The U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) has published major revisions to its humanitarian authorizations and other general licenses under the North Korean Sanctions Regulations (“NKSR”), which took effect on February 16, 2024.  These regulatory changes expand the scope of authorized activity in North Korea, which should lead to fewer specific license applications for NGOs engaged in humanitarian work relating to the DPRK.  In this regard, OFAC has narrowed the restriction on authorized activity arising from “partnerships” with the DPRK government.  OFAC has also established a new authorization for journalistic activities in North Korea.  These revisions to the NKSR, along with some improved guidance from OFAC regarding banks’ due diligence expectations, may result in less de-risking by financial institutions when it comes to customer activity involving North Korea.

At the same time, there remain important limitations and conditions to these authorizations that must be observed.  Moreover, OFAC has implemented a new advance reporting requirement if one intends to use the revised humanitarian general license, which may increase the compliance burden on NGOs as well as provide the State Department an opportunity to object to the use of the general license on a case-by-case basis. Continue Reading OFAC Issues Significantly Revised NGO Authorizations for North Korea

The UK’s National Economic Crime Centre (“NECC”) recently issued an amber alert concerning the sanctions evasion, money laundering, and trafficking in cultural property risks presented to UK industries linked to artwork storage facilities and the art storage sector (the “Amber Alert”).  The Amber Alert highlights that criminals are finding ways to utilize the art market to conduct illicit activity and includes case studies and key indicators that those operating within the art storage sector can use to detect such activity.  This development underscores the UK government’s continued commitment to cracking down on the evasion of sanctions (particularly under the Russia sanctions regime), as well as an increased focus on identifying and targeting more avenues for sanctions evasion so that counter measures can be implemented to thwart those efforts.  It also highlights the increasingly interconnected approach the UK government and law enforcement are adopting to address activity with potential touchpoints to a range of financial and other crimes. Continue Reading UK NECC Publishes Amber Alert on Sanctions Evasion in the Art Storage Sector

After months of anticipation, a federal judge has finally ruled in the closely watched case of Joseph Van Loon, et al. v. Department of Treasury, et al.  This important case addressed challenges to the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) decision to impose sanctions on Tornado Cash as a Specially Designated National and Blocked Person (SDN).  The judge granted summary judgement in favor of OFAC, finding it had sufficient legal authority to designate Tornado Cash, and denied summary judgement on the plaintiffs’ claims.  Shortly after that ruling, OFAC announced the SDN designation of Roman Semenov, one of three alleged co-founders of Tornado Cash, and the Department of Justice (DOJ) charged Semenov and Roman Storm, another Tornado Cash founder, with multiple alleged criminal violations related to anti-money laundering (AML) and economic sanctions laws. 

All three actions are critical developments that contain key insights on how the US government views the AML and sanctions obligations of decentralized protocols and individuals associated with those protocols.  The developments make clear that, at least in certain scenarios, individuals involved in the creation of a DeFi platform can be held responsible for the activities conducted on that platform where such conduct violates US economic sanctions or AML laws, or constitutes sanctionable activity under applicable executive orders. Continue Reading Critical Tornado Cash Developments Have Significant Implications for DeFi AML and Sanctions Compliance

On August 10, 2023, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), in coordination in the United Kingdom and Canada, designated the former governor of Lebanon’s central bank, Riad Salameh (“Salameh”) and four close associates, pursuant to Executive Order (“E.O.”) 13441.  According to OFAC’s press release, Salameh was designated for alleged “corrupt and unlawful actions [that] have contributed to the breakdown of the rule of law in Lebanon” and his close associates were designated for “having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, Salameh.”  The designations are noteworthy in that they were undertaken pursuant to OFAC’s determinations under sections 1(a)(i)(A) and (B) of E.O. 13441 – which provide authority for OFAC designations in response to actions “contribut[ing] to the deliberate breakdown in the rule of law in Lebanon”, among other sanctionable activities – rather than E.O. 13818 (the “Global Magnitsky Act E.O.”), which authorizes the imposition of sanctions against individuals and entities involved in serious human rights abuses, corruption, or other malign activities, including any person determined to “degrade the rule of law,” on a worldwide basis. Continue Reading OFAC Sanctions Former Governor of Lebanon Central Bank and Associates

On July 26, 2023, the US Department of Commerce’s Bureau of Industry and Security (BIS), the US Department of the Treasury’s Office of Foreign Assets Control (OFAC), and the US Department of Justice (DOJ) issued a joint compliance note (the Note) focusing on the voluntary self-disclosure (VSD) policies that apply to US sanctions, export controls, and other national security laws. The Note is the second collective effort by the three agencies to inform the private sector about civil and criminal enforcement trends, as well as to provide guidance to the business community and all persons regarding compliance with US sanctions and export laws. The first joint note, which focused on combatting third-party intermediaries used to evade Russia-related US sanctions and divert export-controlled items that are contributing to Russia’s foreign harmful activities, was issued on March 2, 2023.

The Note does not change the existing VSD policies of the three agencies, but highlights the benefits of their existing VSD policies to incentivize companies to promptly disclose and remediate.  Likewise, the Note highlights the risks companies face, in at least some instances, should they choose not to disclose.

The Note also encourages whistleblowers to report suspected violations of sanctions and anti-money laundering laws to the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN), for which persons that submit whistleblower tips may be awarded up to 10% to 30% of the monetary penalty collected for successful US government enforcement actions.Continue Reading Commerce, Treasury, and Justice Issue Joint Compliance Note on Voluntary Self-Disclosure

On May 19, 2023, the US Treasury Department’s Office of Foreign Assets Control (“OFAC”) and the US Department of State announced a new round of multifaceted sanctions against Russia.  These sanctions actions were announced alongside additional export controls imposed by the US Commerce Department’s Bureau of Industry and Security (“BIS”) and the publication of a new joint alert by BIS and the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”), which are the subject of a separate blog post.

The new sanctions include expanded secondary sanctions authorities targeting additional sectors of the Russian economy; designations of more individuals and entities on the List of Specially Designated Nationals and Blocked Persons (“SDN List”); the inclusion of additional services among those that are prohibited for export to Russia; and new reporting requirements for US holders of property in which Russia’s Central Bank, Finance Ministry, or National Wealth Fund have an interest.

US persons, and others doing business that involves US jurisdiction, should continue to be vigilant against transacting with SDNs or entities that are owned by 50% or more by SDNs.  US and non-US persons alike should also carefully consider whether any of their business could constitute operations in one of the newly sanctioned sectors of Russia’s economy.Continue Reading OFAC and State Department Significantly Expand Russia-Related Sanctions

On February 24, 2023, the US government announced a range of new export controls, sanctions, and tariffs to coincide with the first anniversary of Russia’s ongoing war against Ukraine. These actions by the US Department of Commerce, Bureau of Industry and Security (BIS), the US Department of the Treasury, Office of Foreign Assets Control (OFAC), the US Department of State, and the White House reflect the continued efforts of the US – in coordination with its allies – to impose costs on Russia for the war.

Each successive round of US export controls and sanctions presents new compliance challenges, against the backdrop of heightened enforcement risk resulting from aggressive, well-coordinated US government actions. US and non-US entities and individuals who engage in transactions related to Russia or Belarus should pay close attention to this complex and evolving regulatory framework. Additionally, entities and individuals exporting to Iran should take note of the expanded scope of the US Export Administration Regulations (EAR) under a new Iran Foreign Direct Product (FDP) Rule.Continue Reading US Imposes Additional Export Controls, Sanctions, and Tariffs targeting Russia, Belarus, and Iran On First Anniversary of Russia’s War Against Ukraine

On December 20, 2022, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued or amended general licenses (GLs) and FAQs to implement United Nations Security Council Resolution (UNSCR) 2664, which establishes humanitarian carveouts across UN sanctions regimes. The development of UNSCR 2664 was co-led by the United States and Ireland, and the Security Council adopted the Resolution on December 9, 2022. The amendments to OFAC’s regulations are set forth in OFAC’s Final Rule published in the Federal Register (see here and here).Continue Reading US Treasury Implements Humanitarian Authorizations Across Sanctions Programs to Comply with UN Resolution

This year, we have witnessed an extraordinary set of coordinated economic sanctions and export control regulatory actions against Russia after its invasion of Ukraine. In contrast to the fast and furious pace of regulatory action, enforcement actions did not keep pace.

This year’s enforcement actions by the US Treasury Department’s Office of Foreign Assets Control (OFAC) are notable for their jurisdictional reach and expansion of liability theories that aren’t necessarily supported by the plain language of their regulatory authority. The Commerce Department’s Bureau of Industry & Security (BIS) enforcement actions have targeted the aerospace industry, especially in relation to Russia and Belarus. The Department of Justice (DOJ) expended much of its resources on seizing and forfeiting assets linked to Russian oligarchs, galvanizing its multilateral networks.

Interestingly, OFAC continued to target the Iranian petroleum and petrochemical sector despite news reports of intensive negotiations to revive the Joint Comprehensive Plan of Action (JCPOA).

Below we discuss some representative enforcement actions to date.Continue Reading What to Expect Next? US Economic Sanctions and Export Controls Enforcement Actions Thus Far in 2022

Between April 18 and May 2, 2022, the US government continued to ratchet up economic sanctions, export controls, and other restrictive trade measures targeting Russia.  Most significantly, on April 21, President Biden issued a Proclamation prohibiting “Russian-affiliated vessels” from entering US ports.  Otherwise, the US government has focused on utilizing its existing authorities to impose further costs on Russia.

Over the last two weeks of April, the US Treasury Department’s Office of Foreign Assets Control (OFAC) designated over 40 individuals and entities including Transkapitalbank (TKB), re-issued an expanded set of Ukraine- / Russia- Sanctions Regulations (URSR), and issued several new or revised general licenses, including one relating to the provision of assistance by nongovernmental organizations, and 8 Frequently Asked Questions (FAQs).

Separately, the Commerce Department’s Bureau of Industry and Security (BIS) continues to be focused on restricting the Russian aviation sector, issuing a temporary denial order (TDO) on the Russian cargo aircraft carrier, Aviastar, for operating aircraft on flights into and out of Russia without the BIS authorization required under the Export Administration Regulations (EAR), and providing weekly updates to its list of commercial and private aircraft operated in potential violation of the EAR.Continue Reading April 18 – May 2, 2022 Russian Sanctions Update