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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.”
OFAC issues counter terrorism general license and related FAQs for Afghanistan
On December 10, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued Counter Terrorism General License 16 – Authorizing Noncommercial, Personal Remittances to Afghanistan. Under GL 16, “all transactions involving the Taliban or the Haqqani Network, or any entity in which the Taliban or the Haqqani Network owns, directly or indirectly, individually or in the aggregate, a 50 percent or greater interest,” that would otherwise be prohibited by the Global Terrorism Sanctions Regulations, the Foreign Terrorist Organizations Sanctions Regulations, or amended Executive Order 13224, that are “ordinarily incident and necessary to the transfer of noncommercial, personal remittances to Afghanistan, including through Afghan depository institutions, are authorized.” GL 16 does not, however, authorize (i) financial transfers to identified blocked persons (except for when executing the payment of certain taxes, fees, or other duties); (ii) “[a]ny debit to an account on the books of a U.S. financial institution of any blocked person” described within GL 16; or (iii) any transactions or activities otherwise prohibited by the aforementioned sanctions regulations and executive order. Additionally, OFAC published related amended FAQ 931 and new FAQ 949.
OFAC announces human rights abuse sanctions
On December 10, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13818 against 15 individuals and 10 entities under the Global Magnitsky Human Rights Accountability Act. According to OFAC, the sanctioned individuals and entities are connected to human rights abuse and repression in several countries. The same day, OFAC announced that it imposed investment restrictions on one company in connection with the surveillance technology sector of the People’s Republic of China’s economy, highlighting the human rights abuses allowed through technology. OFAC also noted that the actions are taken on International Human Rights Day, which marks the day the United Nations General Assembly adopted the Universal Declaration of Human Rights in 1948.
As a result of the sanctions, all property and interests in property belonging to the sanctioned entities 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.” OFAC noted that its regulations generally prohibit U.S. persons from participating in transactions with these persons, 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 sanctions corruption networks connected to transnational organized crime
On December 8, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against 16 individuals and 24 entities across several countries in Europe and the Western Hemisphere under the Global Magnitsky Human Rights Accountability Act, which “targets perpetrators of corruption and serious human rights abuse.” These designations follow actions announced last week targeting corruption in the Democratic Republic of Congo as well as persons that contribute to repression and the undermining of democracy around the world (covered by InfoBytes here and here). OFAC also highlighted the recently released United States Strategy on Countering Corruption, which outlines a whole-of-government approach to elevating the fight against corruption, and places particular “emphasis on the transnational dimensions of the challenges posed by corruption, including by recognizing the ways in which corrupt actors have used the U.S. financial system and other rule-of-law based systems to launder their ill-gotten gains.” (Covered by InfoBytes here.) Organized crime and corruption, which are often linked, OFAC warned, undermine the integrity of the international financial system.
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.” OFAC noted that U.S. persons are prohibited from participating in transactions with these persons, which includes “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 sanctions persons linked to Democratic Republic of Congo
On December 6, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13818 against an individual and 12 associated entities in the Democratic Republic of the Congo and Gibraltar under the Global Magnitsky Human Rights Accountability Act. All of the designated persons have allegedly provided support for a previously sanctioned billionaire, OFAC stated, adding that these measures build upon Treasury’s commitment to “supporting the Democratic Republic of the Congo’s anti-corruption efforts by going after those that abuse the political system for economic gain and unfairly profit from the Congolese state.” As a result of the sanctions, all property and interests in property belonging to the sanctioned persons, and “any entities that are owned, directly or indirectly, 50 percent or more” by them that are 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 these individual and entities unless authorized by a general or specific license. This includes “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 and State Dept. announce additional corruption, human rights abuse sanctions
On December 9, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13818 targeting 15 individuals and entities connected to corruption and serious human rights abuse in several countries across Central America, Africa, and Europe under the Global Magnitsky Human Rights Accountability Act. OFAC noted that the designations were announced on International Anti-Corruption Day to “reinforce the priority placed upon curbing corruption through strategic and regulatory action at the Summit for Democracy.” As a result of the sanctions, all property and interests in property belonging to the sanctioned entities 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.” OFAC noted that its regulations generally prohibit U.S. persons from participating in transactions with these persons, 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.” In a complementary action, the U.S. Department of State also announced visa restrictions under Section 7031(c) of the Department of State, Foreign Operations, and Related Programs Appropriations Act, which targeted several corrupt officials and their immediate family members, making them ineligible to enter the U.S.
FINRA fines financial firms $2.25 million for alleged improper storage of customer data
On December 6, the Financial Industry Regulatory Authority (FINRA) entered into a Letter of Acceptance, Waiver, and Consent (AWC), which requires two units of a national bank (respondents) to jointly and severally pay a $2.25 million fine for allegedly failing to store customer information in the format required under federal securities regulations, and then taking three years to report the issue after it was discovered. According to FINRA, in 2016, the agency found that the respondents allegedly violated various books and records retention requirements and related supervisory rules when maintaining approximately one million electronic brokerage records. In 2017, the respondents certified that they “had ‘adopted and implemented policies and procedures reasonably designed to achieve compliance with the applicable federal securities laws and FINRA rules’ addressed in the December 2016 AWC.” However, FINRA claimed that from 2003 to August 2020, the respondents allegedly failed to properly store roughly 13 million records related to their customer identification program (CIP) in the required “write once, read many” format (known as “WORM”). This “non-rewritable, non-erasable” format required under federal securities regulations is intended to prevent the alteration or destruction of customer identification information, FINRA explained. The respondents conducted an internal review in 2020, which concluded that the respondents were storing CIP records on a non-WORM compliant system. However, the respondents self-reported the issue to FINRA in April 2020 and migrated the relevant records to a WORM-compliant system by August 2020. The respondents did not admit nor deny the findings as part of the AWC, but have agreed to a censure and will pay the fine.
OFAC reaches $133,860 settlement in Iranian sanctions matter
On December 8, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $133,860 settlement against an individual for allegedly facilitating four payments on behalf of an Iranian company using a personal bank account in the U.S., in violation of the Iranian Transactions and Sanctions Regulations (ITSR), 31. C.F.R. part 560. According to OFAC’s web notice, between February 2016 and March 2016, the individual accepted $133,860 in the U.S., which went to a personal bank account, on behalf of an Iran-based company selling Iranian-origin cement to another company for a project in a third country.
In arriving at the settlement amount, OFAC considered various aggravating factors, including, among other things, that the individual: (i) willfully was in violation of or recklessly ignored U.S. sanctions on Iran when receiving payments on behalf of an Iranian company; (ii) was aware of, and actively participated in, the violations; and (iii) “harmed the objectives of the ITSR by enabling the evasion of sanctions by an Iranian company.” OFAC also considered various mitigating factors, including that the individual did not receive a penalty notice, finding of violation, or cautionary letter from OFAC in the past five years, and is a natural person with a limited ability to pay.
FinCEN issues NPRM on beneficial ownership
On December 7, FinCEN issued a notice of proposed rulemaking (NPRM) implementing the beneficial ownership information reporting provisions of the Corporate Transparency Act (CTA). As previously covered by InfoBytes, the CTA is included within the Anti-Money Laundering Act of 2021, which was enacted in January as part of the National Defense Authorization Act for Fiscal Year 2021. The proposed rule implements the reporting requirements under the CTA and “reflects FinCEN’s careful consideration of public comments received in response to its April advance notice of proposed rulemaking on the same topic.” (Covered by InfoBytes here.) Among other things, the NPRM addresses who must report beneficial ownership information, when to report it, and what information they must provide. According to FinCEN, gathering “this information and providing access to law enforcement, financial institutions, and other authorized users will diminish the ability of malign actors to hide, move, and enjoy the proceeds of illicit activities.” Treasury Deputy Secretary Wally Adeyemo released a statement noting that Treasury, through the public comments gathered from the NPRM, intends to “develop a regulatory approach that will safeguard the integrity of our markets and root out corruption in American real estate.” The comment period ends 60 days after publication in the Federal Register.