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OFAC sanctions Iranian entities for petrochemicals and petroleum sales
On September 26, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13846 against an international network of companies involved in the sale of Iranian petrochemicals and petroleum products in South and East Asia. According to OFAC, the designations target Iranian brokers and several front companies in the UAE, Hong Kong, and India that have facilitated financial transfers and shipping of Iranian petroleum and petrochemical products. OFAC also noted that the sanctioned entities have played a critical role in concealing the origin of the Iranian shipments and enabling two sanctioned Iranian brokers to transfer funds and ship Iranian petroleum and petrochemicals to buyers in Asia. In addition to OFAC’s designations, the State Department is designating two entities based in the People’s Republic of China for their involvement in Iran’s petrochemical trade. 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 unless authorized by an OFAC general or specific license. Persons that engage in certain transactions with the individuals or entities designated today may themselves be exposed to designation. Additionally, OFAC warned that “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.”
SEC fines tech company $23 million for FCPA violations
On September 27, the SEC announced that a multinational information technology company headquartered in Texas (the “Company”) agreed to pay over $23 million to settle claims that its agents and employees of its subsidiaries in Turkey, the United Arab Emirates (UAE), and India violated the anti-bribery, books and records, and internal accounting controls provisions of the FCPA. According to the SEC’s order, from at least 2014 through 2019, several subsidiary employees used discount schemes and false marketing reimbursement payments to create slush funds used to bribe foreign officials in exchange for business. The slush funds were also used to provide other benefits, including paying for foreign officials and their families to attend technology conferences around the world and trips to the U.S. The SEC explained that first-level supervisors at the subsidiaries could approve purchase orders under $5,000 without evidence that marketing activity actually took place. By exploiting this loophole in the company’s controls, employees of the Company’s subsidiaries in Turkey, the UAE, and India were able to funnel money into the slush funds undetected. Employees of the Turkish subsidiary allegedly used the funds to bribe government officials and pay for the travel and accommodation expenses of customers, including foreign officials, the SEC claimed. Employees of the UAE subsidiary allegedly used the funds to pay $130,000 in bribes to government officials in exchange for six contracts. Employees in India also allegedly engaged in a similar scheme, with one employee claiming that the Company would lose out on a deal if the Indian Ministry of Railways was not provided a 70 percent software discount. According to the SEC, the Ministry’s procurement website showed that the Indian subsidiary faced no competition because the Ministry required the use of the Company’s products for the project.
The resolution requires the Company to pay a $15 million civil money penalty, $7,114,376 million in disgorgement, and $791,040 in prejudgment interest. The Company neither admitted nor denied the allegations.
This is the second time the Company has resolved FCPA charges with the SEC. In 2012, the Company paid a $2 million penalty to settle allegations that it violated the anti-bribery, books and records, and internal accounting controls provisions of the FCPA when it allegedly failed to prevent an India subsidiary from maintaining unauthorized side funds at distributors.
FinCEN releases final rule on beneficial ownership reporting
On September 29, FinCEN issued a final rule establishing a beneficial ownership information reporting requirement, pursuant to the bipartisan Corporate Transparency Act. According to FinCEN, the final rule will require most corporations, limited liability companies, and other entities created in or registered to do business in the U.S. to report information about their beneficial owners to FinCEN. FinCEN noted that the final rule is designed to protect national security and strengthen the integrity and transparency of the U.S. financial system. FinCEN also released a Fact Sheet clarifying the final rule. The final rule is effective January 1, 2024. Reporting companies created or registered before January 1, 2024, will have until January 1, 2025, to file their initial reports, while reporting companies created or registered after January 1, 2024, will have 30 days after creation or registration to file their initial reports. Once the initial report has been filed, both existing and new reporting companies will have to file updates within 30 days of a change in their beneficial ownership information, according to FinCEN. The same day, Treasury Secretary Janet L. Yellen released a statement, noting that the final rule is “a major step forward in giving law enforcement, national security agencies, and other partners the information they need to crack down on criminals, corrupt individuals, and other bad actors who seek to take advantage of America’s financial system for illicit purposes.”
OFAC publishes Cuba FAQ
On September 26, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) published frequently asked question (FAQ) 1090 related to Cuba sanctions. The FAQ clarifies that “U.S. persons send remittances to Cuba using digital payments,” and that OFAC’s general licenses are self-executing, meaning that if U.S. persons assess that their transactions fall within the scope of the authorizations, “they may execute such transactions without further assurance from OFAC. For transactions that do not fall within the scope of these authorizations, U.S. persons may apply for an OFAC specific license.” OFAC further noted that it “will prioritize specific license applications seeking authorization to enable remittances to flow more freely to the Cuban people via digital payments.”
OFAC reports on licensing activities
On September 27, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced its Quarterly Reports of Licensing Activities pursuant to Section 906(b) of the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA), covering activities undertaken by OFAC under Section 906(a)(1) of the TSRA from April 2019 through September 2021. According to OFAC, as required by TSRA-related regulations, OFAC processes license applications requesting authorization to export agricultural commodities, medicine, and medical devices to Iran and Sudan under the specific licensing regime set forth in Section 906 of the TSRA.
OFAC sanctions state prosecutor in Bosnia and Herzegovina
On September 26, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 14033 against a state prosecutor in Bosnia and Herzegovina. According to OFAC, the individual has played a central role in enabling corruption and has been designated for being “responsible for or complicit in, or having directly or indirectly engaged in, actions or policies that undermine democratic processes or institutions in the Western Balkans.” 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. 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 an OFAC general or specific license. U.S. persons who violate these prohibitions may face civil or criminal penalties.
OFAC settles with banks for multiple sanctions violations
On September 26, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $720,258 settlement with an indirect subsidiary of a Switzerland-based bank for allegedly processing transactions in violation of the Cuba, Ukraine-related, Iran, Sudan, and Syria sanctions programs. According to OFAC’s web notice, from April 2013 to April 2016, the bank processed 273 transactions totaling approximately $3,076,180 on behalf of individuals residing in Cuba, Crimea, Iran, Sudan, and Syria. Specifically, OFAC noted that customers in sanctioned jurisdictions were able to continue to purchase and sell securities through the U.S. financial system and to receive related dividend and interest payments until the bank took further steps to prevent such payments.
In arriving at the settlement amount of $720,258, OFAC considered various aggravating factors, including that bank personnel “had reason to know they were processing transactions through the U.S. financial system for individual customers located in comprehensively sanctioned jurisdictions based on the underlying [know-your-customer (KYC)] data obtained by [the bank], which included address information indicating the customers’ location,” and “conferred approximately $3,076,180 in economic benefit to persons in Cuba, Crimea, Iran, Sudan, and Syria,” which caused harm to multiple sanctions programs' integrity. OFAC also considered various mitigating factors, including that the bank cooperated with OFAC throughout the investigation, and has undertaken remedial measures intended to minimize the risk of recurrence of similar conduct.
Separately, the same day OFAC announced a $401,039 settlement with a different indirect subsidiary of the Switzerland-based bank for allegedly processing transactions in violation of the Cuba, Ukraine-related, Iran, Sudan, and Syria sanctions programs. According to OFAC’s web notice, from December 2011 until July 2016, the bank processed 426 transactions totaling approximately $1,233,967 on behalf of individuals ordinarily resident in Cuba, Iran, and Syria.
In arriving at the settlement amount of $401,039, OFAC considered various aggravating factors, including that bank personnel “had reason to know they were processing transactions through the U.S. financial system for individual customers located in comprehensively sanctioned jurisdictions based on the underlying KYC data [the bank had] obtained,” and the bank “conferred approximately $1,233,967 in economic benefit to persons in Cuba, Iran, and Syria,” which caused harm to multiple sanctions programs' integrity. OFAC also considered various mitigating factors, including that the bank cooperated with OFAC throughout the investigation, and has undertaken remedial measures intended to minimize the risk of recurrence of similar conduct.
OFAC issues Iran GL and related FAQs
On September 23, the U.S. Treasury Department issued Iran General License D-2, General License with Respect to Certain Services, Software, and Hardware Incident to Communications General License (GL), to add further authorizing guidance in line with changes in modern technology since the issuance of Iran GL D-1. According to Treasury, the Iranian government cut off Internet access for most of its citizens to prevent the viewing of its violent crackdown on peaceful protestors, provoked by the death of an individual in the custody of Iran’s Morality Police. Treasury further noted that the U.S. supports “the free flow of information and access to fact-based information to the Iranian people.” Highlights of the extended GL includes, among other things: (i) additional covered categories of software/services; (ii) additional authorization for the services that support the communication tools to assist ordinary Iranians in resisting repressive internet censorship and surveillance tools deployed by the Iranian regime; and (iii) the continued authorization of anti-virus and anti-malware software, anti-tracking software, mobile operating systems and related software, and anti-censorship tools and related software. The GL is effective immediately. The same day, Treasury published three frequently asked questions, which clarify GL D-2 and other information on Iran sanctions.
OFAC sanctions Iran’s Morality Police and senior security officials for human rights violence
On September 22, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13553 against Iran’s Morality Police along with seven senior leaders who oversee Iran’s security organizations. These designations were taken in response to recent abuse and violence against Iranian women and violence against peaceful protestors and members of Iranian civil society, among others. “Today’s action to sanction Iran’s Morality Police and senior Iranian security officials responsible for this oppression demonstrates the Biden - Harris Administration’s clear commitment to stand up for human rights, and the rights of women, in Iran and globally,” Secretary of the Treasury Janet Yellen said.
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 must be blocked and reported to OFAC. U.S. persons are also prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons, and “persons that engage in certain transactions with the individuals or entities designated today may themselves be exposed to designation,” OFAC said. Additionally, OFAC warned that “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.”
Treasury official discusses U.S. efforts in response to Russian invasion of Ukraine
On September 20, Assistant Secretary for Terrorist Financing and Financial Crimes Elizabeth Rosenberg delivered prepared remarks before a Senate Committee on Banking, Housing, and Urban Affairs hearing, in which she provided an overview of recent efforts taken by the U.S. Treasury Department to hold Russia accountable for its invasion of Ukraine. Rosenberg explained that these measures are intended to “squeeze Russia’s access to finance and technology for strategic sectors of its economy and degrade its industrial capacity for years to come” and highlighted sanctions imposed against hundreds of Russian individuals and entities, including Russia’s largest financial institutions and key nodes in the country’s military-industrial supply chains, to cut them off from the U.S. financial system. She noted that Treasury has also implemented restrictions on dealings in Russian sovereign debt and has “prohibited economic dealings with the so-called Donetsk People’s Republic and Luhansk People’s Republic regions of Ukraine” as well as new investments in the Russian Federation. Rosenberg added that Treasury has “also imposed prohibitions on importing certain commodities from Russia into the United States, including oil and natural gas, and similarly imposed prohibitions on exporting certain items like luxury goods and dollar-denominated banknotes.” Additionally, Rosenberg discussed international efforts, including “implementing the largest sanctions regime in modern history[,]” and working with allies to facilitate information sharing, law enforcement data, and relevant financial records. She emphasized that “Treasury has mounted an aggressive campaign to close the global financial policy and regulatory loopholes across jurisdictions that Russian aiders and abettors of this war, and other criminals, use to perpetuate their illicit activity[,]” and stated that Treasury remains focused on denying funds to Russia through its oil exports.
Find continuing InfoBytes coverage on the U.S. sanctions response to Russia’s invasion of Ukraine here.