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Leading International Financial Services Institution Pays $1.7 Million to Settle Sanctions Liability
On August 27, Treasury’s OFAC announced a settlement agreement requiring a Switzerland-based financial institution to pay slightly over $1.7 million to resolve potential liability over alleged violations of the Global Terrorism Sanctions Regulations, 31 C.F.R. part 594. According to OFAC, over a five-year period ending in 2013, the financial institution processed over 220 securities and other investment transactions involving an individual included on OFAC’s Specially Designated Nationals and Blocked Persons List. As part of the agreement, OFAC highlighted important mitigating factors leading to its reduced settlement amount with the financial institution noting that the bank has in place an adequate global sanctions compliance program, and that the “[institution] took remedial action in response to the apparent violations, including by conducting a thorough internal investigation regarding the apparent violations.”
OFAC Announces Settlement Agreement with Insurance Company
On August 6, OFAC announced a $271,815 settlement with a New York-based insurance company with an overall focus on marine insurance and related lines of business, professional liability insurance, and commercial umbrella and primary and excess casualty businesses. According to OFAC, from May 8, 2008 to April 1, 2011, the company and its London branch office, “issued global protection and indemnity (“P&I”) insurance policies that provided coverage to North Korean-flagged vessels and covered incidents that occurred in or involved Iran, Sudan, or Cuba—some of which led to the payment of claims.” The company’s willingness to engage with OFAC-sanctioned countries resulted in 48 alleged violations of Foreign Assets Control Regulations, Executive Order 13466 of June 26, 2008, North Korea Sanctions Regulations, Iranian Transactions and Sanctions Regulations, Sudanese Sanctions Regulations, and Cuban Asset Control Regulations. OFAC stated that (i) the company did not maintain a formal compliance program at the time it issued the P&I insurance policies; and (ii) the company’s London office personnel “misinterpreted the applicability of OFAC sanctions regulations.” The final settlement amount reflects the fact that managers and supervisors knew or had reason to know that the majority of the insurance policies and claims payments at issue involved OFAC-sanctioned countries; the company is a commercially sophisticated financial institution; and it did not have a formal OFAC compliance program in place at the time the apparent violations occurred. Mitigating factors included the company’s cooperation with OFAC’s investigation; lack of prior enforcement action; and its remedial action plan to implement a sufficient OFAC compliance program.
OFAC Provides Guidance to Financial Institutions to Help Comply with Crimea Sanctions Regulations
On July 30, OFAC issued a “Crimea Sanctions Advisory,” highlighting certain actions that have been used to circumvent or evade U.S. sanctions involving the Crimea region as described in Executive Order 13685. The Advisory provides guidance to U.S. persons and persons engaging in business activities in or through the United States, directing them to implement appropriate internal controls relative to their OFAC sanctions risk profile. Specifically with respect to financial transactions, OFAC noted that “certain individuals or entities have engaged in a pattern or practice of repeatedly omitting originator or beneficiary address information” from SWIFT messages. OFAC advised that U.S. financial institutions should be “cautious” when processing payment instructions that fail to disclose complete address information when engaging in transactions involving an individual or entity that has previously omitted information of Crimean individuals or entities. OFAC offered three examples of risk mitigating measures: (i) ensure that transaction monitoring systems include appropriate search terms corresponding to major geographic locations in Crimea and not simply references to “Crimea”; (ii) request additional information from entities that previously violated or attempted to violate U.S. sanctions on Crimea; and (iii) clearly communicate U.S. sanctions obligations to international partners and discuss OFAC sanctions compliance expectations with correspondent banking and trade partners.
In addition to issuing the Crimea Sanctions Advisory, OFAC updated its Specially Designated Nationals List and Sectoral Sanctions Identifications List with additional designations.
OFAC Levies Penalty for Violations of the Iranian Transactions and Sanctions Regulations
On July 29, OFAC announced that it levied a $82,260 civil penalty against Blue Robin, Inc. for violating certain provisions of the Iranian Transactions and Sanctions Regulations. According to OFAC, from 2009 through 2010, Blue Robin conducted 33 transactions valued at over $200,000, where Blue Robin imported web development services from PersiaBMW, an Iranian company. The services rendered by PersiaBMW were used to develop web-based systems and applications to streamline online business processes and operations for Blue Robin’s customers. In its consideration of the penalty amount, OFAC determined that “Blue Robin acted recklessly because it knew it was importing services from an Iranian company over a period of more than five years, it sent payments through unlicensed money exchangers instead of through traditional commercial banking channels, and it appears that the company did not take any steps to research the legality of funds transfers to Iran or the importation of services from Iran until after it lost contact with its unlicensed money exchanger.” Nevertheless, due to Blue Robin’s self-disclosure and substantial cooperation with OFAC’s investigation, the penalty amount imposed against Blue Ribbon was below the base penalty amount for the violations.
OFAC Publishes Venezuela Sanctions Regulations
On July 10, OFAC published regulations to implement the Venezuela Defense of Human Rights and Civil Society Act of 2014 and Executive Order 13692. The Act required the President to impose targeted sanctions on certain persons determined to be responsible for significant acts of violence or serious human rights abuses against antigovernment protesters in Venezuela, and to have ordered, or otherwise directed, the arrest or prosecution of certain persons in Venezuela. The Executive Order set forth standards for designating and suspending entry into the United States of corresponding persons in Venezuela. The regulations provide the framework for blocking property or interests in property of persons designated according to the Executive Order. According to OFAC, the regulations are currently in “abbreviated form” and the agency will issue a more comprehensive set of regulations that may provide further interpretive guidance, general licenses, and statements of licensing policy.
OFAC Provides Overview of Agreement with Iran Regarding Sanctions Relief
On July 14, OFAC released a statement regarding the agreement reached with Iran over its nuclear program. Following months of diplomacy, OFAC stated that the P5 + 1 reached a Joint Comprehensive Plan of Action (JCPOA) with Iran regarding Iran’s nuclear program to ensure that it is exclusively peaceful going forward. Once the International Atomic Energy Agency (IAEA) verifies that Iran has implemented key nuclear-related measures described in the JCPOA (“Implementation Day”), “U.S. sanctions relief will be provided through the suspension and eventual termination of nuclear-related secondary sanctions.” The P5 + 1 and Iran also concluded on July 14 that the sanctions relief provided for in the JPOA of November 24, 2013 would be extended through Implementation Day; until further notice, the JPOA sanctions relief will be the only Iran-related sanctions relief in effect. The White House issued a description of the agreement to demonstrate how the long-term comprehensive nuclear deal with Iran “will verifiably prevent Iran from acquiring a nuclear weapon and ensure that Iran’s nuclear program will be exclusively peaceful going forward.” Finally, as decided on July 14, licenses with the following credentials will remain in effect in accordance with their terms until Implementation Day: (i) Issued by OFAC’s Second Amended Statement of Licensing Policy on Activities Related to the Safety of Iran’s Civil Aviation Industry; and (ii) set to expire on or before July 14, 2015. OFAC stated that the U.S. government will publish detailed guidance related to the JCPOA prior to Implementation Day, and will issue revised guidance on the continued JPOA relief shortly.
Update: OFAC Releases Guidance on the Continuation of Certain Temporary Sanctions Relief Under the JPOA
On July 10, the P5 + 1, and Iran agreed to extend the JPOA for three days to further negotiations in reaching a comprehensive solution surrounding Iran’s nuclear program. As a result, OFAC issued updated guidance informing that all JPOA sanctions relief detailed in the Guidance, FAQs, and Statement of License Policy issued in November 2014 has been extended through July 13, 2015. This updated guidance replaces guidance previously issued by OFAC on July 7, 2015.
Update: OFAC Releases Guidance on the Continuation of Certain Temporary Sanctions Relief Under the JPOA
On July 7, the P5 + 1, EU, and Iran agreed to extend the JPOA for three days to further negotiations in reaching a comprehensive solution surrounding Iran’s nuclear program. As a result, OFAC issued updated guidance informing that all JPOA sanctions relief detailed in the Guidance, FAQs, and Statement of License Policy issued in November 2014 has been extended through July 10, 2015. This updated guidance replaces guidance previously issued by OFAC on June 30, 2015.
OFAC Releases Guidance on the Continuation of Certain Temporary Sanctions Relief Under the JPOA
On June 30, the P5 + 1, European Union, and Iran agreed to extend the Joint Plan of Action for seven days, furthering negotiations to reach a solution to reduce Iran’s nuclear program. In conjunction with the announcement of the seven day extension, OFAC published Guidance on the Continuation of Certain Temporary Sanctions Relief Implementing the Joint Plan of Action, as Extended. The guidance continues the JPOA sanctions relief period, provided in November 2014 as implemented via Guidance, FAQs, and Statement of Licensing Policy, from June 30 through July 7, 2015.
U.S. Announces Final Decision to Rescind Cuba's Designation as a State Sponsor of Terrorism
On May 29, the Secretary of State announced his final decision to rescind Cuba’s designation as a State Sponsor of Terrorism, effective immediately. The removal of Cuba’s designation followed the Department of State’s comprehensive review of Cuba’s record and the end of a 45-day Congressional pre-notification period after the President certified in an April 14 report to Congress that (i) Cuba has not provided any support for international terrorism during the preceding 6-month period; and (ii) the Cuban government has provided assurances that it will not support acts of international terrorism in the future.