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President Biden extends national emergency prohibiting securities investments in Chinese military companies
On November 9, President Biden issued a notice, extending for one year, the national emergency declared pursuant to Executive Order (E.O.) 13959, as expanded by E.O. 14032, involving securities investments related to Chinese military companies. As previously covered by InfoBytes, 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 listed Chinese military company. The E.O. also establishes deadlines for divestment of investments in companies currently listed as Chinese military companies as well as companies that later may be added to the list of Chinese military. Among other things, E.O. 14032 also prohibits any transactions by U.S. persons or within the U.S. that evade or avoid, have the purpose of evading or avoiding, cause a violation of, or attempt to violate the provisions set forth in the order, as well as any conspiracy to violate any of these prohibitions.
In continuing the national emergency underlying these actions and extending E.O. 14032, Biden stated the “threat from securities investments that finance certain companies of the [People’s Republic of China] and certain uses and development of Chinese surveillance technology continue to pose an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States.”
OFAC issues Cambodia advisory; sanctions Cambodian officials
On November 10, OFAC published a Cambodia Business Advisory on High-Risk Investments and Interactions, which addresses two primary areas of risk exposure for U.S. companies: (i) illicit finance activities in Cambodia and related risks for certain sectors; and (ii) involvement with Cambodian entities connected to trafficking in persons, wildlife, and narcotics trafficking in Cambodia and associated risks for certain sectors.
The same day, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13818 against two Cambodian government officials under the Global Magnitsky Human Rights Accountability Act. According to OFAC, the sanctioned individuals, among other things, allegedly conspired to inflate the cost of facilities at a Cambodian naval base and personally benefit from the proceeds.
UAE bank fined $100 million for Sudanese sanctions violations
On November 9, NYDFS announced that a United Arab Emirates bank will pay a $100 million penalty to resolve an investigation into payments it allegedly processed through financial institutions in the state, including one of the bank’s New York branches. These transactions, NYDFS stated, were in violation of Sudan-related U.S. sanctions. According to NYDFS’ investigation, the bank instructed employees to avoid including certain details in messages sent between banks that would have linked the transactions to Sudan. By concealing these details, the transactions bypassed other banks’ sanctions filters, which otherwise might have triggered alerts or transaction freezes, NYDFS said. As a result, between 2005 and 2009, the bank illegally processed more than $4 billion of payments tied to Sudan. Following an announcement in 2009 that a Swiss bank used by the bank to process these transactions was being investigated by the New York County District Attorney’s Office for violating economic sanctions rules, the bank closed all U.S. dollar accounts held by Sudanese banks, but failed to disclose the prohibited transactions to NYDFS as required until 2015. NYDFS asserted that “despite having ample notice of the prohibited nature of the Sudan-related [transactions] by 2009,” the bank’s New York branch processed an additional $2.5 million in Sudan-related payments. Under the terms of the consent order, the bank—which was previously cited by NYDFS for anti-money laundering and sanctions compliance deficiencies in a 2018 consent order that included a $40 million fine—is also required to provide a status report on its U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) compliance program, in addition to paying the $100 million penalty. NYDFS acknowledged the bank’s substantial cooperation and ongoing remedial efforts.
NYDFS coordinated its investigation with the Federal Reserve Board and OFAC, both of which announced separate settlements with the UAE bank the same day. The Fed’s announcement of its order to cease and desist cites the bank for having insufficient policies and procedures in place to ensure that activities involving branches outside the U.S. were in compliance with U.S. sanctions laws. Under the terms of the order, the bank is required, among other things, to implement an enhanced compliance program to ensure global compliance with U.S. sanctions, and must also conduct annual reviews, including a “risk-focused sampling” of its U.S. dollar payments, led by an independent external party. The order did not include any additional monetary penalties for the bank.
OFAC also issued a finding of violation (FOV) for violations of the now-repealed Sudanese Sanctions Regulations related to the bank’s actions. These violations included 1,760 transactions that involved USD transfers from Sudanese banks that were processed by the bank’s London branch and routed through U.S. banks. In determining that the appropriate administrative action was an FOV rather than a civil monetary penalty, OFAC stated the bank “voluntarily entered into a retroactive statute of limitations waiver agreement, without which OFAC would have been time-barred from charging the violations.” Because the payment messages did not include the originating Sudanese bank, U.S. correspondent banking partners “could not interdict the payments, and the payments were successfully processed through the U.S. financial system,” OFAC stated. However, OFAC credited the bank with providing substantial cooperation during the investigation, and noted that the bank had taken “extensive remediation” efforts before the investigation began in 2015, and has spent more than $122 million on compliance enhancements.
FinCEN hosts exchange on SAR reporting
On November 9, the Financial Crimes Enforcement Network (FinCEN) held a virtual “FinCEN Exchange” with members of the financial industry and law enforcement “to discuss FinCEN’s analysis of suspicious activity reporting (SAR) with a transactional nexus to Alabama, Florida, Georgia, Mississippi, and South Carolina.” As previously covered by InfoBytes, SAR Stats—formerly called By the Numbers—is an annual compilation of numerical data gathered from SARs filed by financial institutions using FinCEN’s new unified SAR form and e-filing process. According to FinCEN, analysis of certain Bank Secrecy Act filing statistics for SARs and an analysis of SAR filings related to recent FinCEN advisories were among the topics discussed. FinCEN also noted that this FinCEN Exchange “supports one of FinCEN’s highest priorities—to strengthen public-private partnerships to identify and mitigate threats in order to safeguard our national security and protect communities and citizens from harm.”
OFAC issues new Syria sanctions FAQ
On November 8, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) published new Syria FAQ 934, which relates to the United Nations and the U.S. government's stabilization and early recovery-related activities and transactions involving Syria. According to OFAC, the Syrian Sanctions Regulations (SySR) § 542.513 permit, under certain conditions, “the United Nations, its Specialized Agencies, Programmes, Funds, and Related Organizations and their employees, contractors, or grantees to engage in all transactions and activities in support of their official business in Syria, including any stabilization and early recovery-related activities and transactions in support of their official business.” This authorization applies to all United Nations employees, grantees, and contractors carrying out the official business of the United Nations, specialized agencies, programmes, funds, and related organizations. This includes nongovernmental organizations and private sector entities that act as grantees or contractors.
FAQ 934 also reiterates advice from FAQ 884 that non-U.S. persons, including nongovernmental organizations and foreign financial institutions “do not risk exposure to U.S. secondary sanctions pursuant to the Caesar Syria Civilian Protection Act of 2019” for activities that would be authorized for U.S. persons under the SySR. (Covered by InfoBytes here.)
Treasury and DOJ announce sanctions and charges in ransomware attacks, FinCEN updates ransomware guidance
On November 8, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13694 as amended against two ransomware operators and a virtual currency exchange network. According to OFAC, the virtual currency exchange, and its associated support network, are being designated for allegedly facilitating financial transactions for ransomware actors. OFAC is also designating two individuals allegedly associated with perpetuating ransomware incidents against the U.S., and who are part of a cybercriminal group that has engaged in ransomware activities and has received over $200 million in ransom payments. As a result of the sanctions, “all property and interests in property of the designated targets that are subject to U.S. jurisdiction are blocked, and U.S. persons are generally prohibited from engaging in transactions with them” and “any entities 50 percent or more owned by one or more designated persons are also blocked.” According to OFAC, the sanctions are a part of a set of actions focused on disrupting criminal ransomware actors and virtual currency exchanges that launder the proceeds of ransomware, which “advance the Biden Administration’s counter-ransomware efforts to disrupt ransomware infrastructure and actors and address abuse of the virtual currency ecosystem to launder ransom payments.” Additionally, the DOJ announced charges against the sanctioned individuals under OFACs designations, seizing approximately $6.1 million in alleged ransomware payments.
The same day, FinCEN issued an advisory, which updated and replaced its October 1, 2020 Advisory on Ransomware and the Use of the Financial System to Facilitate Ransom Payments (covered by InfoBytes here). The updated advisory is in response to the recent increase in ransomware attacks against critical U.S. infrastructure. The updated advisory also reflects information released by FinCEN in its Financial Trend Analysis Report, which discusses ransomware trends and includes information on current trends and typologies of ransomware and associated payments as well as recent examples of ransomware incidents. Additionally, the updated advisory describes financial red flag indicators of ransomware-related illicit activity to assist financial institutions in identifying and reporting suspicious transactions related to ransomware payments, consistent with obligations under the Bank Secrecy Act.
OFAC sanctions IRGC-connected entities
On October 29, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order (E.O.) 13224, as amended, as well as E.O. 13382, against members of a network of companies and individuals that supported Iran’s Islamic Revolutionary Guard Corps (IRGC) and its expeditionary unit, the IRGC Qods Force (IRGC-QF). The IRGC-QF used and proliferated lethal Unmanned Aerial Vehicles (UAVs) for use by Iran-supported terrorist groups, and to Ethiopia, where a crisis threatens to destabilize the region. Additionally, deadly UAVs were utilized in attacks on international shipping and on the U.S. OFAC also announced sanctions against the commander of the IRGC Aerospace Force (IRGC ASF) UAV Command who allegedly directs the planning, equipment, and training for IRGC ASF UAV operations. As a result of the sanctions, all property and interests in property belonging to the sanctioned individual subject to U.S. jurisdiction are 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.
OFAC sanctions Lebanese individuals
On October 28, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13441 against two Lebanese businessmen and a member of Parliament. According to OFAC, the sanctioned individuals contributed to the breakdown of good governance and the rule of law in Lebanon by profiting from the pervasive corruption and cronyism in Lebanon. As a result of the sanctions, all transactions by U.S. persons or in the U.S. that involve any property or interests in property of designated or otherwise blocked persons are generally prohibited. 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 generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons.
FinCEN renews GTOs covering 12 metropolitan areas
On October 29, the Financial Crimes Enforcement Network (FinCEN) reissued the renewal of its Geographic Targeting Orders (GTOs). The GTOs require U.S. title insurance companies to identify the natural persons behind shell companies that pay “all cash” (i.e., the transaction does not involve external financing) for residential real estate in the 12 major metropolitan areas covered by the orders. The renewed GTOs are identical to the April 2021 GTOs (covered by InfoBytes here). The purchase amount threshold for the beneficial ownership reporting requirement remains set at $300,000 for residential real estate purchased in the covered areas. The renewed GTOs take effect November 1 and end April 29, 2022, and cover certain counties within the following areas: Boston, Chicago, Dallas-Fort Worth, Honolulu, Las Vegas, Los Angeles, Miami, New York City, San Antonio, San Diego, San Francisco, and Seattle.
FinCEN FAQs regarding GTOs are available here.
FATF updates statements concerning jurisdictions with AML/CFT/CPF deficiencies
On October 26, the Financial Crimes Enforcement Network (FinCEN) announced updates to the Financial Action Task Force (FATF) statements concerning jurisdictions with strategic anti-money laundering, countering the financing of terrorism, and combating weapons of mass destruction proliferation financing (AML/CFT/CPF) deficiencies. Specifically, to ensure compliance with international standards, the FAFT updated the following two statements: (i) Jurisdictions under Increased Monitoring, which identifies jurisdictions with strategic deficiencies in their AML/CFT/CPF regimes that have committed to, or are actively working with, the FATF to address those deficiencies in accordance with an agreed upon timeline and; (ii) High-Risk Jurisdictions Subject to a Call for Action, which identifies jurisdictions with significant strategic deficiencies in their AML/CFT/CPF regimes and instructs FATF members to apply enhanced due diligence, and in the most serious cases, apply counter-measures to protect the international financial system from such risks. Notably, Jordan, Mali, and Turkey have been added to the Jurisdictions under Increased Monitoring, while Botswana and Mauritius have been removed from the list. Among other things, through the announcement, FinCEN further instructed financial institutions to comply with U.S. prohibitions against the opening or maintaining of any correspondent accounts, whether directly or indirectly, for North Korean or Iranian financial institutions, which are already prohibited under existing U.S. sanctions and FinCEN regulations. As previously covered by InfoBytes, FinCEN last announced updates to the FATF statements in July.