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On March 4, 2020, the Financial Crimes Enforcement Network (FinCEN) of the US Treasury Department imposed a $450,000 civil money penalty against the former chief operational risk officer at US Bank National Association (US Bank), for his alleged role in failing to prevent violations of US anti-money laundering (AML) laws and regulations that occurred during his tenure.

FinCEN’s unprecedented individual enforcement action is the latest sign that US AML regulators intend to hold individual executives accountable for their roles in financial institutions’ violations of law. It serves as a reminder of the importance of strengthening compliance programs in order to minimize the likelihood of findings of individual liability. Meanwhile, authorities outside the United States, including in the UK, are increasingly focused on AML failings and individuals potentially liable for those failings.Continue Reading Client Advisory: FinCEN Penalizes Compliance Officer for Anti-Money Laundering Failures

Click here to read the full Client Advisory by Steptoe.

In December 2019, the US Department of Justice (DOJ) announced a revised policy regarding voluntary disclosure of export control and sanctions violations by business organizations (VSD Policy). The VSD Policy encourages business organizations – which now include financial institutions – to self-disclose “all

On July 22, 2019, Secretary of State Mike Pompeo announced that the US Government would impose sanctions on Chinese state-owned oil trading company Zhuhai Zhenrong Company Limited and its chief executive Youmin Li for knowingly purchasing or acquiring oil from Iran.  Zhuhai Zhenrong was previously sanctioned in 2012 due to alleged dealings with Iran, but those sanctions were far less extensive, and were removed in 2016 pursuant to the Iran nuclear deal. This action announced by Secretary Pompeo involves the addition of these parties to the Specially Designated Nationals (SDN) list, as a result of which any transactions or dealings involving US persons with these parties or their “interests in property” are prohibited, and US persons are required to freeze any such property pursuant to specific rules promulgated by the US Treasury Department’s Office of Foreign Assets Control (OFAC). In addition, Youmin Li is subject to a US visa ban.

According to the Department of State, these sanctions resulted from Zhuhai Zhenrong’s purchase or acquisition of crude oil from Iran after the expiration of China’s Significant Reduction Exception (SRE), which we have previously discussed and which allowed China to continue buying oil from Iran until May 2, 2019 without the risk of sanctions for companies and financial institutions involved in that trade. These sanctions were imposed under Executive Order (EO) 13846. Section 3(a)(ii) of EO 13846 authorizes the imposition of different types of sanctions, ranging from less severe measures to the most severe measure of designation on the SDN list, for persons determined to have, “on or after November 5, 2018, knowingly engaged in a significant transaction for the purchase, acquisition, sale, transport, or marketing of petroleum or petroleum products from Iran.” Section 3 also authorizes sanctions on a person determined to be a “successor entity to,” or, if there is some knowledge or participation in the relevant activity, a person that “owns or controls” or “is owned or controlled by or under common ownership or control with,” a person designated under Section 3 of EO 13846. 
Continue Reading US Sanctions Chinese Company for Buying Oil from Iran

On May 9, 2019, the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) published long-awaited guidance addressing how FinCEN regulations apply to what the agency calls “convertible virtual currency” (CVC), which covers most types of cryptocurrencies and crypto-tokens. The guidance focuses on:

  • Platforms engaged in exchange transactions involving securities, commodities, or futures contracts and fiat currency, CVC, or other value that substitute for currency;
  • Natural persons providing CVC money transmission as person-to-person (P2P) exchangers;
  • CVC wallets (differentiating among hosted, unhosted, and multiple signature wallet providers);
  • CVC provided through electronic terminals, kiosks, or automated teller machines;
  • CVC services provided through decentralized (software) applications (DApps), including anonymizing services;
  • Payment processing services;
  • Internet casinos;
  • Initial Coin Offerings (ICOs) and the status of creators of CVC;
  • DApp developers, users conducting financial activities, and DApps conducting CVC transactions; and
  • Mining pools and cloud miners.

Continue Reading FinCEN Issues New Advisory on BSA/AML Obligations Related to Virtual Currency

On April 25, 2019, OFAC announced that Haverly Systems, Inc. (“Haverly”), a New Jersey software company, had agreed to pay $75,375 to settle apparent violations from 2014 related to Haverly’s collection of payments from JSC Rosneft (“Rosneft”), a Russian oil major on OFAC’s Sectoral Sanctions Identifications (“SSI”) list. The key issue was OFAC’s finding that Haverly accepted the payments from Rosneft outside of the then-applicable 90-day window and thereby dealt in the restricted “new debt” of Rosneft. This appears to be the first time OFAC has published a settlement involving violations of the SSI list Directives, and underscores the importance for companies subject to US jurisdiction of monitoring invoicing and payments with SSI list entities and their subsidiaries. Non-US companies may also face “secondary sanctions” risk under Section 228 of CAATSA, on which we have previously advised, for certain types of transactions with SSI list designees. See also our previous advisory on OFAC’s SSI list sanctions, along with our previous discussion of the CAATSA-mandated changes to those sanctions.

Pursuant to Directive 2 under Executive Order 13662 and § 589.201 of OFAC’s Ukraine-Related Sanctions Regulations, US persons are prohibited from transacting or otherwise dealing in “new debt” of longer than certain stated maturity periods of SSI list designees or any entities of which they own 50% or more. At the time of this apparent violation, the relevant maturity period was 90 days.[1] “Debt” is defined broadly to include any “extensions of credit.” OFAC has stated in FAQ guidance that open payment terms, such as the time permitted to pay commercial invoices, also fall within the scope of “new debt.”
Continue Reading New Jersey Software Company Settles with OFAC for Accepting Late Payments from Rosneft

Next week, the World Trade Organization (WTO) will consider Venezuela’s request for the establishment of a panel to decide whether US sanctions affecting Venezuela violate international trade law.

In December, Venezuela filed its second ever complaint at the World Trade Organization challenging US sanctions. Specifically, Venezuela claimed that the US imposed “coercive trade-restrictive measures” in an attempt to isolate Venezuela economically. These measures included “certain US laws and regulations relating to goods of Venezuelan origin, the liquidity of Venezuelan public debt, transactions in Venezuelan digital currency, and the Specially Designated Nationals and Blocked Persons List [which] are inconsistent with the WTO’s General Agreement on Tariffs and Trade (GATT) 1994 and the General Agreement on Trade in Services (GATS),” according to a statement by the WTO.
Continue Reading Venezuela Challenge to US Sanctions Escalates at WTO

On February 13, the European Commission adopted a new list of “high-risk” jurisdictions that the Commission identified as posing significant threats to the European Union’s financial system as a result of strategic deficiencies in their anti-money laundering and counter-terrorism financing (AML/CFT) frameworks.  In addition to countries like North Korea, Iran, and Syria, the list also includes four US territories.  In response, the US Department of Treasury expressed “significant concerns about the substance of the list,” which diverges from the list published by the Financial Action Task Force (FATF), as well as the “flawed process” by which the list was developed.  As a result of the new list, banks in the EU will be required to exercise enhanced due diligence when dealing with customers and financial institutions from the listed countries and territories.

According to the Commission, the new list reflects the broadened criteria for the identification of high-risk jurisdictions under the EU’s Fifth Anti-Money Laundering Directive, which now includes “the availability of information on the beneficial owners of companies and legal arrangements” including trusts.  In creating this list, the Commission “developed its own methodology to identify high-risk countries, which relies on information from the Financial Action Task Force, complemented by its own expertise and other sources such as Europol.”  EU Justice Commissioner Věra Jourová stated that the list is aimed at ensuring that “dirty money from other countries does not find its way [into the EU’s] financial system,” and urged the listed countries “to remedy their deficiencies swiftly.”
Continue Reading European Commission Adds US Territories to “Dirty Money” List in Departure from FATF

On January 28, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced the designation of Venezuelan state-owned oil company Petróleos de Venezuela, S.A. (PdVSA) as a Specially Designated National (SDN).  The designation was made pursuant to Executive Order (EO) 13850 (Blocking Property of Additional Persons Contributing to the Situation in Venezuela).  That order initially applied only to the Venezuelan gold sector, but as part of the Treasury Department’s actions, Treasury Secretary Steven Mnuchin determined “that persons operating in Venezuela’s oil sector are subject to sanctions pursuant to E.O. 13850,” allowing for the designation of PdVSA.

As is the case with all SDNs, all property and interests in property of PdVSA in the possession or control of a US person or within the United States must be blocked and US persons are generally prohibited from dealing with the company.  Such prohibitions also extend to entities owned 50% or greater by PdVSA.  Given the sizable role that PdVSA and its subsidiaries play in the US economy and petroleum industry, OFAC issued 8 new general licenses (GLs) with the goal of limiting potential disruption from the designation.
Continue Reading Trump Administration Designates PdVSA, Issues General Licenses

On December 17, 2018, the Financial Crimes Enforcement Network (“FinCEN”) announced that UBS Financial Services, Inc. (“UBS”) had entered into a consent agreement to resolve violations of the Bank Secrecy Act (BSA). UBS is a global firm providing financial services in over 50 countries, including the US  As part of this agreement, UBS will pay $14.5 million in civil penalties to US regulators — $5 million of which will be paid to the US Department of the Treasury, while the remainder will be made concurrent with penalties imposed by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).

According to FinCEN, UBS willfully violated anti-money laundering (AML) program requirements and failed to conduct ongoing due diligence on correspondent accounts for foreign financial institutions for more than a decade. Violations included: failure to develop and implement an appropriate risk-based AML program that adequately addressed the risks associated with accounts that included both traditional brokerage and banking-like services; failure to implement appropriate policies and procedures to ensure the detection and reporting of suspicious activity; failure to hire and retain sufficient AML compliance staff to meet its obligations under the BSA, resulting in a backlog of cases that hindered UBS’s ability to investigate and report suspicious activity;  and failure to adequately monitor foreign currency-denominated wire transfers conducted through commodities accounts and retail brokerage accounts.  These practices violated UBS’s obligations as a brokerage firm providing bank-like services to develop and implement an adequate AML program.
Continue Reading UBS Financial Services Agrees to Pay $14.5 Million to Resolve Anti-Money Laundering Violations

On November 15, OFAC imposed economic sanctions against 17 Saudi officials for their participation in the killing of Jamal Khashoggi. Khashoggi, a journalist and “royal insider-turned-critic of Saudi policy”, was murdered at the Saudi Arabian consulate in Istanbul, Turkey on October 2, 2018. Among the men designated in yesterday’s action are Saud Al-Qahtani—a top aide to Saudi Crown Prince Mohammed bin Salman—and Saudi Consul General Mohammed Alotaibi. These individuals were designated pursuant to Executive Order 13818, which builds upon and implements the Global Magnitsky Human Rights Accountability Act targeting perpetrators of serious human rights abuse and corruption.

Yesterday’s designations were announced hours after Saudi Arabia’s public prosecutor said the death penalty was being sought for five out of eleven suspects charged in Khashoggi’s murder in Saudi Arabia. The economic sanctions do not target the Riyadh government or the Crown Prince, who the Saudi foreign minister said had “absolutely nothing to do” with the murder. Nonetheless, US officials have continued to press the Saudi government for a full investigation.
Continue Reading Treasury Sanctions 17 Saudi Officials, though not the Crown Prince, in the Killing of Jamal Khashoggi