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).
On January 5, 2023, President Biden signed into law the Protecting American Intellectual Property Act of 2022 (the Act). The Act requires periodic reports to Congress identifying any “foreign persons” who are found to have engaged in significant theft of trade secrets of U.S. persons. The Act also requires menu-based sanctions against such persons, which may include blocking sanctions.
Although the Act does not specifically target any country, the press statement from Sen. Chris Van Hollen (D-Md.), the sponsor of the Act, clearly indicates that China is a primary intended target of the legislation.…
On October 11, 2022, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) and Financial Crimes Enforcement Network (FinCEN) announced enforcement actions against Bittrex, Inc. (Bittrex), a privately-owned digital asset trading platform based in Bellevue, Washington, for apparent violations of anti-money laundering (AML) laws and of multiple sanctions programs. A settlement of over $24 million was announced by OFAC and a $29 million fine was announced by FinCEN. FinCEN will credit payment of the OFAC settlement amount toward Bittrex’s potential liability with FinCEN, meaning Bittrex will pay just over $29 million in total. Joint enforcement action between OFAC and FinCEN is uncommon—the settlements mark the first instance of parallel enforcement actions by OFAC and FinCEN in the digital asset sector.
Continue Reading OFAC and FinCEN Announce Enforcement Actions Against Bittrex
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.…
On August 8, 2022, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced the imposition of sanctions on the decentralized digital asset mixer Tornado Cash. The action marks the first time OFAC has targeted an on-chain decentralized protocol. To date, OFAC has not issued any guidance specific to decentralized finance (DeFi) as part of its broader sanctions guidance for the “virtual currency” industry, but the Tornado Cash action lays down an important marker and makes clear that OFAC will target projects or protocols engaged in illicit activity regardless of their centralized or decentralized status. (Our prior blog post on OFAC’s general virtual currency guidance is available here).
Continue Reading OFAC Designates Tornado Cash in First Action Against a Decentralized Platform
The National Economic Crime Centre (NECC), a multi-agency unit in the National Crime Agency (NCA), and HM Treasury’s Office of Financial Sanctions Implementation (OFSI) have published a “red alert” on financial sanctions evasion typologies by Russian elites and enablers (Red Alert) that synthesizes information from a range of UK law enforcement agencies as well as industry to identify common techniques designated persons and their enablers are suspected to be using to evade financial sanctions.
The Red Alert provides a series of sanctions evasion indicators identified from real world case studies. It also sets out recommendations as to the level and type of due diligence that companies should perform on higher risk transactions and counterparties. The stated purpose of the Red Alert is to combat and disrupt financial sanctions evasion by complementing the private sector’s existing knowledge of these issues and facilitating preventative action in the form of enhanced business processes and procedures to identify and mitigate the significant exposure that many sectors of industry have to sanctions evasion following the unparalleled volume of sanctions designations introduced since the start of the Russian invasion of Ukraine.
In practical terms, the Red Alert offers a timely reminder of the challenges companies can face in effectively identifying and mitigating the sanctions risks posed by higher risk transactions and counterparties and underscores the importance of companies undertaking robust due diligence that is calibrated to address appropriately the sanctions risks, including sanctions evasion risks, posed by such transactions and business relationships. In particular, companies should carefully consider whether their existing sanctions compliance processes take into consideration the sanctions evasion warning flags and due diligence recommendations outlined in the Red Alert.…
On June 15, 2022, the United Kingdom will introduce a strict civil liability standard for violations of UK financial sanctions committed after that date. In anticipation of this important change to the enforcement powers of HM Treasury’s Office of Financial Sanctions Implementation (OFSI), the OFSI enforcement and monetary penalties for breaches of financial sanctions guidance (Monetary Penalties Guidance) has been updated and will take effect from June 15. OFSI Director, Giles Thomson, also has outlined OFSI’s enforcement approach in light of these imminent changes in a blog post.
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.…
Between April 5 and April 17, 2022, the US government took several steps to ratchet up economic sanctions, export controls, and other restrictive trade measures targeting Russia and Belarus.
President Biden issued a new Executive Order prohibiting US persons from engaging in new investment in Russia, and also establishing a framework through which US persons could in the future be prohibited from providing certain services to any person in Russia.
The US Treasury Department’s Office of Foreign Assets Control (OFAC) designated a darknet market and cryptocurrency exchange, several Russian banks and their subsidiaries, and a number of companies allegedly assisting the Russian military by adding them to the Specially Designated Nationals and Blocked Persons (SDN) List pursuant to Executive Orders (EOs) 14024 and 13694. OFAC also published seven new and amended general licenses, including authorizations related to the recent designations of Public Joint Stock Company Sberbank of Russia (Sberbank), Joint Stock Company Alfa-Bank (Alfa-Bank), and Public Joint Stock Company Alrosa (Alrosa).
Separately, the US Commerce Department’s Bureau of Industry and Security (BIS) announced new, stringent export controls so that all items subject to the US Export Administration Regulations, except items designated “EAR99,” require a license for export, reexport, or transfer (in country) to or in the Russian Federation and Belarus.…
Between March 24 and April 1, 2022, the US Treasury Department’s Office of Foreign Assets Control (OFAC) designated over 400 Russian elites, Duma members, and defense companies as Specially Designated Nationals (SDNs) pursuant to Executive Order (EO). 14024. OFAC also published four new, limited General Licenses regarding certain humanitarian, import-related, diplomatic, and journalistic activities, added one new FAQ, and published a determination for EO 14024. Separately, the White House has indicated that the United States is seriously considering imposing secondary sanctions against companies engaged in evasive activities with Russia or in business that otherwise undermines sanctions.
Additionally, on April 1, the Commerce Department’s Bureau of Industry and Security (BIS) added 120 entities in Russia and Belarus to the Entity List.