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U.S., UK collaborate on privacy-enhancing tech prize challenges
On June 13, the White House announced that the U.S. and UK governments are developing privacy-enhancing technology prize challenges to help address cross-border money laundering. The White House highlighted that the estimated $2 trillion of cross-border money laundering which happens annually could be better detected if improvements were made to information sharing and collaborative analytic efforts. However, research shows that this process “is hindered by the legal, technical and ethical challenges involved in jointly analyzing sensitive information,” the White House said. Privacy-enhancing technologies (PETs) could play a transformative role in addressing the global challenges of financial crime, the White House explained, noting that PETs can allow “machine learning models to be trained on high quality datasets collaboratively among organizations, without the data leaving safe environments.” Moreover, “[s]uch technologies have the potential to help facilitate privacy-preserving financial information sharing and analytics,” thus “allowing suspicious types of behavior to be identified without compromising the privacy of individuals, or requiring the transfer of data between institutions or across borders.”
Opening this summer, the challenges (developed between the White House Office of Science and Technology Policy, the U.S. National Institute of Standards and Technology, the U.S. National Science Foundation, the UK’s Center for Data Ethics and Innovation, and Innovate UK) will allow innovators to develop state-of-the-art privacy-preserving federated learning solutions to help combat barriers to the wider use of these technologies without the uncertainty of potential regulatory implications. Innovators will engage with the U.K.’s Financial Conduct Authority and Information Commissioner’s Office and the Financial Crimes Enforcement Network. Acting FinCEN Director Himamauli Das announced that the agency “is pleased to support this important initiative to advance the development of a building block for protecting the U.S. financial system from illicit finance.”
OFAC clarifies certain Russia-related prohibitions
On June 9, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced the publication of new Russia-related FAQs. Among other things, the FAQs provide information on the previously issued Determination Pursuant To Section 1(a)(ii) of E.O. 14071, which prohibits “the exportation, reexportation, sale, or supply, directly or indirectly, from the United States, or by a United States person, wherever located, of accounting, trust and corporate formation, or management consulting services to any person located in the Russian Federation” unless licensed or otherwise authorized by OFAC (covered by InfoBytes here). Specifically, FAQ 1063 explains that “[t]he prohibitions imposed by the determination do not distinguish between new and existing trusts and companies.” Additionally, FAQ 1067 provides that “[t]he determination does not prohibit U.S. persons from exporting, reexporting, selling, or supplying, directly or indirectly, software to the Russian Federation.”
OFAC issues Covid-related general licenses and FAQs
On June 10, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued Syria General License (GL) 21A, Venezuela GL 39A, and Iran GL N-1, “Authorizing Certain Activities to Respond to the Coronavirus Disease 2019 (COVID-19) Pandemic.” Each GL authorizes certain Covid-19-related transactions through June 17, 2023. Additionally, OFAC updated Frequently Asked Questions regarding the purposes of the GLs and provided clarifying information.
OFAC amends Cuban Assets Control Regulations
On June 8, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a final rule amending the Cuban Assets Control Regulations, and further implementing portions of President Biden’s foreign policy to increase support for Cuban people. Specifically, the final rule “authorizes group people-to-people educational travel to Cuba and removes certain restrictions on authorized academic educational activities, authorizes travel to attend or organize professional meetings or conferences in Cuba, removes the $1,000 quarterly limit on family remittances, and authorizes donative remittances to Cuba.” The final rule is effective June 9.
In conjunction with the announcement, OFAC published a number of new and updated Cuba-related frequently asked questions addressing, among other things, remittance transactions, travel activities, and authorized imports.
OFAC sanctions actors throughout the Western Balkans
On June 6, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against two prominent officials in Bosnia and Herzegovina. This is the third action taken under E.O. 14033. According to the Under Secretary of the Treasury for Terrorism and Financial Intelligence, the designated individuals “have each sought to pursue ethnonationalist and political agendas at the expense of the democratic institutions and citizens of Bosnia and Herzegovina.” As a result of the sanctions, all assets belonging to the designated 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 dealings involving any property or interests in property of the blocked or designated persons.
FinCEN issues ANPRM on no-action letter process
On June 3, FinCEN issued an Advance Notice of Proposed Rulemaking (ANPRM) soliciting comments on questions related to implementing a no-action letter process at the agency. The ANPRM is part of FinCEN’s implementation of the Anti-Money Laundering Act of 2020, which directed the agency to conduct an assessment of a no-action letter process concerning how anti-money laundering or countering the financing of terrorism laws may apply to specific conduct. The ANPRM follows FinCEN’s June 2021 report to Congress (covered by InfoBytes here), which concluded that the agency should undertake rulemaking to establish a process for issuing no-action letters that will supplement its current forms of regulatory guidance and relief. FinCEN noted in its announcement that the addition of a no-action letter process (“generally understood to be a form of enforcement discretion where an agency states by letter that it will not take an enforcement action against the submitting party for the specific conduct presented to the agency”) could overlap with and “affect other forms of regulatory guidance and relief that FinCEN already offers, including administrative rulings and exceptive or exemptive relief.” The agency is seeking public input on whether the process should be implemented and, if so, how the process should work. Included in the ANPRM are questions concerning, among other things, FinCEN jurisdiction (specifically “[w]hat is the value of establishing a FinCEN no-action letter process if other regulators with jurisdiction over the same entity do not issue a similar no-action letter”), whether there should be limitations on which factual circumstances could be considered, and whether the scope of a no-action letter should be limited so that requests may not be submitted during a Bank Secrecy Act examination. The ANPRM also asked questions related to changes in circumstances, revocations, denials and withdrawals, confidentiality and consultation concerns, and criteria for distinguishing no-action letters from administrative rulings or exceptive/exemptive relief.
Comments on the ANPRM are due August 5.
Terrorist Financing Targeting Center members designate financial facilitators of terrorism
On June 6, the U.S. Treasury Department announced that member nations of the Terrorist Financing Targeting Center (TFTC) have jointly designated 16 individuals, entities, and groups affiliated with a variety of regional terrorist organizations. This marks the fifth year of coordinated TFTC sanctions actions targeting terrorist financing, Treasury stated. The sanctioned persons, who were all previously designated by the U.S., include three individuals associated with Iran’s Islamic Revolutionary Guard Corps-Qods Force, four ISIS-associated individuals and one company, six Boko Haram financiers, and two terrorist groups. The TFTC was created to counter regional money laundering and terrorist financing networks by “identifying, tracking, and sharing information about terrorist financing networks; coordinating joint disruptive actions; and offering capacity-building training and assistance in countering the financing of terrorism,” and serves to enhance multilateral efforts among the U.S. and the Gulf countries of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates.
SEC enters $78 million FCPA settlement with steel pipe manufacturer
On June 6, the SEC announced that a Luxembourg-based manufacturer and supplier of steel pipe products agreed to pay over $78 million to settle the SEC’s claims that it violated the anti-bribery, books and records, and internal accounting controls provisions of the FCPA and the Exchange Act. The settlement is the latest in the long-running investigation regarding Brazilian state-owned and controlled energy company Petrobras, and resolves allegations that agents and employees of the company’s Brazilian subsidiary paid approximately $10.4 million in bribes between 2008 and 2013 to obtain over $1 billion in new contracts and to retain existing business from Petrobras. The bribes were allegedly funded on behalf of the company through entities associated with its controlling shareholder and paid to Brazilian government officials in exchange for using their influence to persuade Petrobras to forego an international tender process. The DOJ closed its parallel investigation without charges.
This is the second time the Luxembourg-based company has resolved FCPA charges with U.S. authorities, following 2011 resolutions with both the DOJ and SEC related to a state-owned entity in Uzbekistan. The company had been the first ever to enter into a Deferred Prosecution Agreement with the SEC.
The current resolution involves a $25 million monetary penalty, as well as $42.8 million in disgorgement and over $10 million in prejudgment interest. The company neither admitted nor denied the allegations.
OFAC sanctions individuals connected to Mexican cartels
On June 2, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 14059 against six individuals for engaging with a Mexico-based drug traffic organization. Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson stated that “[v]iolence and corruption have been critical to [the organization’s] growth in the past decade,” which has “fueled the cartel’s territorial expansion, and with it a greater capacity to traffic deadly drugs to the United States.” The sanctions are the result of a collaboration between Treasury, the Government of Mexico, and the U.S. Drug Enforcement Administration (DEA) with support from the U.S. Customs and Border Protection. As a result of the sanctions, the designated persons’ property located in the U.S. or held by U.S. persons is blocked and must be reported to OFAC. Additionally, OFAC regulations generally prohibit U.S. persons from participating in transactions with the designated persons.
OFAC sanctions additional networks used by Russian elites, issues new Russia-related General Licenses
On June 2, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced additional sanctions pursuant to Executive Orders (E.O.) 14024, 13685, and 13661, against key networks used by Russian elites, including President Putin, that target “a Kremlin-aligned yacht brokerage, several prominent Russian government officials, and a close Putin associate and money-manager [] who is a custodian of President Putin’s offshore wealth.” OFAC’s announcement also identified “yachts and aircraft in which sanctioned Russian elites maintain interests.” The designations were taken in tandem with the Department of State (which imposed sanctions on five Russian oligarchs and elites) as well as the Department of Commerce (which added 71 new parties located in Russia and Belarus to its Entity List, thus “further restricting the Russian military’s ability to obtain technologies and other items it needs to sustain aggression and project power”).
As a result of the sanctions, all property and interests in property belonging to the sanctioned persons in the U.S. 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.” OFAC noted that U.S. persons are prohibited from participating in transactions with the sanctioned persons unless authorized by a general or specific license.
On the same day, OFAC issued several new Russia-related general licenses (GL): (i) GL 25B authorizes transactions related to telecommunications and certain internet-based communications that are otherwise prohibited by Russian Harmful Foreign Activities Sanctions Regulations; (ii) GL 36 and GL 37 authorize the wind down of transactions normally prohibited by E.O. 14024 involving an identified public joint stock company and a gold mining company respectively; and (iii) GL 38 authorizes transactions related to pension payments to U.S. persons that are normally prohibited by E.O. 14024 “provided that the only involvement of blocked persons is the processing of funds by financial institutions blocked pursuant to E.O. 14024.” Additionally, OFAC issued several new and amended Russia-related frequently asked questions.