. Additionally, “any entities that are owned, directly or indirectly, individually or in the aggregate, 50 percent or more by one or more blocked persons are also blocked.” U.S. persons are generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons, unless authorized by a general or specific OFAC license, or if otherwise exempt.

    Additionally, OFAC published a final rule in the Federal Register amending and reissuing the Belarus Sanctions Regulations in their entirety in order to implement the August 2021 Belarus-related Executive Order 14038 (discussed above), “Blocking Property of Additional Persons Contributing to the Situation in Belarus,” and incorporate a directive regarding sovereign debt (covered by InfoBytes here and here). The final rule (effective March 27) also updates and adds new definitions, general licenses, and interpretive guidance, among other things.

    Financial Crimes Of Interest to Non-US Persons OFAC OFAC Sanctions OFAC Designations Belarus Russia Ukraine Ukraine Invasion

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