Trump Administration Recertifies Iran’s Compliance with Nuclear Deal, Imposes Sanctions on IRGC-Linked Individuals and Entities

The Iran nuclear deal lives to see another day—but President Trump continues to express deep reservations regarding the agreement.

Iran Nuclear Deal Certification

On Monday, the Trump Administration reportedly certified Iran’s compliance with its nuclear-related obligations under the Joint Comprehensive Plan of Action (JCPOA) agreement, as required under the Iran Nuclear Agreement Review Act (INARA). As we previously have noted, the INARA requires the President to certify to Congress every 90 days that Iran is in compliance with its nuclear obligations under the JCPOA.  If the President fails to make the certification or advises Congress that Iran has materially breached its obligations, then the statute provides for expedited congressional consideration of legislation re-imposing sanctions.

According to reports, the President was strongly opposed to issuing the certification, and continues to press his administration to take a hard line towards Iran. Reportedly, during an hour-long meeting with senior administration officials last week—including Secretary of State Rex W. Tillerson, Defense Secretary Jim Mattis, National Security Advisor Lt. Gen. H. R. McMaster, and Joint Chiefs of Staff chairman Gen. Joseph F. Dunford Jr.—the President spent 55 minutes telling the officials that he did not want to make the certification. It was only after another round of meetings that the President finally relented, agreeing to make the certification late Monday evening but pressing officials to deliver results regarding Iran’s behavior. Continue Reading

OFAC Penalizes AIG’s Voluntary Disclosure of Overly “Narrow” Exclusion Clauses and Single Shipment Policies

On June 26, 2017, American International Group, Inc. (AIG) agreed to a $148,698 civil settlement with OFAC based on a voluntary disclosure of 555 apparent violations of OFAC’s Iran, Sudan, Cuba and Weapons of Mass Destruction Proliferators economic sanctions programs.  AIG processed approximately $396,530 in premiums and paid claims on policies covering maritime shipments of goods destined for or transiting through Iran, Sudan, or Cuba, or that involved a person on OFAC’s Specially Designated Nationals (SDN) list.  455 of the 555 transactions involved Iran, and 33 involved shipments aboard “blocked” vessels belonging to Islamic Republic of Iran Shipping Lines (IRISL).  IRISL was an SDN at the time, but was delisted as a result of the Iran nuclear deal in January 2016 (although IRSL remains subject to sanctions for U.S. persons and in limited circumstances also for non-U.S. persons).

OFAC’s Frequently Asked Questions (FAQs) concerning the Insurance Industry make clear that OFAC’s regulations trump state insurance law, and that the mere issuance of a policy or coverage to a prohibited person or for a prohibited activity constitutes a “service” that would violate U.S. law, assuming the insurer is subject to OFAC’s jurisdiction. Furthermore, an insurance policy that involves a restricted government, SDN, or entity owned 50 percent or more by an SDN, could be treated as “blocked” property, in which case the insurer essentially cannot take any action on the policy without a license from OFAC.

The standard practice for insurance companies operating with global scope to cope with these restrictions (in addition to screening the names of parties against the relevant sanctions lists) is to include “exclusionary clauses” in their policies to carve out from coverage any provisions that would violate U.S. economic or trade sanctions. There is no “one size fits all” exclusion clause that OFAC has published or officially endorsed, but the clause should be written in such a way and operate so as to put the insured on notice and legally exclude the sanctioned activity or party from the coverage. Continue Reading

President Trump Delays Decision on Permanent Rollback of Sudan Sanctions

On July 11, 2017, President Trump issued an executive order (“new executive order”) delaying the Trump Administration’s decision on whether to make permanent broad Sudan sanctions relief instituted in the waning days of the Obama Administration.

On January 13, 2017, President Obama issued Executive Order (“EO”) 13761, which waived a number of statutory provisions mandating sanctions on Sudan and established a framework for the potential permanent revocation of key Sudan sanctions programs. On January 17, the US Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) issued a broad general license to allow all transactions that had previously been prohibited under the Sudanese Sanctions Regulations (“SSR”). (See our previous advisory here). The US Commerce Department’s Bureau of Industry and Security (“BIS”) also amended the Export Administration Regulations (“EAR”) to set out a favorable licensing policy for exports and reexports to Sudan of certain items related to civil or commercial aviation and railroads. These developments opened significant new business opportunities in Sudan and essentially lifted, on a temporary basis, the United States’ longstanding comprehensive sanctions on Sudan (although the Darfur and South Sudan sanctions programs remain intact).

EO 13761 would have made this sanctions relief permanent as of July 12, had the Secretary of State published a notice in the Federal Register indicating that Sudan had “sustained [the] positive actions that gave rise to this order.” President Trump’s new executive order pushed the date back to October 12, 2017, giving the Trump Administration more time to conduct its review of Sudan’s behavior.  Depending on the outcome of that assessment the sanctions against Sudan could be terminated in full.  Continue Reading

BIS Amends EAR Based on Missile Technology Control Regime Plenary Agreements

On July 7, 2017, the US Department of Commerce’s Bureau of Industry and Security (“BIS”) published a final rule amending the Export Administration Regulations (“EAR”) based on the 2016 Missile Technology Control Regime (“MTCR”) plenary agreements. The MTCR is a multilateral export control regime designed to control the export of certain goods and technology that might contribute to a delivery system for weapons of mass destruction.  The 35 nations that are members of the regime voluntarily agree to guidelines and export restrictions developed under the MTCR and implement those controls through their respective national export control laws.

The changes adopted in the BIS rule are intended to integrate amendments made to the MTCR Annex at the October 2016 plenary meeting in Busan, South Korea and the March 2016 Technical Experts Meeting in Luxembourg City, Luxembourg. The rule also implements several additional changes designed to better conform the EAR to the MTCR Annex.  Many of these amendments are technical changes that do not alter the substantive meaning or scope of control of the EAR.  This advisory focuses only on the substantive changes adopted.  Continue Reading

In the Wake of Kokesh v. SEC: Whither Disgorgement in FCPA Cases

On June 5, 2017, the United States Supreme Court unanimously held that disgorgement in SEC enforcement actions operates as a penalty in Kokesh v. Securities and Exchange Commission.  This means that disgorgement is subject to the federal five-year statute of limitations under 28 U.S.C. §2462. The Kokesh decision settled a dispute between the US Court of Appeals for the Tenth Circuit and the Eleventh Circuit, and in the process undermined a key source of large recoveries by the SEC in FCPA resolutions, and in SEC proceedings more broadly.

For more information, please see our advisory.

ISO Standard on Anti-Corruption Measures: The First Nine Months and Next Steps

On July 6, 2017, Steptoe’s Matthew Herrington and Brady Cassis coauthored a piece in Compliance Complete on the International Organization for Standardization (ISO) standard.  The article breaks down how the standard has fared in its first nine months, and provides straightforward ways compliance officers can use the ISO standards to bolster their existing anti-corruption programs.

For more information, the full article can be found at Compliance Complete (subscription required).

2017 FCPA Mid-Year Review

On June 29, 2017, Steptoe published its US Foreign Corrupt Practices Act (FCPA) Mid-Year Review. There was a flurry of enforcement actions in the beginning of January to start off 2017, including some major resolutions that broke new ground in international anti-corruption enforcement.  After the change in administration on January 20, 2017, however, there were no further corporate FCPA resolutions announced until the June 2017 declination issued to Linde Gas North America LLC and Linde North America Inc.  Although this period of inaction raised some questions about the Trump administration’s commitment to continued enforcement of the FCPA, it is likely at least in part that the situation was caused by delays in key appointments within the US Department of Justice (DOJ) and Securities and Exchange Commission (SEC).  While President Trump has previously voiced some skepticism about the law, senior political appointees such as Attorney General Sessions have indicated that the DOJ would continue to enforce the FCPA “as appropriate based on the facts and circumstances of each case.”

For more information, please see our advisory.

US Ratchets up Pressure on North Korea by Targeting Chinese Supporters

President Trump’s recent exasperated tweet at China – suggesting China is not doing enough to stop North Korea’s nuclear efforts and rogue behavior – was followed last week by financial sanctions on Chinese supporters of North Korea.  On June 29, the Treasury Department’s Office of Foreign Assets Control (“OFAC”) placed on its list of Specially Designated Nationals (“SDNs”) two Chinese nationals and one Chinese-North Korean transport company.  In addition, Treasury’s Financial Crimes Enforcement Network (“FinCEN”) named one Chinese bank as an institution of “primary money laundering concern” for serving as a conduit for illicit North Korean financial transactions.

It is unclear whether these actions presage a sustained and large-scale effort to target Chinese supporters of the North Korean regime, as some have urged, or whether this is a more targeted effort involving particularly culpable persons.  Continue Reading

FATF Continues Suspension of Countermeasures Against Iran, but Call for Enhanced Due Diligence Remains

The Financial Action Task Force (“FATF”) has announced the continued suspension of countermeasures against Iran. FATF, the international standards setting body for anti-money laundering (“AML”) and combating the financing of terrorism (“CFT”), maintains a list of high-risk and non-cooperative jurisdictions that may be subject to calls for enhanced due diligence and countermeasures.  Iran was previously subject to FATF calls for countermeasures, but the organization granted a temporary suspension in June of 2016 after Iran committed to implementing an action plan designed to address its AML/CTF deficiencies.

At its plenary meeting on June 23, FATF renewed its suspension, which had previously been granted for a 12 month period. While the suspension of countermeasures is highly significant for Iran, the country continues to be included on FATF’s so-called “blacklist” of high-risk and non-cooperative jurisdictions and remains subject to FATF’s call for enhanced due diligence.

FATF’s initial suspension of countermeasures came on the heels of the Iran nuclear deal (formally known as the Joint Comprehensive Plan of Action or JCPOA) and the sanctions relief incorporated in that agreement. Many observers expected that sanctions relief would generate significant interest by non-U.S. companies with regard to business opportunities in Iran (U.S. persons continue to be barred from most Iranian business opportunities).  However, international business has been slow to return to Iran due to a variety of factors including concerns over remaining US sanctions, corruption risks, and money laundering.  FATF’s continued suspension of its call for countermeasures is an important step in ameliorating some of the AML concerns regarding Iran, but many businesses likely will continue to view the country wearily until it is removed from FATF’s blacklist and FATF ends its call for enhanced due diligence.  Such action likely will not occur until FATF determines that Iran has completed implementing its action plan.  The FATF statement did not include any timetable for expected completion.

Steptoe Blockchain Blog – Implications of the Combating Money Laundering, Terrorist Financing, and Counterfeiting Act of 2017

On June 23, 2017, Steptoe’s Blockchain Blog published a piece about the implications of the Combating Money Laundering, Terrorist Financing, and Counterfeiting Act of 2017, S. 1241.  The Senate bill was introduced by Senator Grassley (R-IA), along with Senators Feinstein (D-CA), Cornyn (R-TX), and Whitehouse (D-RI), and aims to strengthen criminal money laundering statues, particularly in fighting terrorism and terror finance.  The issue of potential links between terrorist financing and money laundering, and government knowledge of these links, has become an increasingly important topic in Congress, with both houses looking further into the issue.  On June 8, 2017, the House Financial Services Committee’s Subcommittee on Terrorism and Illicit Finance held a hearing titled “Virtual Currency: Financial Innovation and National Security Implications.” 

For more information, please visit Steptoe’s Blockchain Blog.