InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
Treasury designates Chinese GSA for providing support to Iranian airline
On May 19, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) designated a China-based company pursuant to Executive Order (E.O.) 13224 for allegedly acting as a general sales agent (GSA) for or on behalf of an Iranian airline. According to OFAC, this is the seventh time a GSA has been designated to the airline since 2018, which was previously designated under E.O.s 13224 and E.O, 13382 for providing support to Iran’s Islamic Revolutionary Guard Corps-Qods Force. OFAC emphasized that entities operating in the airline industry “should conduct due diligence to avoid performing services, including GSA services, for or on behalf of a designated person, which may be sanctionable,” and referred the industry to a 2019 advisory that outlined potential civil and criminal consequences for providing unauthorized support to or for designated Iranian airlines.
As a result of the sanctions, “all property and interests in property of [the GSA] that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC.” OFAC further noted that its regulations “generally prohibit all dealings by U.S. persons or within (or transiting) the United States that involve property or interests in property of blocked or designated persons,” and warned foreign financial institutions that knowingly facilitating significant transactions or providing significant financial services to designated individuals may subject them to U.S. correspondent account or payable-through sanctions.
Global advisory addresses illicit shipping and sanctions evasion practices
On May 14, the U.S. Departments of State and Treasury, along with the U.S. Coast Guard, issued a global advisory warning the maritime industry of deceptive shipping practices used by Iran, North Korea, and Syria to evade economic sanctions. The “Sanctions Advisory for the Maritime Industry, Energy and Metals Sectors, and Related Communities” expands upon previously issued advisories and discusses due diligence approaches that entities, including financial institutions, should employ to monitor illicit activity and mitigate the risk of potentially engaging in prohibited activities or transactions. Among other things, the advisory provides a list of general compliance practices that may help entities “in more effectively identifying potential sanctions evasion.” These include: (i) institutionalizing sanctions compliance programs; (ii) establishing Automatic Identification System (AIS) best practices and contractual requirements to monitor for manipulations and disruptions, which may be an indication of potential illicit or sanctionable activity; (iii) monitoring ships throughout the entire transaction lifecycle, including those leased to third parties; (iv) knowing your customers and counterparties; (v) exercising supply chain due diligence; (vi) incorporating these best practices into contractual language; and (vii) engaging in industry information sharing of challenges, threats, and risk mitigation measures.
See here for previous InfoBytes coverage on global shipping advisories.
OFAC clarifies North Korea SDNs
On May 13, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) provided clarifying text related to the modified North Korea Sanctions and Policy Enforcement Act (covered by InfoBytes here), which bars foreign subsidiaries of U.S. financial institutions from knowingly engaging in transactions with Specially Designated Nationals (SDNs) identified under North Korea-related authorities. OFAC added the following text to 490 SDN records to assist the private sector in identifying persons that have been so designated: “Transactions Prohibited For Persons Owned or Controlled by U.S. Financial Institutions: North Korea Sanctions Regulations section 510.214.”
OFAC issues new Venezuela-related general licenses, revokes other
On May 12, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued two new General Licenses (GL) Venezuela GL 3H, “Authorizing Transactions Related to, Provision of Financing for, and Other Dealings in Certain Bonds,” and GL 9G, “Authorizing Transactions Related to Dealings in Certain Securities.” OFAC removed and revoked GL13E. The changes reflect the need to remove Nynas AB. According to the announcement, Nynas AB “has undertaken a corporate restructuring that has resulted in Nynas AB no longer being blocked pursuant to the Venezuela Sanctions Regulations.” Therefore, U.S. persons can engage in transactions or activities with Nynas AB, “provided such activities do not involve blocked persons or otherwise prohibited activities.” OFAC also made conforming technical updates to two FAQs to reflect the issuance of the new GLs.
OFAC settles Cuban Assets Control Regulation violations
On May 6, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $257,862 settlement with an animal nutrition company for 44 alleged violations of the Cuban Assets Control Regulations (CACR). According to OFAC, between July 2012 and September 2017, the company and its owned or controlled foreign entities allegedly coordinated agricultural commodity sales to a Cuban company without OFAC authorization by processing Cuba-related business through its foreign affiliates and developing “a transaction structure that it incorrectly determined would be consistent with U.S. sanctions requirements.” OFAC noted that the company “could potentially have availed itself of such authorization” or applied for a specific licenses from OFAC, but “failed to seek appropriate advice or otherwise take the steps necessary to authorize these transactions.” OFAC determined that in light of the fact that the transactions may have been eligible for authorization, as well as the company’s voluntary self-disclosure, compliance enhancements, and other factors, the apparent violations constituted a non-egregious case.
OFAC advised U.S. companies with a global presence to maintain an appropriate sanctions compliance program and to seek “appropriate advice and guidance” when contemplating business that may be impacted by U.S. sanctions programs. In addition, OFAC referenced enforcement and compliance resources and cautioned that sanctions violations can arise from a misinterpretation or lack of understanding of OFAC’s regulations, including general licenses and authorizations. OFAC advised U.S. persons to “exercise[e] caution when dealing with foreign subsidiaries or affiliates located in regions subject to U.S. sanctions programs” and to understand the full scope and applicability of authorizations related to certain sanctions prohibitions.
OFAC issues Finding of Violation to company for issuing prepaid card to SDN
On April 30, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued a Finding of Violation to a travel-related services company for alleged violations of the Weapons of Mass Destruction Proliferators Sanctions Regulations. According to OFAC, the company allegedly issued a prepaid card to, and processed 42 transactions totaling more than $35,000 on behalf of, a Specially Designated National (SDN) due to human error and screen system defects. When issuing the Finding of Violation, OFAC considered the fact that, among other things, (i) the company did not engage in willful or reckless behavior; (ii) there is no indication that the company was aware that it provided a card to an SDN or that its risk engine could be overridden; (iii) the company took remedial action in response to the violations to prevent similar reoccurrences; (iv) the company cooperated with OFAC and voluntarily disclosed the violations; and (v) OFAC has not issued a penalty notice or Finding of Violation to the company in at least five years prior to the alleged violations. A civil monetary penalty was not issued to the company.
OFAC issues amended Venezuela-related general license
On April 21, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued amended Venezuela General License (GL) 8F, titled “Authorizing Transactions Involving Petróleos de Venezuela, S.A. (PdVSA) Necessary for the Limited Maintenance of Essential Operations in Venezuela or the Wind Down of Operations in Venezuela for Certain Entities.” GL 8F supersedes GL 8E and extends the expiration date for certain authorizations through December 1 that would otherwise be prohibited under Executive Orders 13850, 13857, or 13884.
Visit here for additional InfoBytes coverage of actions related to Venezuela.
Special Alert: OFAC encourages humanitarian aid, promises consideration of Covid-19 compliance challenges
The Department of the Treasury’s Office of Foreign Assets Control recently took two actions to address the impact of Covid-19. First, OFAC issued a fact sheet that consolidates existing authorizations and guidance permitting humanitarian, agricultural, and medical aid to six jurisdictions subject to sanctions. Second, OFAC encouraged companies facing compliance challenges due to Covid-19 to shift resources to higher-risk areas, noting that it would take this move into consideration if it leads to a violation during the pandemic. Companies facing compliance challenges may wish to consider such a shift, while documenting their risk-based rationale for doing so.
Humanitarian fact sheet
Last week, OFAC issued a fact sheet regarding the provision of Covid-19-related assistance under its Iran, Cuba, North Korea, Syria, Ukraine/Russia, and Venezuela sanctions regimes. The fact sheet made no changes to existing laws and guidance, but consolidated existing licenses, exemptions, authorizations, and related FAQs relevant to humanitarian aid and medical equipment for these regimes. The fact sheet should prove to be a valuable resource for financial institutions and other organizations confronting a wave of transactions to provide personal protective equipment to sanctions-targeted jurisdictions wracked by Covid-19, while complying with OFAC regulations.
Multiagency advisory warns of North Korean cyber-threat to international finance system
On April 15, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), in conjunction with the Departments of State and Homeland Security and the Federal Bureau of Investigation, issued an advisory warning that North Korea’s (DPRK) cyber activities—including cybertheft, money laundering, extortion, and cryptojacking—“pose a significant threat to the integrity and stability of the international finance system.” These activities, the agencies caution, highlight DPRK’s use of cyber-enabled means to generate revenue while mitigating the impact of OFAC-imposed sanctions. In addition to providing examples of cyber activities that target the international financial sector and DPRK state-sponsored cyber incidents, the advisory also outlines recommended measures that governments, industry, civil society, and individuals can take to counter DPRK cyber threats. These include (i) raising awareness; (ii) sharing technical information; (iii) implementing and promoting cybersecurity best practices; (iv) notifying law enforcement; and (v) strengthening anti-money laundering, countering the financing of terrorism, and counter-proliferation financing compliance. The agencies reiterate the consequences of engaging in prohibited and sanctionable conduct, and remind individuals and entities that OFAC has the authority to impose sanctions on any persons found to have engaged in conduct supporting DPRK cyber-related activity. The agencies also point out that foreign financial institutions that knowingly conduct or facilitate significate trade or transactions on behalf of a designated person for DPRK-related activity, may “lose the ability to maintain a correspondent or payable-through account in the [U.S.]”
OFAC guidance addresses Covid-19 humanitarian assistance and trade
On April 16, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) published a Fact Sheet providing guidance to ensure humanitarian-related trade and assistance reaches at-risk populations through legitimate and transparent channels during the global Covid-19 pandemic. Specifically, the Fact Sheet highlights the most pertinent exemptions, exceptions, and authorizations for humanitarian assistance and trade under the Iran, Venezuela, North Korea, Syria, Cuba, and Ukraine/Russia-related sanctions programs. OFAC notes, however, that under certain sanctions program, entities may be required to obtain separate authorization from other U.S. government agencies. The Fact Sheet also provides guidance for persons seeking to export personal protective equipment from the U.S. Additional questions regarding the scope or applicability of any humanitarian-related authorizations can be directed to OFAC’s Sanction Compliance and Evaluation Division.