Texas-Based U.S. Gold Refinery Pleads Guilty for Failing to Maintain an Adequate Anti-Money Laundering Program and Agrees to Forfeit $15M, Continuing Trend of Criminal Enforcement Actions and Prosecutions for Compliance Failures

A series of recent federal enforcement actions targeting weaknesses in Bank Secrecy Act/anti-money laundering (BSA/AML) compliance programs continued on March 16, when U.S. Gold refinery Elemetal LLC, based in Dallas, Texas, pled guilty in U.S. District Court for the Southern District of Florida to a single-count information charging failure to maintain an adequate BSA/AML program.

Elemental admitted that from August 2012 through November 2016, it purchased and refined billions of dollars of gold from countries around the world, but willfully failed to develop, implement, and maintain an adequate BSA/AML compliance program, despite the high risk of gold-based money laundering.  The international gold trade is recognized as a common method for laundering illegally mined gold, narcotics and other criminal proceeds.

Federal prosecutors alleged and Elemetal admitted that they had: Continue Reading

Impending Steel and Aluminum Tariffs: Opportunities for Exemptions and Exclusions

On March 8, 2018, President Trump proclaimed new tariffs on steel and aluminum imports as a result of an investigation into the national security impact of these imports under Section 232 of the Trade Expansion Act of 1962.

Although these tariffs will apply to a wide range of steel and aluminum products from all countries except Canada and Mexico, the United States Trade Representative (USTR) is considering exemptions for other countries and the Department of Commerce (DOC) will review requests from affected U.S. parties for specific product exclusions. USTR and DOC are expected to release official guidance on the exemption and exclusion processes in the next few days.  National security and related strategic considerations will factor heavily into both agencies’ decision making. According to media reports, in the USTR process, countries’ security relationships with the U.S. and alignment with U.S. trade policy goals will be determining factors in whether a country can receive an exemption. In the DOC process, U.S. companies seeking product exemptions will need to show how imports are required to serve U.S. demand or how the imports in question serve to promote U.S. national security.  (Within DOC, the Bureau of Industry and Security, which administers the DOC export controls program, also will have responsibility for handling Section 232 exemption requests.)

As such, it will be critically important for companies seeking product exclusions or otherwise managing the impact of this major trade policy development to understand the national security implications of the steel and aluminum that they import. An alert from our International Trade Practice discusses the tariffs, the exemption/exclusion processes, and next steps for affected companies in detail.

Webinar on Application of U.S. Export Controls Outside the United States

On Thursday, March 29 at 11:00 AM EST, Anthony Rapa will present “Dual-Use Export Controls: Application of U.S. Export Controls Outside the U.S.”, a webinar hosted by Federal Publications.  As described on the Federal Publications website:

When do U.S. dual-use export controls apply outside the United States? Much more often than you might think. 

This webinar will cover key aspects of the U.S. Export Administration Regulations as they apply overseas, including with regard to U.S.-origin items held abroad, non-U.S. origin items controlled under the “de minimis” and “direct product” rules, transshipment issues, and the “warehouse exception / inventory rule” in the Iran sanctions context.

This webinar is the second of a three-part series that will focus on export controls. 

You can sign up for the webinar here.

Newly Introduced Sanctions Bill Targets IRGC

On March 1, House Foreign Affairs Committee Chairman Ed Royce (R-CA) and the committee’s ranking Democrat, Eliot Engel (D-NY), introduced bipartisan legislation targeting Iran’s Islamic Revolutionary Guard Corps (“IRGC”), a branch of Iran’s armed forces considered responsible for much of Iran’s international terrorism and domestic repression.  The new bill, known as the Iranian Revolutionary Guard Corps Economic Exclusion Act (HR 5132), seeks to expand sanctions against the IRGC and push the administration to more robustly implement already existing sanctions.

Continue Reading

FinCEN Issues Proposed Rule to Designate ABLV Bank as Being of Primary Money Laundering Concern

On February 13, 2018, the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a Notice of Proposed Rulemaking (NPRM), pursuant to Section 311 of the PATRIOT Act, seeking to prohibit the opening or maintaining of a correspondent account in the United States for, or on behalf of, ABLV Bank, located in Riga, Latvia. A final rule may be issued after a 60 day comment period.

The NPRM asserts that ABLV is a “foreign bank of primary money laundering concern.” In particular, FinCEN claims that it has reasonable grounds to believe the following:

ABLV management permits the bank and its employees to orchestrate and engage in money laundering schemes; solicits the high risk shell company activity that enables the bank and its customers to launder funds; maintains inadequate controls over high-risk shell company accounts; and seeks to obstruct enforcement of Latvian anti-money laundering and combating the financing of terrorism (AML/CFT) rules in order to protect these business practices. In addition, illicit financial activity at the bank has included transactions for parties connected to U.S. and UN-designated entities, some of which are involved in North Korea’s procurement or export of ballistic missiles.

According to the NPRM, ABVL does not currently maintain correspondent accounts directly with U.S. banks; rather, it accesses the U.S. financial system through nested U.S. dollar correspondent relationships with other financial institutions that do hold direct U.S. correspondent accounts. If finalized, this action would prohibit such accounts and bar other financial institutions from processing any transactions involving ALBV through correspondent accounts they hold at U.S. financial institutions.  To ensure this requirement is enforced effectively, the final rule would require U.S. financial institutions to conduct due diligence on foreign correspondent account holders and to notify them of this prohibition.  The NPRM states that the following notice will suffice:

Notice: Pursuant to U.S. regulations issued under Section 311 of the USA PATRIOT Act, see 31 CFR 1010.661, we are prohibited from opening or maintaining in the United States a correspondent account for, or on behalf of, ABLV. The regulations also require us to notify you that you may not provide ABLV, including any of its subsidiaries, branches, and offices with access to the correspondent account you hold at our financial institution. If we become aware that the correspondent account you hold at our financial institution has processed any transactions involving ABLV, including any of its subsidiaries, branches, and offices we will be required to take appropriate steps to prevent such access, including terminating your account.

U.S. financial institutions will not be required to obtain certification from any of its correspondent account holders that such access will not be provided in order to comply with the notice requirement.

Four banks as well as the countries of Burma and North Korea are currently subject to 311 sanctions. Eighteen other banks or jurisdictions have been similarly subject to an NPRM that was either never finalized or was subsequently rescinded.

Dual-Use Export Controls Webinar

On Tuesday, February 27 at 11:00 AM EST, Anthony Rapa will be presenting “Introduction to Dual-Use Export Controls: U.S. EAR and EU Dual-Use Regulation”, a webinar hosted by Federal Publications.  As described on the Federal Publications website:

Are you involved in the flow of goods, software, or technical data across borders?  If so, you might be impacted by export controls.  This webinar provides an introduction to U.S. and EU “dual-use” (i.e., commercial / civilian) export control laws and regulations, including an overview of:

  • What activity is subject to export controls
  • Which items are covered
  • The reach of U.S. export jurisdiction (hint: everywhere!)
  • How U.S. and EU rules overlap and differ
  • Export licensing requirements
  • Basic compliance tips

This webinar is the first of a three-part series that will focus on export controls.

You can sign up for the webinar here.

OFAC Publishes FAQs on New Debt and Late Payments Under Venezuelan Sanctions Regime

On February 12, 2018, the Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) published new frequently asked questions (“FAQs”) regarding the meaning of “new debt” under Executive Order (“EO”) 13808 and the receipt of certain late payments from the Government of Venezuela (“GoV”) and Petroleos de Venezuela, S.A. (“PdVSA”).

EO 13808 prohibits “all transactions related to, provision of financing for, and other dealings in … new debt with a maturity of greater than 90 days” of PdVSA and “new debt with a maturity of greater than 30 days, or new equity, of the Government of Venezuela” by a U.S. person or within the United States. See our previous post.

Newly published FAQ #553 defines new debt to mean “debt created on or after August 25, 2017.” The FAQ further explains that debt created prior to that date does not constitute new debt unless the terms of the debt instrument were changed on or after August 25, 2017.  Under FAQ #511, the term debt includes “bonds, loans, extensions of credit, loan guarantees, letters of credit, drafts, bankers acceptances, discount notes or bills, or commercial paper.” Continue Reading

H-1B Petitions for Foreign Employees: Changes to Policy, Not Process

With widespread media attention on the Deferred Action for Childhood Arrivals (DACA) policy expiration and immigration policy negotiations, it is important not to overlook the start of the H-1B “cap” case season. With no time to waste, employers must determine their need for H-1B cap filings and immediately begin preparation, well ahead of the five-day filing window starting April 2, 2018. Changes to the H1-B program in the past year, while significant, have been limited to policy and practice changes. At present, the various proposals for changes to law and regulation are still just proposals. The H-1B cap filing timing and procedures remain unchanged and, despite the challenges discussed in this advisory, the cap season is still a high priority and necessity for many US employers.

For more information, please see our advisory.

Service on Foreign Governments in US Lawsuits – Handle with Care, and Avoid the Embassy

Proper service of process is vital in litigation involving foreign sovereigns, including litigation to obtain an enforceable judgment. Recently, the Fourth Circuit held that the Foreign Sovereign Immunities Act does not permit service of process by mail to a foreign government’s embassy in the United States. In Kumar v. Sudan, the Fourth Circuit vacated a $34 million default judgment entered against Sudan for damages related to Sudan’s alleged provision of material support to the al-Qaeda operatives who carried out the 2000 bombing of the U.S.S. Cole. The US Supreme Court is currently reviewing the question of service of process on a foreign embassy in another case involving Sudan, Sudan v. Harrison, in which the Second Circuit reached a contrary holding. To read our full advisory, please click here.

Steven K. Davidson, Michael J. Baratz, and Brian Egan authored this advisory.