Skip to main content
Menu Icon
Close

InfoBytes Blog

Financial Services Law Insights and Observations

Filter

Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.

  • Treasury official warns that the cost of doing business with Russia is steep

    Financial Crimes

    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.”

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

  • Treasury official highlights fintech, crypto assets, and cloud services challenges

    Federal Issues

    On February 15, Treasury Assistant Secretary for Financial Institutions Graham Steele delivered remarks before the Exchequer Club of Washington, D.C., during which he discussed the U.S. Treasury Department’s financial institutions agenda on fintech, cryptocurrency, and cloud service providers. Stating that “significant potential exists to harness the underlying technology in fintech, digital assets, and cloud services adoption,” Steele cautioned that there exist common risks across these spaces related to inadequate oversight, excessive concentration, and consumer harms.

    With respect to nonbanks and fintech, Steele noted that participation by nonbanks in financial services is a key priority for Treasury. He commented that while nonbanks add diversity and competition pressure to consumer finance markets, they “have largely not been subject to the kind of comprehensive regulation and supervision to which banks are subject,” which has created numerous “risks related to regulatory arbitrage, data privacy and security, bias and discrimination, and consumer protection, among others.” Steele highlighted recent Treasury recommendations primarily focused on using existing authorities held by the federal banking regulators and the CFPB as a way to coordinate supervision of bank-fintech partnerships and credit underwriting models. Another area of concern, Steele noted, are big technology firms—those that generally seek to enter the consumer finance market via relationships with banks and third-party fintech firms, and who avoid prudential regulation, supervision, and risk-management requirements that would apply if they offered banking services. “Big Tech firms may have incentives to leverage their existing commercial relationships, consumer data, and other resources to enter new markets, expand their networks and offerings, and scale rapidly to achieve capabilities that others—including depository institutions—do not have and cannot replicate,” Steele said.

    Steele also touched on Treasury’s objectives for crypto assets, in which he referred to several studies examining “the potential financial stability implications of crypto-asset activities” and the risks and opportunities they might present to consumers, investors, and businesses. He also addressed concerns about misleading claims and representations in this space (for example, with respect to the availability of deposit insurance) and noted that there exist several gaps in existing authorities over crypto assets. Finally, Steele discussed a recent Treasury report, which examined potential benefits and challenges associated with the adoption of cloud services technology by financial services firms (covered by InfoBytes here).

    Federal Issues Digital Assets Fintech Privacy, Cyber Risk & Data Security Department of Treasury Nonbank Cryptocurrency Cloud Technology

  • U.S.-EU release statement on Joint Financial Regulatory Forum

    Financial Crimes

    On February 7-8, EU and U.S. participants, including officials from the Treasury Department, Federal Reserve Board, CFTC, FDIC, SEC, and OCC, participated in the U.S.-EU Joint Financial Regulatory Forum to continue their ongoing financial regulatory dialogue. According to a joint statement issued by the participants, the matters discussed focused on six themes: “(1) market developments and financial stability risks; (2) sustainable finance and climate-related financial risks; (3) regulatory developments in banking and insurance; (4) operational resilience and digital finance; (5) regulatory and supervisory cooperation in capital markets; and (6) anti-money laundering and countering the financing of terrorism (AML/CFT).”

    The joint statement acknowledged that the Russia/Ukraine conflict, coupled with global economic uncertainty and inflationary pressures, have exposed “the financial system to downside risk both in the EU and in the U.S,” with participants stressing the importance of international coordination in monitoring vulnerabilities and building resilience against stability risks. During the forum, participants discussed recent developments related to sustainability-related financial disclosures, climate-related financial risks, cross-border bank resolution coordination, the transition away from LIBOR, digital finance operational resilience, and progress made in strengthening their respective AML/CFT frameworks.

    Financial Crimes Of Interest to Non-US Persons Department of Treasury EU Digital Assets Anti-Money Laundering Climate-Related Financial Risks LIBOR

  • OFAC sanctions more Bulgarian officials

    Financial Crimes

    On February 10, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Order 13818, against five current or former Bulgarian government officials for their alleged “extensive involvement in corruption in Bulgaria.” The designations build upon previous OFAC sanctions taken against three individuals and their networks (encompassing 64 entities) for their extensive roles in corruption in Bulgaria. (Covered by InfoBytes here.) 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. U.S. persons are generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons. 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 issued by OFAC. “[F]inancial institutions and other persons that engage in certain transactions or activities with the sanctioned entities and individuals may expose themselves to sanctions or be subject to an enforcement action,” OFAC warned.

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

  • OFAC authorizes certain transactions to aid Syrian earthquake disaster relief

    Financial Crimes

    On February 9, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued Syria General License (GL) 23 to authorize, for 180 days, all transactions related to earthquake relief efforts that would ordinarily be prohibited by the Syrian Sanctions Regulations (SySR). Specifically, authorizations under GL 23 include “the processing or transfer of funds on behalf of third-country persons to or from Syria in support of” transactions related to earthquake relief efforts in the country. Additionally, “U.S. financial institutions and U.S. registered money transmitters 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. GL 23 does not permit any transactions prohibited under the SySR related to the importation of petroleum or petroleum products of Syrian origin into the U.S., or any transactions involving persons “whose property and interests in property are blocked pursuant to the SySR, other than persons who meet the definition of the term Government of Syria, as defined in section 542.305(a) of the SySR, unless separately authorized.” Additionally, OFAC advised financial institutions and others who may be engaged in disaster relief activities for Syria to contact OFAC directly to seek specific licenses or guidance should they believe their activities are not covered by existing authorizations or exemptions.

    Financial Crimes Of Interest to Non-US Persons Department of Treasury OFAC OFAC Sanctions OFAC Designations Syria Money Service / Money Transmitters

  • Treasury official warns Turkish companies on engaging with Russian entities

    Financial Crimes

    On February 3, Under Secretary of the Treasury for Terrorism and Financial Intelligence, Brian E. Nelson, met with the Banks Association of Turkey to discuss international sanctions actions against Russia for its war against Ukraine. Nelson highlighted global illicit finance challenges and stressed the importance of addressing weaknesses within the financial system “to root out financial crime, shine light on the financial shadows that illicit actors exploit, and work toward a more equitable and inclusive global economy.” Nelson commented on potential areas for cooperation between Turkish banks and the broader international finance community, pointing to opportunities for the U.S. and Turkey to work together to mitigate anti-money laundering vulnerabilities in the real estate sector. He also focused on Russia’s “abuse of the global financial system to fund” its war in Ukraine as a main factor in international cooperation for preventing Russia from circumventing sanctions and financial controls “in dozens of countries, including [Turkey].” While Nelson recognized Turkey’s reliance on Russian energy and agriculture, he said that “the marked rise over the past year in non-essential Turkish exports or re-exports to Russia makes the Turkish private sector particularly vulnerable to reputational and sanctions risks.” Engaging with sanctioned Russian entities puts Turkish banks and businesses “at risk of sanctions and a potential loss of access to G7 markets and correspondent relationships,” Nelson stressed, calling upon Turkish financial institutions to conduct “enhanced due diligence” in all transactions with Russian entities and individuals—especially within vulnerable sectors.

    Financial Crimes Of Interest to Non-US Persons OFAC OFAC Designations OFAC Sanctions Department of Treasury Russia Ukraine Ukraine Invasion Illicit Finance Anti-Money Laundering

  • OFAC, UK announce joint sanctions on Russia-based cybercrime gang

    Financial Crimes

    On February 9, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), in coordination with the UK, announced sanctions against seven individuals who allegedly are involved in a Russia-based cybercrime gang and are associated with the development or deployment of a range of ransomware strains designed to steal financial data. (See also UK’s announcement here.) The sanctions, taken pursuant to Executive Order (E.O.) 13694 as amended by E.O. 13757, represent the first sanctions of their kind for the UK, and come as a result of a partnership between OFAC and the U.K.’s Foreign, Commonwealth, and Development Office, the UK National Crime Agency, and His Majesty’s Treasury—all of which serve to disrupt Russian cybercrime and ransomware. “Cyber criminals, particularly those based in Russia, seek to attack critical infrastructure, target U.S. businesses, and exploit the international financial system,” Treasury Under Secretary Brian E. Nelson said in the announcement, stressing that “international cooperation is key to addressing Russian cybercrime.” Referring to an action taken by FinCEN last month, which identified a Russia-based virtual currency exchange “as a ‘primary money laundering concern’ in connection with Russian illicit finance” (covered by InfoBytes here), OFAC reiterated that the U.S. and UK are “committed to using all available authorities and tools to defend against cyber threats.” The designations follow other joint sanctions actions taken by the two countries and reflect findings that sanctions are most effective in coordination with international partners, OFAC said.

    As a result of the sanctions, all property and interests in property belonging to the sanctioned individuals that are in the U.S. or in the possession or control of U.S. persons are blocked and must be 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. Persons that engage in certain transactions with the designated individuals 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.”

    Financial Crimes Of Interest to Non-US Persons OFAC Department of Treasury OFAC Sanctions OFAC Designations SDN List UK Privacy, Cyber Risk & Data Security FinCEN Russia

  • OFAC sanctions 9 companies for involvement in Iranian petrochemicals and petroleum

    Financial Crimes

    On February 9, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Order 13846, against six Iran-based petrochemical manufacturers or their subsidiaries, as well as three firms located in Malaysia and Singapore, for their involvement in the sale and shipment of petroleum and petrochemicals on behalf of a previously designated company. According to the announcement, the designations follow sanctions imposed by OFAC last November against 13 companies in multiple jurisdictions for their involvement in the sale of Iranian petrochemicals and petroleum products to buyers in East Asia on behalf of sanctioned Iranian petrochemical brokers (covered by InfoBytes here). 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 individuals or entities designated today may themselves be exposed to sanctions or subject to enforcement. Additionally, OFAC warned that “any foreign financial institution that knowingly facilitates a significant transaction or provides significant financial services for any of the individuals designated today could be subject to U.S. sanctions.”

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

  • OFAC FAQ clarifies Russia-related investment prohibitions

    Financial Crimes

    On February 8, OFAC published Russia-related FAQ 1113 to clarify whether new investment prohibitions in Executive Order (E.O.) 14066, E.O. 14068, or E.O. 14071 prohibit U.S. persons, including U.S. financial institutions, from transferring securities issued by non-blocked Russian entities from a decedent’s estate to a beneficiary. OFAC explained that securities may be transferred “provided such transfers (i) are part of the ordinary course administration of the decedent’s estate, (ii) do not involve an exchange for value, and (iii) have no other sanctions nexus (including the involvement of blocked persons).” OFAC noted, however, that blocked securities in a decedent’s estate must remain blocked and that transferring blocked securities would require a specific license from OFAC.  

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

  • OFAC announces sanctions tied to Central America drug trafficking

    Financial Crimes

    On February 8, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Order 13581, against an individual based in Honduras and another individual based in Nicaragua for their involvement in drug trafficking, violence, murder, extortion, and money laundering. “Treasury’s sanctions against MS-13 aim to interrupt its use of the financial system to launder illicit proceeds,” 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 individuals 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 unless authorized by a general or specific license issued by OFAC, OFAC warned.

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

Pages

Upcoming Events