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OCC releases enforcement actions
On October 20, the OCC released a list of recent enforcement actions taken against national banks, federal savings associations, and individuals currently and formerly affiliated with such entities. Included among the actions is a cease and desist order against an New York branch of an India-based bank for allegedly engaging in Bank Secrecy Act/anti-money laundering (BSA/AML) program violations. The bank allegedly “failed to establish and maintain a reasonably designed BSA/AML compliance program ('BSA/AML Program') that adequately covers the required BSA/AML Program components. Deficiencies include (i) a weak system of internal controls; (ii) a weak BSA Officer function; and (iii) an insufficient training program.” The order requires the bank to, among other things, submit a BSA/AML action plan and develop a written suspicious activity monitoring and reporting program.
OFAC sanctions drug network
On October 19, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 14059 against an individual and a drug trafficking organization, two Mexican nationals and members of the designated drug trafficking organization, and three Mexico-based transportation companies. According to OFAC, the designated network evolved into a sophisticated network that is involved in the importation and transport of multi-ton quantities of illicit drugs from Mexico to the U.S. OFAC noted that the designations are the result of OFAC’s ongoing collaboration with Homeland Security Investigations San Diego Strike Force Group, U.S. Customs and Border Protection’s National Targeting Center, and the Government of Mexico. As a result of the sanctions, all property and interests in property belonging to the sanctioned entities in the U.S. 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.” OFAC also noted 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.”
OFAC sanctions Russian military technology procurement network
On October 19, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 14024 against a Russian military technology procurement network for allegedly procuring military and sensitive dual-use technologies from U.S. manufacturers and supplying them to Russian end-users. The individual and his two companies are designated as part of a joint action with the DOJ and FBI and highlights the U.S. government’s on-going “efforts to hinder Russia’s ability to wage its war of aggression in Ukraine, including by holding accountable those who support Russia’s military by disrupting its illicit defense and technology procurement networks around the world.” The action builds upon an October 14 alert issued by OFAC and the Department of Commerce’s Bureau of Industry and Security and the Department of State, which details the impact of international sanctions and export controls (covered by InfoBytes here). The alert followed the convergence of top officials representing ministries of finance and other government agencies from 33 countries who met to discuss the effects of international sanctions and export controls on Russia’s military-industrial complex and critical defense supply chains.
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. Further, “any entities that are owned, directly or indirectly, 50 percent or more in the aggregate by one or more of such 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.
The same day, the DOJ (with the support of the Department’s Task Force KleptoCapture) unsealed indictments against nearly a dozen individuals and several entities, including the sanctioned Russian national and his two companies, accused of scheming to export military technologies to Russia.
Treasury releases CFIUS Enforcement and Penalty Guidelines
On October 20, the U.S. Treasury Department released CFIUS Enforcement and Penalty Guidelines to provide the public with information on how the Committee on Foreign Investments in the United States (CFIUS) assesses violations of laws and regulations on transaction parties. The guidelines inform the public about how CFIUS—which is tasked with identifying and mitigating certain national security risks related to foreign investments—assesses whether to impose a penalty or take other enforcement action for a violation of a party’s obligation, as well as factors that CFIUS considers when making such a determination. “The vast majority of those who come before CFIUS abide by their legal obligations and work collaboratively with the Committee to mitigate any national security risks arising from the transaction; however, those who fail to comply with CFIUS mitigation agreements or other legal obligations will be held accountable,” Assistant Secretary of the Treasury for Investment Security Paul Rosen stressed. “Today’s announcement sends a clear message: Compliance with CFIUS mitigation agreements is not optional, and the Committee will not hesitate to use all of its tools and take enforcement action to ensure prompt compliance and remediation, including through the use of civil monetary penalties and other remedies.”
OFAC issues finding of violation to entity for sanctions violations
On October 14, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced the issuance of a Finding of Violation to an international financial entity in Puerto Rico, for violations of the Venezuelan Sanctions Regulations (VSR), and the Reporting, Penalties and Procedures Regulations (RPPR). According to the web notice, OFAC claimed that the entity engaged in three transactions totaling approximately $50,000 in violation of VSR, failed to maintain full and accurate records related to the handling of the blocked accounts in violation of RPPR, and failed to report the blocked accounts accurately. In determining the Finding of Violation, OFAC considered aggravating factors, including that the entity failed to exercise a minimal degree of caution or care when it (i) engaged in transactions involving blocked property without obtaining an OFAC license, even though senior managers at the bank were aware an OFAC license was needed; and (ii) failed to maintain relevant records associated with the bank’s handling of the blocked property, which may have impaired its ability to provide full and accurate information to OFAC. OFAC also considered various mitigating factors, including that the entity has not received a penalty notice from OFAC in the preceding five years, it voluntarily self-disclosed the alleged violations, and it has taken numerous remedial measures.
U.S.-UK sanctions partnership to exchange best practices
On October 17, Andrea Gacki, Director of the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), and Giles Thomson, Director of the Office of Financial Sanctions Implementation (OFSI), HM Treasury, announced that in the upcoming months, officials will exchange best practices for enhancing and strengthening the U.S.-UK sanctions partnership. Among other things, OFAC and OFSI officials plan to identify opportunities for pooling expertise, and will explore ways to align the way sanctions are implemented and develop joint products and collaborative guidance to assist stakeholders. Gacki and Thomson noted that work is already underway on developing approaches for addressing shared priorities related to cyber threats, virtual asset misuse, information sharing, and making sure sanctions do not impede humanitarian trade and assistance. Recognizing that financial sanctions are most effective when implemented multilaterally, Gacki and Thomson discussed efforts taken by their respective countries to coordinate and implement sanctions programs, including measures designed to tackle corruption, kleptocracy, and other forms of economic crime. They recognized, however, “that the growing scale of sanctions has increased the complexities of their implementation,” and reiterated their commitment to engage with stakeholders and provide useful sanctions-related information and guidance.
OFAC updates Russia-related general license
On October 17, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued Russia-related General License (GL) 28A, which authorizes certain transactions through January 18, 2023, involving a public joint stock company that are “ultimately destined for or originating from Afghanistan” and that are normally prohibited by Executive Order 14024. OFAC explained that U.S. financial institutions are authorized to operate correspondent accounts on behalf of the company, “or any entity in which [the company] owns, directly or indirectly, a 50 percent or greater interest, provided such accounts are used solely to effect transactions” as authorized by GLA 28A’s specifications. GL 28A replaces and supersedes GL 28 (covered by InfoBytes here).
OFAC sanctions financial facilitators
On October 17, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Order (E.O.) 13224, against a network of financial facilitators who hold leadership roles and are key interlocutors between the group and local companies in Somalia. According to OFAC, the network has engaged in weapons procurement, financial facilitation, and recruitment activities. OFAC further noted that in addition to being leaders within the designated network, these facilitators have had direct contact with other previously designated officials in the network. Concurrent with OFAC’s designations, the U.S. State Department designated five of the network’s leaders pursuant to E.O. 13224, as amended, for their leadership roles within the designated network. As a result of the 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, 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. Persons that engage in certain transactions with the individuals or entities designated today may themselves be exposed to designation. Additionally, OFAC warned that engaging with the designated individuals can impose risk of secondary sanction. OFAC also stated that it “can prohibit or impose strict conditions on the opening or maintaining in the United States of a correspondent account or a payable-through account of a foreign financial institution that knowingly conducts or facilitates any significant transaction, or provides significant financial services, for any [Specially Designated Global Terrorist].”
OFAC issues Russian sanctions alert
On October 14, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) published a Russia-related alert, Impact of Sanctions and Export Controls on Russia’s Military-Industrial Complex. The alert, issued by OFAC, the Department of Commerce’s Bureau of Industry and Security, and the Department of State, is intended to inform the public of the impact of sanctions and export control restrictions targeting Russia’s defense capabilities and warn of the risks of supporting Russia’s military-industrial complex. The alert also, among other things, outlined efforts taken by OFAC and the State Department involving Russia since February 2022, such as issuing approximately 1,500 new and 750 amended sanctions listings. The alert also described the strategic intent and impact of actions, highlighting efforts “to degrade Russia’s ability to wage its unjust war against Ukraine and prevent Russia from projecting military force beyond its borders.” OFAC also published new Russia-related Frequently Asked Question (FAQ) 1092, which clarifies that “non-U.S. companies risk exposure to sanctions for providing ammunition or other military goods to Russia or for supporting Russia’s military-industrial complex.”
FinCEN provides timing on CTA rulemaking
On October 12, FinCEN acting Director Himamauli Das provided timelines on recent agency efforts to combat financial crime. Speaking during the ACAMS AML Conference, Das pointed to actions taken by bad actors to hide assets behind shell/front companies and evade U.S. sanctions, and highlighted measures, including beneficial ownership information reporting, suspicious activity reporting, and geographic targeting, designed to combat illicit activity. Das also provided an update on recent rulemakings mandated by the Corporate Transparency Act (CTA), including (i) the beneficial ownership reporting rule (which takes effect January 1, 2024, and is covered by InfoBytes here); (ii) the access rule, which would establish protocols for accessing the beneficial ownership database by law enforcement and financial institutions (FinCEN is currently working on the notice of proposed rulemaking and expects to issue it in the near term); and (iii) the Customer Due Diligence rule, which Das said will be revised “no later than one year after the effective date of the reporting rule” as required by the CTA. He added that FinCEN is also developing an “infrastructure to build a secure and confidential database that meets the highest security standards” to ensure only authorized users can access information. This system is expected to be operational by the time the beneficial ownership reporting rule takes effect. Additionally, FinCEN will, among other things, develop guidance and educational materials to assist companies when preparing their beneficial ownership information reports and will continue to regularly update its dedicated resource page on this subject.