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OFAC Issues General License Authorizing Certain Exports to or from Burma
On December 7, OFAC issued a six-month general license authorizing trade transactions involving Specially Designated Nationals and SDN-owned entities that would otherwise be prohibited by the Burmese Sanctions Regulations. The general license authorizes certain transactions that are “ordinarily incident to an exportation to or from Burma of goods, technology, or non-financial services” and also permits U.S. financial institutions to “unblock and return transactions blocked on or after April 1, 2015 that would have qualified as authorized had they been engaged in pursuant to the authorization in the general license.” U.S. financial institutions that unblock transactions blocked on or after April 1, 2015 must submit to the Department of the Treasury a report to include the following: (i) a copy of the original blocking report filed with OFAC; (ii) the date the transaction was unblocked; (iii) the amount unblocked, if applicable; (iv) the name of the party to whom the blocked property was returned; and (v) a reference to the general license as the legal authority under which the transaction was unblocked and the blocked property was returned. The general license is effective through June 7, 2016.
Federal Reserve and New York DFS Take Action Against Canadian Bank for Deficiencies Relating to AML Compliance
On November 10, the Federal Reserve and the New York DFS announced an enforcement action against a Canadian bank for alleged deficiencies relating to its BSA/AML compliance program. In order to resolve the allegations, the bank agreed to prepare various written policies and procedures, including (i) a written plan that provides for a sustainable governance framework, including improving the management information systems reporting of compliance with BSA/AML requirements, OFAC regulations, and State Regulations; (ii) a revised written BSA/AML compliance program; (iii) a revised written program for conducting customer due diligence; (iv) a written program that ensures that any suspicious activity is timely reported; and (v) a written plan to improve compliance with OFAC regulations. All policies must be submitted for approval within 60 days of the agreement’s issuance date.
Federal Reserve and New York DFS Announce $258 Million Penalty Against Global Bank
On November 4, the Federal Reserve and the New York DFS announced a combined $258 million penalty against a global bank for “violations in connection with transactions on behalf of countries and entities subject to U.S. sanctions.” According to the Fed’s cease and desist order, the bank failed to implement adequate risk management and compliance policies and procedures to “ensure that activities conducted at offices outside the United States complied with applicable OFAC Regulations and were timely reported in response to inquiries by the Federal Reserve Bank of New York.” Specifically, the Fed alleged that, from November 2001 to January 2006, foreign offices of the bank processed funds transfers with parties subject to OFAC Regulations through the bank’s New York-based subsidiary and other unaffiliated U.S. financial institutions without having the information necessary to determine that the transactions were consistent with U.S. law. The Fed’s order requires the bank to develop a compliance program that establishes (i) policies and procedures to ensure compliance with applicable OFAC regulations; (ii) an OFAC compliance reporting system; and (iii) requirements for employee training in OFAC-related issues. Under the terms of the DFS consent order, the bank agreed to hire an independent monitor to conduct a comprehensive review of its BSA/AML and OFAC sanctions compliance program, policies, and procedures.
OFAC Authorizes Transactions Involving Certain Belarusian Entities
On October 29, OFAC granted a General License authorizing nine Belarusian entities to make transactions otherwise prohibited by Executive Order 13405, effective October 30. The General License also authorizes transactions with any entities that are owned 50 percent or more by the nine named entities. U.S. persons must report authorized transactions or series of transactions exceeding $10,000 to the U.S. Department of State no later than 15 days after execution. The General License expires on October 31, 2016, unless extended or revoked.
Multiple Agencies Take Action Against Paris-Based Investment Bank for Sanctions Violations
On October 20, the DOJ, OFAC, the NYDFS, the Manhattan District Attorney’s Office, and the Federal Reserve simultaneously announced that a Paris-based investment bank would pay a total of more than $787 million to settle multiple alleged violations of U.S. sanctions regulations. The OFAC settlement resolves allegations that the investment bank and certain predecessor banks, between August 6, 2003 and September 16, 2008, processed 4,055 transactions – for a total of approximately $337,043,846 – to or through U.S. financial institutions that involved countries and/or persons subject to the sanctions regulations administered by OFAC. The investment bank settled with OFAC for more than $329,500,000, an amount that reflects the agency’s consideration of the following aggravating factors: (i) the investment bank had indications that its actions had the potential to constitute violations of the U.S. law before the earliest date of the apparent violations; (ii) several managers of the investment bank were aware of the conduct that led to the violations; (iii) the investment bank’s conduct resulted in significant harm to various sanctions programs OFAC oversees and their associated policy objectives; (iv) the investment bank’s size and sophistication, along with its global presence; and (v) the investment bank’s failure to maintain proper controls to prevent the violations from occurring and otherwise maintain an adequate compliance program.
In addition to OFAC’s settlement, parallel actions against the bank resulted in the investment bank agreeing to pay (i) $385 million to the NYDFS; (ii) $90.3 million to the Federal Reserve; (iii) $156 million to the Manhattan District Attorney’s Office; and (iv) $156 million to the U.S. Attorney’s Office for the District of Columbia.
OFAC Authorizes Certain Transactions and Activities to Liquidate Honduras-Based Bank
On October 21, following the October 7 designation of a Honduras-based bank as a Specially Designated Narcotics Trafficker, OFAC announced that it granted a General License authorizing certain transactions and activities to help with the liquidation and wind down of the same bank. Pursuant the General License, transactions and activities that are otherwise prohibited by OFAC during a bank’s liquidation process will be permitted through 12:01 a.m. ET on December 12, 2015, with the following exceptions: (i) the unblocking of any party pursuant to the Foreign Narcotics Kingpin Sanctions Regulations; and (ii) transactions or dealings that are limited by Executive Order, or are with an individual or entity, other than the Honduras-based bank, that is on OFAC’s List of Specially Designated Nationals or Blocked Persons. Any U.S. persons involved in the bank’s liquidation process must file a report with OFAC’s Licensing Division to include the parties involved, and the type, scope, and dates of the activities conducted.
OFAC Issues Finding of Violation to a Bank for Violations of Iranian Transactions and Sanctions Regulations
On October 21, OFAC issued a Finding of Violation to a Chicago-based bank as the successor of a bank that processed six funds transfers totaling approximately $67,000. According to OFAC, the predecessor bank, between February 3, 2011 and March 10, 2011, processed six funds transfers on behalf of its customer “for the purpose of paying an outstanding balance owed to an Iranian entity located in Iran for the purchase of Iranian-origin carpets,” allegedly resulting in a violation of the Iranian Transactions and Sanctions Regulations (ITSR). The bank allegedly failed to remove its customer “from [its] False Hit List or implement any additional measures to prevent or identify possible violations involving the [customer]” after OFAC removed a general license for the importation of Iranian-origin carpets, which became effective September 29, 2010.
OFAC stated that its determination to issue a Finding of Violation reflects that (i) the predecessor bank may have not been aware of the risks associated with failing to properly review and update a false hit list; (ii) a staff member was aware of the conduct that led to two of the violations, and had “reason to know that the customer may process additional transactions in violation of the ITSR”; and (iii) the bank failed to maintain a compliance program with procedures for updating its internal sanctions list following changes to OFAC-administered sanctions programs. On the other hand, OFAC also considered that (i) no managers or supervisors were aware of the conduct that led to the ITSR violation; (ii) the bank had not previously received a penalty notice or Finding of Violation; and (iii) the bank – pre and post-merger – substantially cooperated with OFAC during the investigation.
Iran Sanctions: Treasury and White House Comment on JCPOA Adoption Day
On October 18, the Department of the Treasury released a statement on reaching the formal “Adoption Day” of the Joint Comprehensive Plan of Action (JCPOA), the plan reached between the P5+1, the European Union, and Iran regarding Iran’s nuclear program. Adoption Day is the day JCPOA participants will begin taking steps necessary to implement their JCPOA commitments. According to Treasury Secretary Lew, October 18 marks an “important milestone” as “Iran begins taking its nuclear-related measures and the United States and [its] partners prepare to lift nuclear-related sanctions in response.” Although this action means that the JCPOA’s effective date is October 18, 2015, no sanctions will be lifted until Implementation Day, which will occur after international inspectors confirm that Iran has met its commitments under the JCPOA. As decided in July and outlined in an OFAC press release, licenses with certain credentials will remain in effect in accordance with their terms until Implementation Day. OFAC also issued FAQs concerning Adoption Day. Commenting on the implications of Adoption Day, the White House likewise issued a Statement that it had directed the heads of all relevant executive departments and agencies of the United States to begin preparations to implement U.S. commitments under the JCPOA.
OFAC Announces Honduras-Based Bank as Specially Designated Narcotics Trafficker
On October 7, OFAC announced the designation of a Honduras-Based bank (the Bank) as a Specially Designated Narcotics Trafficker. According to the Department of the Treasury, this announcement “marks the first time that OFAC has designated a bank pursuant to the [Foreign Narcotics Kingpin Designation Act].” OFAC alleged that the Bank was an integral part of a money laundering operation that “facilitated the laundering of narcotics proceeds for multiple Central American drug trafficking organizations.” In addition to the Bank’s designation, OFAC announced the designation of three Honduran businessmen for supporting, via money laundering and other services, the international trafficking of narcotics for the same Central American criminal organizations. The Government of Honduras informed OFAC on October 10 that the liquidation process for the Bank was in effect. Non-U.S. persons involved in the Bank’s liquidation process will not be subject to OFAC designations or enforcement actions, with the understanding that “they do not undertake such transactions with knowledge that such transactions involve or benefit, directly or indirectly, any individual or entity other than [the Bank] that is listed on OFAC’s List of Specially Designated Nationals or Blocked Persons or that otherwise constitutes a person whose property and interests in property are blocked.” Liquidation transactions involving U.S. persons or financial institutions are prohibited, unless the individual or entity applied for and received OFAC authorization.
OFAC Updates Cuban Assets Control Regulations Easing Sanctions on Cuba
On September 18, OFAC issued a final rule amending the Cuban Assets Control Regulations (CACR) to reflect policy changes previously announced by the Obama administration. With respect to financial transactions, the amendments, among other things, (i) permit certain additional persons subject to U.S. jurisdiction to open and maintain bank accounts in Cuba to use for authorized purposes; (ii) removes limitations on donative remittances to Cuban nationals, on certain authorized remittances that authorized travelers may carry to Cuba, and on the amount of remittances that a Cuban national permanently resident in Cuba who is departing from the U.S. may carry to Cuba; (iii) adds a new general license authorizing remittances from Cuba and Cuban nationals to the United States; (iv) adds a new general license authorizing the unblocking and return of certain previously blocked remittances and funds transfers in certain circumstances; and (v) authorizes U.S. depository institutions to maintain accounts for Cuban nationals while the Cuban-national account holder is located outside the United States, provided that the account holder may only access the account while lawfully present in the United States, and removes a cap on payments from blocked accounts held by Cuban nationals in the United States in a nonimmigrant status to use for living expenses. The amendments also relax restrictions previously set forth in the telecommunications and internet sector, on travel between the U.S. and Cuba, and other various activities. Revisions to the CACR take effect on September 21, 2015.
At the same time, OFAC published a set of new and revised FAQs addressing the changes set forth in the updated CACR.