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OFAC sanctions BiH official and entity
On January 5, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, the first designations under Executive Order 14033, against an individual and one entity under that individual’s control in response to corrupt activities and ongoing threats to the stability and territorial integrity of Bosnia and Herzegovina (BiH). According to OFAC, the designated individual has used his official BiH position to accumulate personal wealth through graft, bribery, and other forms of corruption and has undermined BiH institutions by attempting to unilaterally transfer state competencies from the BiH government, among other things. As a result of the sanctions, all property and interests in property of the sanctioned individual subject to U.S. jurisdiction are blocked and must be reported to OFAC. OFAC noted that its regulations generally prohibit U.S. persons from participating in transactions with the designated person, which include “the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any blocked person or the receipt of any contribution or provision of funds, goods or services from any such person.”
OFAC settles with money services business for Cuba sanctions violations
On January 3, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $91,172 settlement against a registered money services business for allegedly processing payment transactions for guests traveling to Cuba "for reasons outside of OFAC’s authorized categories” and failing to maintain certain required records associated with Cuba-related transactions. These actions, OFAC, stated, allegedly violated the Cuban Assets Control Regulations (CACR). According to OFAC’s web notice, as the company scaled up its traveler services in Cuba, its technology platforms were allegedly unable to manage the associated sanctions risks, which led to the alleged violations. Among other things, OFAC maintained that the company used a manual process to screen hosts and guests for potential sanctions issues until it began using a customized IP blocking system. Additionally, the company’s alleged recordkeeping violations were primarily attributed to technical defects involving an older version of the company’s mobile application that could be used for Cuba-related travel without “maintain[ing] complete functionality for [g]uests to make an attestation regarding their reason for travel to Cuba.”
In arriving at the settlement amount, OFAC considered various aggravating factors, including, among other things, that the company is a large, sophisticated U.S.-based technology company, and that its alleged violations followed a 2015 foreign policy change with respect to Cuba, as well as associated changes to the CACR, which maintained certain specified restrictions. OFAC also considered various mitigating factors, including that the company (i) did not receive a penalty notice or finding of violation in the past five years preceding the earliest transaction giving rise to this settlement; (ii) conducted a comprehensive review of its sanctions compliance program, voluntarily reported its findings to OFAC, and substantially cooperated with the investigation; and (iii) undertook significant remedial measures to ensure sanctions compliance.
OFAC announces international terrorism sanctions
On December 22, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13224 against three members of a Brazil-based network of an international terrorist group and two connected entities for providing support to the terrorist group. According to OFAC, the terrorist group generates most of its revenue outside of the U.S., and the U.S. government has used financial tools to limit its funding streams globally, such as designating almost 300 individuals and entities affiliated with the terrorist group and other terrorist organizations throughout Afghanistan, Pakistan, the Gulf, Africa, and other regions. As a result, all property and interests in property belonging to the designated individual subject to U.S. jurisdiction are blocked, and 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 report to OFAC.” U.S. persons are generally prohibited from engaging in transactions with the designated individual unless authorized by a general or specific OFAC license or otherwise exempt. OFAC warned that the agency “can prohibit or impose strict conditions on the opening or maintaining in the United State[s] of a correspondent account or a payable-through account by a foreign financial institution that either knowingly conducted or facilitated any significant transaction on behalf of a Specially Designated Global Terrorist.” OFAC further noted that that engaging in certain transactions with the designated individual “entails risk of secondary sanctions pursuant to E.O. 13224, as amended.”
OFAC settles with bank for alleged NKSR and Foreign Narcotics Kingpin Sanctions Regulations violations
On December 23, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a roughly $115,005 settlement of two cases with a Delaware-based bank for allegedly processing transactions in violation of the North Korea Sanctions Regulations (NKSR) and the Foreign Narcotics Kingpin Sanctions Regulations. According to OFAC’s web notice, in the first matter, between December 2016 and August 2018, the bank processed 1,479 transactions totaling $382,685, and maintained nine accounts on behalf of five employees of the North Korean Mission to the United Nations without a license from OFAC. Additionally, the bank allegedly often misidentified North Korea or did not properly complete the citizenship field in the customer profiles, which resulted in failing to flag the accounts. The web notice explained that “[u]nder the [NKSR], a general license authorizing certain transactions with the North Korean Mission to the United Nations specifies that it does not authorize U.S. financial institutions to open and operate accounts for employees of the North Korean mission. It further specifies that U.S. financial institutions are required to obtain OFAC specific licenses to operate accounts for such persons.” According to the web notice, since the bank did not obtain a specific license to offer these services, its conduct resulted in apparent violations.
In arriving at the settlement amount of $105,238, OFAC considered various aggravating factors, including, among other things, that the bank (i) failed to use due caution or care in processing the 1,479 transactions, which was in violation of the NKSR for over a year; (ii) “had reason to know that it maintained accounts for North Korean nationals because at account opening, the account holders of all nine accounts presented to [the bank] North Korean passports”; and (iii) “is a large and commercially sophisticated financial institution with a global presence.” OFAC also considered various mitigating factors, including, among other things, that the bank (i) “enhanced its controls for identifying government officials of sanctioned countries”; and (ii) “updated its operating procedures to specify that reviews of customers in or affiliated with sanctioned jurisdictions must be escalated.”
In the second matter, according to the web notice, the bank allegedly maintained accounts for a U.S. resident who was on OFAC’s SDN List. The bank did not block the account and disclose to OFAC until after the fifth high-confidence sanctions screening alert was generated because the previous alerts had a “match on full name DOB and geographical location.” The bank’s fraud unit, unaware of the sanctions-related reason for account closure, then credited one of the individual’s accounts, which caused it to be re-opened. The notice reported that the failure to correctly identify the individual as a person on the SDN List was the result of human error and a breakdown in the bank’s sanctions compliance procedures. Further, “[i]n addition to incorrectly dispositioning these alerts, [the bank’s] analysts contravened [the bank’s] procedures which require alerts to be escalated if a match occurs in first and last name and any additional information field.” Such conduct resulted in 145 apparent violations of the Foreign Narcotics Kingpin Sanctions Regulations.
In arriving at the settlement amount of $9,766, OFAC considered various aggravating factors, including, among other things, that the bank (i) “failed to exercise due caution or care for U.S. economic sanctions requirements by incorrectly adjudicating high-confidence sanctions screening alerts four times over four years, despite full date-of-birth and first and last name matches”; (ii) permitted $35,514.13 in transactions by an individual on the SDN List; and (iii) “is a large and sophisticated financial institution with a global presence.” OFAC also considered various mitigating factors, including, among other things, that the bank did not appear to have had actual knowledge of the conduct that led to the apparent violations, and represented that it has terminated this conduct and has undertaken remedial measures.
OFAC sanctions Chinese tech firms
On December 16, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) added eight Chinese companies to OFAC’s Non-SDN Chinese Military-Industrial Complex Companies sanctions list. The eight Chinese technology firms were identified by OFAC pursuant to E.O. 13959, as expanded by E.O. 14032, for “actively support[ing] the biometric surveillance and tracking of ethnic and religious minorities in China.” As previously covered by InfoBytes, last month President Biden extended, for one year, the national emergency declared pursuant to E.O. 13959, as expanded by E.O. 14032, involving securities investments related to Non-SDN Chinese Military-Industrial Complex Companies. Among other things, E.O. 14032 generally prohibits U.S. persons from “the purchase or sale of any publicly traded securities, or any securities that are derivative of such securities, or are designed to provide investment exposure to such securities, of” any such companies.
Additionally, the U.S. Commerce Department’s Bureau of Industry and Security issued a final rule, amending the Export Administration Regulations through the addition of 37 new foreign entities to the Entity List after determining the entities have engaged in activities that are “contrary to the foreign policy or national security interests of the United States.” According to OFAC’s announcement, these 37 entities “include 25 PRC entities that contribute to Beijing’s efforts to develop and deploy biotechnology and other technologies for military applications and human rights abuses, including four entities previously identified in E.O. 13959, as amended.”
OFAC sanctions Central African Republic leader
On December 17, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) added a leader of a Central African Republic based militia group to OFAC’s SDN sanctions list. According to OFAC, the militia group leader was identified pursuant to E.O. 13667 for serious human rights abuses. The sanctioned individual is a leader of an entity that has engaged in the targeting of women, children, or any civilians through the commission of acts of violence, among other things, that would constitute a serious abuse or violation of human rights or a violation of international humanitarian law. As a result of the sanction, all property and interests in property of the designated individual generally must be blocked and reported to OFAC. OFAC also noted that its regulations generally prohibit all dealings by U.S. persons that involve any property or interests in property of designated persons.
U.S.-UK financial regulators discuss bilateral issues
On December 17, the U.S. Treasury Department issued a joint statement covering the recently held fifth meeting of the U.S.-UK Financial Regulatory Working Group (Working Group). Participants included officials and senior staff from both countries’ treasury departments, as well as regulatory agencies including the Federal Reserve Board, CFTC, FDIC, OCC, SEC, the Bank of England, and the Financial Conduct Authority. The Working Group discussed, among other things, (i) international and bilateral cooperation; (ii) “emerging regulatory approaches and the need to promote multilateral cooperation and alignment given that a number of third-party providers operate cross-border to provide services to the financial sector and there are potential risks of regulatory fragmentation”; (iii) “risks associated with regulatory driven fragmentation in derivatives clearing and banking markets”; (iv) “efforts in relation to the LIBOR transition, market developments, the risks associated with newly created credit-sensitive rates, and transition implications for other jurisdictions;” and (v) the management of climate-related financial risks and other sustainable finance issues. According to the statement, Working Group participants will continue to engage bilaterally on these issues and others ahead of the next meeting planned for this spring.
FinCEN says wildlife trafficking threatens financial system integrity
On December 20, the Financial Crimes Enforcement Network (FinCEN) issued a Financial Threat Analysis concerning suspicious activity reports (SARs) related to wildlife trafficking trend information identified in Bank Secrecy Act (BSA) data. FinCEN identified wildlife trafficking as a major transnational organized crime involving “the illicit trade of protected animals, animal parts, and derivatives thereof, including procurement, transport, and distribution, in violation of international or domestic law, and money laundering related to this activity.” The proceeds related to wildlife trafficking is estimated to be between $7 and $23 billion annually. According to FinCEN, traffickers damage the integrity of the financial system. FinCEN also stated that financial institutions play a critical role in “identifying wildlife trafficking and protecting the U.S. financial system from associated illicit finance through compliance with their BSA obligations.”
FinCEN stated that the issues with wildlife trafficking are: “(1) its strong association with corruption and transnational criminal organizations, two of FinCEN’s national anti-money laundering and countering the financing of terrorism priorities published in June 2021; (2) a need to enhance reporting and analysis of related illicit financial flows; and, (3) wildlife trafficking’s contribution to biodiversity loss, damage to fragile ecosystems, and the increased likelihood of spreading of zoonotic diseases.”
Biden issues executive order expanding Treasury sanction authority; OFAC issues sanctions pursuant to the Kingpin Act
On December 15, President Biden issued an Executive Order (E.O.), “Imposing Sanctions on Foreign Persons Involved in the Global Illicit Drug Trade.” The E.O. was issued due to the threat of drug trafficking into the U.S of illicit drugs, which “is causing the deaths of tens of thousands of Americans annually, as well as countless more non-fatal overdoses with their own tragic human toll.” Among other provisions, the E.O authorizes the Department of Treasury to impose certain sanctions on any foreign person determined by the Secretary of the Treasury, in consultation with the Secretary of State, the Attorney General, and the Secretary of Homeland Security to have engaged in activities contributing to the international proliferation of drugs or to have knowingly received property derived from drug proliferation.
According to an announcement issued by Treasury, the E.O provides “the Treasury Department with new tools to tackle changes in the global illicit drug trade that substantially contributed to over 100,000 American overdose deaths in the 12-month period ending in April 2021.” Among other things, the E.O. “enhances the Department of Treasury’s authorities to target any foreign person engaged in drug trafficking activities, regardless of whether they are linked to a specific kingpin or cartel” and “enables Treasury to sanction foreign persons who knowingly receive property that constitutes, or is derived from, proceeds of illicit drug trafficking activities.” Under the E.O., Treasury’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to the Foreign Narcotics Kingpin Designation Act against 10 individuals and 15 entities in 4 countries “for having engaged in, or attempted to engage 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.”
Counter ISIS Finance Group continues efforts to isolate ISIS from international financial system
On December 14, the U.S. Treasury Department announced the release of a joint statement by the Counter ISIS Finance Group (CIFG) of the Global Coalition to Defeat ISIS, which coordinates efforts to isolate the Islamic State of Iraq and Syria (ISIS) from the international financial system and eliminate revenue sources. CIFG held its fifteenth meeting on December 6-7 to discuss ongoing efforts to combat ISIS financing worldwide. According to the statement, the “Coalition is deepening and expanding cooperation to identify and disrupt ISIS finance networks around the world, while taking steps to strengthen oversight of financial systems and non-profit sectors in vulnerable jurisdictions to prevent their abuse by terrorist groups and their supporters.” During the meeting, participants discussed ISIS financing in Africa, the Middle East, and South Asia, as well as recent judicial and administrative enforcement actions. CIFG noted that while ISIS continues to rely on the use of informal money service businesses (e.g., cash couriers and charitable appeals made through internet platforms) to move funds across borders, authorities in several key countries have coordinated measures to disrupt these activities. CIFG noted that local virtual asset service providers’ compliance with anti-money laundering and countering the financing of terrorism standards have helped as well. CIFG further stressed the importance of “ongoing vigilance” to prevent ISIS’ abuse of non-profit organizations, and “encourage[d] counterterrorism partners to share their knowledge and experiences to strengthen our fight against ISIS financing and defend the international financial system from abuse by terrorists.”