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OFAC sanctions timeshare fraud network
On March 2, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Order 14059, against eight Mexican companies connected to timeshare fraud on behalf of the Cartel de Jalisco Nueva Generacion (CJNG). The CJNG is also designated under E.O. 14059. OFAC described timeshare fraud typology, explaining that schemes often involve third-party scammers who claim to have ready buyers and make unsolicited purchase offers to timeshare owners. If these offers are accepted, the scammers ask timeshare owners to pay advance fees and taxes to “facilitate or expedite the sale with assurances of reimbursement upon closing.” However, timeshare owners, after making multiple payments, eventually realize that the offers do not exist and lose their money, OFAC said. In conjunction with the sanctions, OFAC issued an alert warning that perpetrators of timeshare fraud may falsely claim to represent OFAC to appear legitimate and further their fraud.
As a result of the sanctions, all property and interests in property of the designated persons located in the U.S. or held by U.S. persons is blocked and must be reported to OFAC. Further, “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 an OFAC-issued general or specific license, or exempt. OFAC further warned that “U.S. persons may face civil or criminal penalties for violations of E.O. 14059 and the Kingpin Act.”
OFAC issues supplemental guidance on humanitarian sanctions exceptions
On February 27, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued supplemental guidance for the provision of humanitarian assistance. As previously covered by InfoBytes, last December OFAC implemented a carveout from the asset freeze provisions of UN sanctions programs by issuing or amending several general licenses to ease the delivery of humanitarian aid and ensure a baseline of authorizations for the provision of humanitarian support across many sanctions programs. The 2023 fact sheet provides information for the U.S. government, international organizations and entities, nongovernmental organizations, persons involved in the distribution of food, agricultural commodities, medicine, and medical devices, and financial institutions and other service providers who support or facilitate these transactions. The action reflects “Treasury’s work to limit the unintended impact of sanctions by providing greater consistency and clarity across U.S. sanctions programs to help legitimate humanitarian assistance and related trade reach at-risk populations through transparent financial channels.”
OFAC sanctions Mexican arms trafficker for supplying weapons to cartel
On February 28, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order (E.O.) 14059 against a Mexican national for his role in providing, or having attempted to provide, financial, material, or technological support for, or goods or services in support of, the Cartel de Jalisco Nueva Generacion (CJNG). The CJNG is also designated under E.O. 14059. According to OFAC, the sanctions are part of a whole-of-government effort to combat global threats posed by illicit drug trafficking into the U.S. The agency stressed it will continue to coordinate with federal government partners and foreign counterparts to target and pursue accountability for foreign illicit drug actors. As a result of the sanctions, the designated individual’s property located in the U.S. or held by U.S. persons is blocked and must be reported to OFAC. Further, “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 an OFAC-issued general or specific license, or exempt. OFAC further warned that “U.S. persons may face civil or criminal penalties for violations of E.O. 14059 and the Kingpin Act.”
OFAC sanctions persons supporting North Korea
On March 1, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against three entities and two individuals for their roles in illicitly generating revenue to support the government of the Democratic People’s Republic of Korea (DPRK). According to OFAC, two of the sanctioned entities are designated pursuant to Executive Order (E.O.) 13687 “for being agencies, instrumentalities, or controlled entities of the Government of North Korea or the Workers’ Party of Korea.” One of the entities is a subordinate to the Government of North Korea, and is used by the DPRK government to earn foreign currency, collect intelligence, and provide cover status for intelligence operatives. The other entity—a subordinate to the DPRK Ministry of People’s Armed Forces (which was previously sanctioned by OFAC)—allegedly generated funds for the DPRK government for decades by conducting art and construction projects on behalf of regimes throughout the Middle East and Africa. The two individuals are sanctioned, pursuant to E.O. 13810, for being North Korean persons who have generated revenue for the DPRK government or the Workers’ Party of Korea. These individuals, OFAC said, established the third sanctioned entity in the Democratic Republic of the Congo to earn revenue from construction and statue-building projects with local governments.
As a result of the sanctions, all property and interests in property of the sanctioned persons 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 individuals and entities may themselves be exposed to sanctions, and “any foreign financial institution that knowingly facilitates a significant transaction or provides significant financial services for any of the individuals or entities designated today could be subject to U.S. correspondent or payable-through account sanctions.”
FinCEN warns financial institutions of surge in mail theft-related check fraud
On February 27, FinCEN issued an alert to financial institutions on the nationwide surge in check fraud schemes targeting the U.S. mail. Mail theft-related check fraud, FinCEN explained, generally relates to the fraudulent negotiation of checks stolen from the U.S. postal service, and represents one of the most significant money laundering threats to the U.S. The alert is intended to ensure financial institutions file suspicious activity reports (SARs) that appropriately identify and report suspected check fraud schemes possibly linked to mail theft. The alert highlighted red flags to help financial institutions identify and report suspicious activity, and reminded financial institutions of their Bank Secrecy Act (BSA) reporting requirements. According to FinCEN, BSA reporting for check fraud has increased significantly over the past three years. “In 2021, financial institutions filed over 350,000 [SARs] to FinCEN to report potential check fraud, a 23 percent increase over the number of check fraud-related SARs filed in 2020,” the agency said, adding that in 2022, SARs related to check fraud reached over 680,000. When suspecting this type of fraud, financial institutions are advised to refer customers to the United States Postal Inspection Service in addition to filing a SAR.
OFAC issues more Russian sanctions and metals and mining determination
On February 24, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced significant measures targeting the metals and mining sector of the Russian Federation economy under Executive Order 14024. OFAC also imposed sanctions on 22 individuals and 83 entities to further isolate Russia from the international economy and hinder the country’s access to capital, materials, technology, and military support sustaining its war against Ukraine. (See also OFAC’s fact sheet on sanctions measures taken during the past year.) According to OFAC, the designations target “over 30 third-country individuals and companies connected to Russia’s sanctions evasion efforts, including those related to arms trafficking and illicit finance.” The agency added that “[w]hile Russian banks representing over 80 percent of total Russian banking sector assets are already subject to U.S and international sanctions,” it is now “designating over a dozen financial institutions in Russia, including one of the top-ten largest banks by asset value.” OFAC explained that sanctioned actors are known to turn to smaller banks and wealth-management firms to evade sanctions and access the international financial system. As a result, several wealth management-related entities and associated individuals playing key roles in Russia’s financial services sector have been sanctioned. OFAC also issued a determination (effective February 24), in consultation with the Department of State, allowing for sanctions to be imposed on any individual or entity determined to operate or have operated in the metals and mining sector of the Russian Federation economy.
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. Further, “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 an OFAC-issued general or specific license, or exempt.
The announcement further noted that additional measures have been taken by the Departments of State and Commerce, as well as the Office of the U.S. Trade Representative, in coordination with allies and G7 partners.
In conjunction with the sanctions, OFAC issued several Russia-related general licenses (see GLs 8F, 13D, 60, and 61), as well as five associated frequently asked questions.
FATF suspends Russia’s task force membership
On February 24, the Financial Action Task Force (FATF), the international standard-setting body on illicit finance, suspended the Russian Federation’s membership, saying the country’s “actions unacceptably run counter to the FATF core principles aiming to promote security, safety, and the integrity of the global financial system.” This marks the first time the FATF has ever suspended a country from its membership. Despite the suspension, the FATF emphasized that Russia “remains accountable for its obligation to implement the FATF Standards” and “must continue to meet its financial obligations.” According to the statement, the FATF will continue to monitor the situation and will consider whether to lift or modify these restrictions during each of its plenary meetings.
Treasury Secretary Janet Yellen issued a statement following the suspension. Explaining that “FATF members lead the global effort on combatting money laundering and the financing of terrorism and proliferation and members are expected to uphold and promote core principles that safeguard the global financial system,” Yellen stressed that “Russia’s ongoing war undermines the principles of international cooperation and mutual respect that underpin the mandate of the FATF.” She further commented that the “United States commends the FATF’s historic decision to suspend Russia’s membership in the body,” and added that “Russia’s disregard for the sovereignty and territorial integrity of Ukraine is at odds with the FATF’s foundational values of international cooperation and the rule of law. Further, Russia’s dealings with suppliers of last resort such as Iran and North Korea, its government-driven efforts to evade international sanctions and export controls, and other activities … make it a haven for illicit finance—the very thing the FATF works to combat.”
OFAC announces sanctions tied to Mexican drug cartel
On February 22, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Order 14059, against six Mexican nationals involved in the methamphetamine and fentanyl trade, along with six related Mexico-based entities. According to OFAC, the sanctioned network’s actions aid a Mexican drug cartel’s facilitation of fentanyl and other drugs trafficked into the United States. OFAC coordinated with the Mexican government, the FBI, and the DEA to take this action. 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. U.S. persons are also generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons, and “may face civil or criminal penalties for violations of E.O. 14059.” Additionally, OFAC warned that “persons that engage in certain transactions with the individuals and entities designated today may themselves be exposed to sanctions or subject to an enforcement action.”
OFAC issues sanctions compliance guidance for transactions related to Syrian earthquake disaster relief
On February 21, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued sanctions compliance guidance for authorized transactions related to Syrian earthquake disaster relief. The OFAC Compliance Communique: Guidance on Authorized Transactions Related to Earthquake Relief Efforts in Syria responds to questions from nongovernmental organizations and the general public on how to provide assistance and funding to earthquake relief efforts in Syria that would otherwise be prohibited by the Syrian Sanctions Regulations. As previously covered by InfoBytes, earlier in February, OFAC issued Syria General License (GL) 23 to authorize certain transactions ordinarily prohibited by OFAC sanctions. Among other things, GL 23 informed U.S. financial institutions and U.S. registered money transmitters that they “may rely on the originator of a funds transfer with regard to compliance” for transactions related to earthquake relief efforts in Syria, provided that the financial institution does not know or have reason to know that the funds transfer is not related to such efforts.
Treasury official warns that the cost of doing business with Russia is steep
On February 21, Deputy Secretary of the Treasury Wally Adeyemo discussed sanctions efforts and export controls taken by a coalition of more than 30 nations over the past year to immobilize the majority of Russia’s sovereign wealth and central bank assets. Adeyemo noted that the breadth of this coalition will enable Russia’s continued isolation, and emphasized that those nations that fail to implement these sanctions and export controls will be forced to choose between their economic ties with the coalition and providing material support to Russia. Recognizing that the Russian government is actively seeking ways to circumvent these sanctions, Adeyemo laid out the coalition’s plan to countering sanctions evasion, as follows: (i) “improve information sharing and coordination among our allies, as well as share additional information with firms in our countries to garner their assistance in preventing countries, companies, and individuals from providing material support to Russia”; (ii) take measures to identify and shut down the specific channels used by Russia to equip and fund its military; and (iii) apply pressure on companies and jurisdictions known to allow or facilitate sanctions evasions. Adeyemo warned that “[o]fficials from the U.S. and the governments of our coalition partners are also engaging with companies and banks in these jurisdictions to tell them directly that if they do not enforce our sanctions and export controls, we will cut them off from access to our markets and financial systems.” He added that the “cost of doing business with Russia in violation of our policies is a steep one, and companies and financial institutions should not wait for their governments to make the decision for them.”