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OFAC settles with international financial institution
On June 20, the U.S Treasury Department’s Office of Foreign Assets Control (OFAC) announced a settlement with a Latvia-based bank—a subsidiary of an international financial institution headquartered in Sweden—to resolve potential civil liability stemming from OFAC’s Crimea sanctions. According to OFAC’s web notice, in 2015 and 2016, a shipping industry client of the Latvia-based subsidiary bank made 386 transactions totaling over $3 million through its e-banking platform from a Crimea-based IP address to persons in Crimea, which were processed through U.S. correspondent banks. OFAC alleges that in 2016, the client attempted to make a payment to a U.S. correspondent bank from a Crimea-based IP address, but after the payments were rejected and the bank was reassured by the client that the transactions did not involve Crimea, the bank rerouted the payment through a different U.S. correspondent bank. OFAC alleges that the bank had client onboarding information that the client had a physical presence in Crimea, so the bank had reason to know that the transactions in fact involved Crimea. OFAC also accused the bank of not integrating the client’s IP data into its sanctions screening processes.
In arriving at the $3.4 million settlement amount, OFAC considered, among other things, that the bank willfully violated U.S. sanctions by not self-disclosing the violations, which is required as a third party. According to the OCC, the bank failed to exercise due caution or care in neglecting to account for the client’s presence in Crimea, and instead solely relied on the client’s reassurances when it possessed contradictory information. OFAC also claimed that the bank had many customers in Crimea, and therefore had reason to know the origin of the payments it was processing. OFAC also considered several mitigating factors, including that: (i) the bank has not received a penalty notice from OFAC in the preceding five years; (ii) the bank and the financial institution took remedial action; and (iii) the bank and the financial institution cooperated with OFAC’s requests for information.
OFAC said that this action “demonstrates the importance of implementing and maintaining effective, risk-based sanctions compliance controls, especially for sophisticated financial institutions operating in proximity to high-risk regions.” OFAC added that this case also demonstrates the importance of undertaking reasonable efforts to investigate red flags. Finally, OFAC noted that this matter underscores the importance of remaining vigilant against efforts by entities based in Crimea, Russia, and other high-risk countries seeking to evade sanctions and elude compliance controls.
McHenry objects to FSOC’s proposed designation framework
On June 15, House Financial Services Committee Chairman Patrick McHenry sent a letter to Treasury Secretary Janet Yellen urging the Financial Stability Oversight Council (FSOC), which Yellen chairs, to “revisit” its proposals on nonbank financial firm risks. As previously covered by InfoBytes, in April, FSOC released a proposed analytic framework for financial stability risks to provide greater public transparency on how it identifies, assesses, and addresses potential risks “regardless of whether the risk stems from activities or firms.” The same day, FSOC also released for public comment proposed interpretive guidance relating to procedures for designating systemically important nonbank financial companies for Federal Reserve supervision and enhanced prudential standards.
McHenry’s letter raised concerns with FSOC’s decision to evaluate risks based on an entity’s size and not its activities. According to McHenry, FSOC’s April proposals will essentially undo changes it made in 2019, which incorporated principles considering a financial institution’s systematic risk rather than merely its size. In his announcement accompanying the letter, McHenry elaborated on his concerns, stating that “allowing FSOC to extend its supervisory reach beyond prudential institutions to nonbank entities in this way could pose significant regulatory consequences for our financial system.” McHenry claimed these institutions may engage in different activities, thus presenting different risks, and said the proposals do not take this into account. McHenry also argued that expanding the Fed’s oversight jurisdiction is not a “panacea for financial stability.”
OFAC clarifies impact of sanctions on humanitarian assistance and trade
On June 14, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued a Fact Sheet for “Provision of Humanitarian Assistance and Trade to Combat COVID-19.” The Fact Sheet, among other things, highlights Treasury’s humanitarian-related or other general licenses (GL) issued to support people impacted by Covid-19 across Iran, Venezuela, North Korea, Syria, Cuba, and Russia. Relatedly, OFAC issued Iran-related GL N-2, Venezuela-related GL 39B, and Syria-related GL 21B to authorize transactions and activities related to the prevention, diagnosis, or treatment of Covid-19, as well as several amended FAQs.
OFAC sanctions network supporting Iran’s missile and military programs
On June 6, the U.S. Treasury Department’s Office of Foreign Assets Control announced sanctions, pursuant to Executive Order 13382, against seven individuals and six entities in Iran, China, and Hong Kong for supporting Iran’s ballistic missile program. These sanctions build on OFAC’s March 30, 2022, designations against other supporters of the Iran-based missile program (covered by InfoBytes here) in an effort to target weapons of mass destruction proliferators and their supporters. OFAC explained that the designated individuals and entities have done business with and supported the procurement of critical parts and technology for Iran’s ballistic missile development.
As a result of the sanctions, all property and interests in property belonging to the sanctioned individuals and entities that are in the U.S. or in the possession or control of U.S. persons are blocked and must be reported to OFAC. Further, “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. Persons that engage in certain transactions with the designated individuals or entities may themselves be exposed to sanctions, and “any foreign financial institution that knowingly facilitates a significant transaction or provides significant financial services for any of the individuals or entities designated today pursuant to E.O. 13382 could be subject to U.S. sanctions.”
OFAC sanctions entities connected to Mexican cartel
On June 6, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Order 14059, against three individuals and one entity connected to the Cartel de Jalisco Nueva Generación (CJNG). The CJNG is a Mexico-based organization responsible for a significant proportion of fentanyl and other drugs trafficked into the U.S. OFAC explained that two individuals are senior members of CJNG who engaged in trafficking firearms into the U.S. and fuel theft in Mexico. These sanctions follow similar actions taken earlier this year against other Mexican arms dealers working in collaboration with the CJNG (covered by InfoBytes here). Additionally, one individual and her currency exchange house (responsible for laundering over $6 million between 2020 and 2022) have been identified for laundering money on behalf of the CJNG, OFAC stated.
As a result of the sanctions, all property and interests in property of the designated persons located in the U.S. or held by U.S. persons are blocked and must be reported to OFAC. Further, “any entities that are owned, directly or indirectly, individually or in the aggregate, 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 unless authorized by an OFAC-issued general or specific license, or an exemption. OFAC further warned that “U.S. persons may face civil or criminal penalties for violations of E.O. 14059 and the Kingpin Act.”
OFAC sanctions individuals and entities connected to Russia’s corruption in Moldova
On June 5, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Order 14024, against seven leading members of a Russian intelligence-linked group and an entity connected to one of these individuals, for their role in “the destabilization campaign and continued malign influence campaigns in Moldova.” OFAC previously sanctioned individuals and entities endeavoring in similar efforts to undermine Moldova’s democracy, (covered by InfoBytes here). OFAC also mentioned in the announcement that the EU sanctioned Russian and Moldovan individuals for the same crimes. The designated individuals for these sanctions, OFAC said, are part of a global information operation connected to the Russian Federation—targeting not only Moldova, but other Balkan countries, the EU, UK, and U.S.—that provokes anti-government demonstrations designed to instill fear that undermines faith in democratic principles. Notably, the actors designated were part of a plot to “capitalize on these protests in Chisinau and seize the Moldovan Government House,” OFAC stated. As a result of these 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 are blocked and must be reported to OFAC. Further, “any entities that are owned, directly or indirectly, individually or in the aggregate, 50 percent or more by one or more blocked persons are also blocked.” U.S. persons are prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons, unless exempt or authorized by a general or specific OFAC license. Additionally, OFAC warned that financial institutions and other persons that engage in certain transactions or activities with the sanctioned persons may themselves be exposed to sanctions or be subject to an enforcement action.
OFAC sanctions Iranian tech company and employees
On June 2, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Order 13846, against an Iran-based technology company, two senior employees, and an affiliate based in the UAE. According to OFAC, the sanctioned persons and entities partook in facilitating the Iranian regime’s censorship of the internet in Iran. The technology company is a key partner in Iran’s development of the National Information Network, which, OFAC states is, “a countrywide intranet that is being used to disconnect the Iranian people from the global internet.” As a result of the sanctions, all property and interests in property belonging to the sanctioned individuals and entities 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. Additionally, OFAC warned that “persons that engage in certain transactions with the individuals and entities designated today may themselves be exposed to sanctions or subject to an enforcement action.” Also, OFAC noted that unless an exception applies, any foreign financial institution that knowingly takes part in a significant transaction or provides significant financial services for any of the persons designated could also be subject to U.S. sanctions.
In conjunction with the sanctions, OFAC issued several Iran-related general licenses (see General License P).
OFAC sanctions entities in China and Mexico tied to illicit drugs
On May 30, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Order 14059, against 17 individuals and entities for their involvement in the rapid increase of equipment used to make illicit drugs. OFAC detailed the impact of the drugs the equipment produces and explained that the counterfeit pills are often laced with fentanyl and ultimately end up in U.S. markets. Targeting every stage of the pill production process, OFAC designated seven entities and six individuals based in China and three individuals based in Mexico for perpetuating the trafficking of illicit drugs through the sale, manufacturing, and/or shipment of pill press equipment.
As a result of these 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, individually or in the aggregate, 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 a general or specific license or exempt. Further, financial institutions and persons that engage in certain transactions with the designated persons may themselves be exposed to sanctions or subject to enforcement.
OFAC sanctions Russian paramilitary leader in Mali
Recently, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Order 14024, against a Mali-based principal administrator and head of a Russian private military company’s paramilitary units. Aside from acting as a key player in Russia’s war against Ukraine, the private military company “has meddled in and destabilized countries in Africa, committing widespread human rights abuses and appropriating natural resources,” OFAC said, noting that the sanctioned individual worked with the Malian government to support incoming paramilitary forces to Mali, including preparing living quarters and arranging meetings with officials from several African nations. The action follows previous sanctions issued against those working with or supporting the private military company’s destabilizing activities, involving human rights abuses, and appropriating natural resources.
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 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 generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons, unless authorized by a general or specific OFAC license, or otherwise exempt.
OFAC sanctions cut cash flow supporting violence in Sudan
On June 1, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Order 14098, against four companies for generating revenue from, and contributing to, the conflict in Sudan. Two of the companies are affiliated with the paramilitary Rapid Support Forces and two companies are affiliated with the Sudanese Armed Forces. OFAC stated that sanctions against those who have “directly or indirectly engaged or attempted to engage in actions or policies that threaten the peace, security, or stability of Sudan” will hinder the financial support for the entities waging war in Sudan.
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 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 generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons, unless authorized by a general or specific OFAC license, or otherwise exempt.
In conjunction with the sanctions, OFAC issued several Sudan-related general licenses (see General Licenses 1, 2, 3 and 4).