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OFAC sanctions Russian companies and other entities
On August 1, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced several new sanctions in response to Russia’s invasion of Ukraine. The new sanctions, issued pursuant to Executive Order 14024, target elites, a major multinational company, a sanctions evasion operation, and a yacht used by a sanctioned individual. The action was taken together with the U.S. Department of State, which imposed additional sanctions on entities and individuals, as well as visa restrictions. 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, and “any entities that are owned, directly or indirectly, 50 percent or more” by the targeted persons are blocked and must be reported to OFAC. Additionally, 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 following day, OFAC issued several new Russia-related General Licenses (GLs). OFAC also published three frequently asked questions regarding “Russian Harmful Foreign Sanctions.”
OFAC sanctions Iranian petrochemical network
On August 1, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13846 against companies used by one of Iran’s largest petrochemical brokers to facilitate the sale of Iranian petroleum and petrochemical products from Iran to East Asia. The designations follow OFAC sanctions announced on July 6 against a network of individuals and entities for facilitating the delivery and sale of hundreds of millions of dollars’ worth of Iranian petroleum and petrochemical products from Iranian companies to East Asia through a web of Gulf-based front companies (covered by InfoBytes here). As a result of the sanctions, all property and interests in property of the sanctioned persons subject to U.S. jurisdiction, as well as any entities owned 50 percent or more by such persons, are blocked and must be reported to OFAC. U.S. persons are also generally prohibited from entering into transactions with the sanctioned persons. Additionally, OFAC warned that “any foreign financial institution that knowingly facilitates a significant transaction for any of the individuals or entities designated today could be subject to U.S. sanctions.”
FDIC releases June enforcement actions
On July 29, the FDIC released a list of administrative enforcement actions taken against banks and individuals in June. During the month, the FDIC made public twelve orders consisting of “three consent orders, one order to pay civil money penalty, four orders of prohibition, one section 19 order, one order terminating consent order, two orders of termination of insurance, one Notice of Intention to Prohibit from Further Participation, Notice of Assessment of Civil Money Penalties, Findings of Fact and Conclusions of Law, Order to Pay, Notice of Hearing, and Prayer for Relief.” The FDIC imposed a civil money penalty against a Missouri-based bank for alleged violations of the Flood Disaster Protection Act. Among other things, the FDIC claimed that the bank “made, increased, extended or renewed a loan secured by a building or mobile home located or to be located in a special flood hazard area without providing timely notice to the borrower and/or the servicer as to whether flood insurance was available for the collateral.” The bank must pay a $7,000 civil money penalty.
The actions also include a consent order with a Georgia-based bank, which alleged that the bank violated “law or regulation related to weaknesses in the Bank’s compliance with the Bank Secrecy Act.” According to the consent order, the bank must, among other things: (i) “enhance its oversight of the Bank’s BSA/AML Compliance Program and assume full responsibility for the approval of sound BSA/AML policies, procedures, and processes”; (ii) “revise, adopt, and implement a written BSA/AML Compliance Program, including policies and procedures”; and (iii) “review and revise as appropriate its written policies, procedures, and processes for assessing the money laundering, terrorist financing, and other illicit financial activities risk profile of the Bank.”
U.S.-UK financial regulators discuss bilateral issues
On July 26, the U.S. Treasury Department issued a joint statement covering the recently held sixth meeting of the U.S.-UK Financial Regulatory Working Group. Participants included officials and senior staff from both countries’ treasury departments, as well as regulatory agencies including the Federal Reserve Board, CFTC, FDIC, OCC, SEC, the Bank of England, and the UK’s Financial Conduct Authority. The Working Group discussed, among other things, (i) market developments since the Russian invasion of Ukraine; (ii) continuing international and bilateral cooperation; (iii) the international financial sector priorities at the G7, the G20, the Financial Stability Board (FSB), and the International Organisation of Securities Commissions (IOSCO); (iv) the risks associated with the Non-Bank Financial Intermediation (NBFI) sector and interconnectedness with other financial and non-financial actors; and (v) “the mutual desire to promote multilateral cooperation around risk management in global derivatives and banking markets.” The Working Group participants will continue to engage bilaterally on these issues and others ahead of the next meeting, planned for later this year.
OFAC issues Russia-related sanction, general licenses, and FAQs
On July 21, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced Russia-related General License (GL) 45 and GL 46. GL 45 authorizes transactions related to the wind down of certain financial contracts prohibited by Executive Order (E.O.) 14071. GL 46 authorizes transactions in support of an auction process to settle certain credit derivative transactions prohibited by E.O. 14071. OFAC also announced that it published two new Frequently Asked Questions (FAQs) and two amended FAQs on “Russian Harmful Foreign Activities Sanctions.” Additionally, OFAC added a name to the SDN list.
U.S.-EU release statement on Joint Financial Regulatory Forum
On July 20, EU and U.S. participants, including officials from the Treasury Department, Federal Reserve Board, CFTC, FDIC, SEC, and OCC, participated in the U.S. – EU Joint Financial Regulatory Forum to continue their ongoing financial regulatory dialogue. Matters discussed focused on six themes: “(1) market developments and financial stability risks, (2) sustainable finance and climate-related financial risks, (3) regulatory developments in banking and insurance, (4) regulatory and supervisory cooperation in capital markets, (5) operational resilience and digital finance, and (6) anti-money laundering and countering the financing of terrorism (AML/CFT).”
The statement acknowledged that the Russia/Ukraine conflict, as well as “inflationary pressures”, exposes “a series of downside risks to financial markets both in the EU and in the U.S.” The statement notes that financial markets have so far proven to be “resilient” and stressed that “[i]nternational cooperation in monitoring and mitigating financial stability risks remains essential in the current global environment in light of the negative impacts on global energy and commodities markets.” During the Forum, participants also discussed recent developments related to digital finance and crypto-assets, including so-called stablecoins, as well as potential central bank digital currencies. Additionally, participants discussed various issues related to third-party providers; climate-related financial risks and challenges, including sustainability reporting standards; the transition away from LIBOR; and progress made in strengthening their respective AML/CFT frameworks.
House passes bill to expand AML regulation
On July 20, the U.S. House passed H.R. 7900 with a 329-101 vote. Section 5401 of the bill, if passed, would amend the Bank Secrecy Act to require that professional service providers who “serve as key gatekeepers to the U.S. financial system adopt anti-money laundering procedures that can help detect and prevent the laundering of corrupt and other criminal funds into the United States.” Section 5401 calls for the imposition of anti-money laundering requirements on any person, excluding any governmental entity, employee, or agent, who engages in any activity which the Secretary determines by regulation to be the provision, with or without compensation, of (i) corporate or other legal entity arrangement, association, or formation services; (ii) trust services; or (iii) third party payment services, among other things. The strategy is intended to combat money laundering through shell companies by imposing anti-money laundering requirements on persons who act as gatekeepers for legal entities to enter the United States.
OFAC settles with bank for alleged Foreign Narcotics Kingpin Sanctions Regulations violations
On July 15, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $430,500 settlement with a subsidiary of a national bank for allegedly processing transactions in violation of the Foreign Narcotics Kingpin Sanctions Regulations. According to OFAC’s web notice, between May 2018 and July 2018, the bank allegedly processed 214 transactions totaling $155,189, in violation of OFAC’s Kingpin sanctions. Specifically, OFAC noted that the processed transactions were for an account whose supplemental card holder was designated in connection with illegal drug distribution and money laundering.
In arriving at the settlement amount of $430,500, OFAC considered various aggravating factors, including that the bank “is a large and sophisticated financial institution with a global presence,” and “conferred $155,189.42 in economic benefit to an account associated with a [person] who was designated for involvement in illegal drug distribution and money laundering.” OFAC also considered various mitigating factors, including that the bank cooperated with OFAC throughout the investigation, and has undertaken remedial measures intended to minimize the risk of recurrence of similar conduct.
Treasury clarifies impact of sanctions on agricultural commodities, agricultural equipment, or medicine relating to Russia
On July 14, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued a Fact Sheet to clarify that the U.S. has not imposed sanctions on the production, manufacturing, sale, or transport of agricultural commodities, agricultural equipment, or medicine relating to Russia. Additionally, OFAC issued General License (GL) 6B to expand agricultural and medical authorizations to now cover transactions related to agricultural equipment that would normally be prohibited by the Russian Harmful Foreign Activities Sanctions Regulations. OFAC emphasized that U.S. sanctions on Russia issued in response to its war against Ukraine “do not stand in the way of agricultural and medical trade.” OFAC referred to guidance issued in April for more details on authorizations under U.S. sanctions related to agricultural and medical transactions, nongovernmental organization activities, and Covid-19 relief, among others, to support people impacted by Russia’s war (covered by InfoBytes here).
OFAC sanctions Mexican cartel facilitator
On July 11, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to the Foreign Narcotics Kingpin Designation Act against an individual engaged in the trafficking of high-caliber firearms from the U.S. to a Mexican drug organization. According to OFAC, the designated individual acted for or on behalf of a violent drug trafficking organization based in Mexico, which is responsible for a significant proportion of drugs trafficked into the U.S. OFAC further noted that the designation “is the result of ongoing efforts by U.S. agencies and the Government of Mexico to disrupt Mexican drug trafficking organizations’ procurement of weapons, including those sourced in the United States.” As a result of the sanctions, all property belonging to the sanctioned persons 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 of blocked or designated persons.