On February 26, 2020, the Office of Foreign Assets Control (OFAC) announced a $7,829,640 settlement with Switzerland-based Société Internationale de Télécommunications Aéronautiques (SITA) for 9,256 violations of the Global Terrorism Sanctions Regulations (GTSR). The settlement, which concerns SITA’s provision of computer services and software subject to U.S. jurisdiction for the benefit of sanctioned airlines, is the latest OFAC enforcement action to highlight the importance of sanctions compliance for software and digital service providers inside and outside the United States.

The takeaway: Non-U.S. providers of software and digital services should avoid the provision of U.S.-origin products or the involvement of U.S.-based infrastructure or subsidiaries in activities with U.S.-sanctioned customers and territories, unless licensed under, or exempted from, OFAC regulations.

Continue Reading Data Breach: OFAC Settles with Swiss Firm over Digital Services for Sanctioned Airlines

Effective February 27, 2020, the Office of Foreign Assets Control (OFAC) of the US Department of the Treasury issued General License (GL) Number 8 to authorize certain humanitarian transactions involving the Central Bank of Iran (CBI).  As discussed further below, GL No. 8 and other measures taken by the US Government should now facilitate transfers, transactions, and certain activities related to the exportation and reexportation of agricultural commodities, medicines, and medical devices to Iran. Before issuance of GL No. 8, humanitarian trade from the United States and involving U.S. persons had been significantly and negatively affected based on the US Government’s “maximum pressure” campaign against the Government of Iran.

Continue Reading New OFAC General License No. 8 Authorizes Agricultural Commodity and Medical Commodity Transactions Involving the CBI

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On February 24, 2020, the US Commerce Department’s Bureau of Industry and Security (BIS) issued a rule that significantly expands the scope of US export controls on Russia and Yemen. The new trade restrictions on Russia have been imposed due to “proliferations concerns” regarding Russia on the part of the US government. The rule also broadens export controls on Yemen to account for heightened US national security concerns emanating from Yemen as it continues to suffer from a years-long internal and regional war.

These new US export controls will impact US companies, but also many non-US companies whose products have US content or other US links. The changes are significant for the nuclear and aerospace sectors, but also have relevance in other sectors. Products and technologies that may now require a license for Russia include many industrial goods, such as certain valves, machine tools and robots, along with certain composites, electronics production technologies and others.

For more information on how these rules may impact your business, click here to read the Client Advisory.

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On February 20, 2020, the US Office of Foreign Assets Control (OFAC) issued two new FAQs on the Reporting Procedures and Penalties Regulations (RPPR), 31 CFR part 501. The FAQs follow OFAC’s June 2019 amendments to the RPPR, which significantly expanded the requirement for US persons (and in some circumstances non-US persons subject to OFAC’s regulatory jurisdiction) to report blocked property, unblocked property, or rejected transactions to OFAC.

Continue Reading New OFAC FAQs Clarify Rules for Reporting of Rejected Transactions

On February 18, 2020, OFAC designated Switzerland-based oil broker Rosneft Trading SA (“Rosneft Trading”), a subsidiary of Rosneft Oil Company, as a Specially Designated National (“SDN”) for “operating in the oil sector of the Venezuelan economy,” under Executive Order 13850.  The US government had been weighing possible sanctions against Rosneft entities due to their activity in Venezuela for months.  A US official stated during a briefing that Rosneft Trading handled more than half of Venezuela’s oil exports and took steps to conceal those shipments, and that this sanctions designation was “a reaction to the growing and increasingly central role of Rosneft in the affairs of Venezuela, particularly in the course of the last year.”  Illustrating the policy deliberations that appear to have preceded this designation, a US Department of Energy official stated that this action was viewed as not likely to destabilize global oil markets, which have seen recent price declines.

OFAC also sanctioned Didier Casimiro, Rosneft Trading’s Chairman and President, who a State Department press release notes “also serves as Rosneft’s Vice President for Refining, Petrochemical, Commerce and Logistics.”  It is noteworthy that the US government intentionally targeted an officer and director of the Rosneft parent entity.  Mr. Casimiro’s profile on Rosneft’s website confirms that he holds that VP position, along with membership on the board of Rosneft and a small number of shares of Rosneft.  The Rosneft web page listing other positions held by board members states that Mr. Casimiro “is Chairman of the Board of Directors at PJSC Saratov Oil Refinery, PJSC NC Rosneft – МP Nefteproduct, CJSC Rosneft-Armenia, LLC RNY, Rosneft Trading S.A., LLC «RNCommerce», LLC «RN-Refining», Chairman of the Supervisory Board at PRJSC LINIK, member of the Board of Directors at SLAVNEFT, Slavneft-YANOS PJSC, Rosneft Global Trade S.A., JSC SPIMEX, Rosneft Techno S.A., PJSOC Bashneft, LLC «RNForeign Projects», Nayara Energy Limited.”  The designation of Mr. Casimiro, if he continues to hold these senior positions within Rosneft and other organizations, could potentially add compliance complications in doing business with Rosneft or those other organizations, along with the direct and more significant impact of these sanctions actions on Rosneft Trading and Mr. Casimiro himself.

Continue Reading US Sanctions Rosneft Subsidiary and a Rosneft Director and Vice President for Venezuela Oil Trade

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On February 13, 2020, the final rules implementing changes to the Committee on Foreign Investment in the United States’ (CFIUS) jurisdiction and review process, as required under the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), take effect.

CFIUS, the inter-agency body responsible for reviewing foreign investment into the United States for national security risks, has traditionally been limited to reviewing transactions in which a foreign person acquires “control” of a US business. CFIUS’s regulations at Part 800 now cover both “controlling” and certain “non-controlling” investments in US businesses.

The final rules track fairly closely with the proposed rules released in September 2019, although CFIUS made a number of changes in response to comments from industry. The Client Advisory summarizes the final regulations in their entirety and also highlights where the final regulations differ from the proposed rules.

For more information about the new CFIUS rules and their impact, click here to read Steptoe’s Client Advisory.

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On January 23, 2020, Transparency International published its 2019 Corruption Perceptions Index (CPI),  which measures perceptions of public sector corruption in 180 countries. Viewed together with the 2019 TRACE Bribery Risk Matrix,  which also includes private sector corruption, the Asia Pacific (APAC) region overall remains generally high risk for bribery and corruption relative to other parts of the globe, with some notable exceptions.

APAC countries that have historically ranked highly (e.g., New Zealand, Singapore, Australia, Hong Kong, and Japan) continued to do so, with some demonstrating slight improvements in their CPI scores. Historically underperforming countries (e.g., Cambodia, North Korea, and Afghanistan) also remained in place, with no significant improvements. Gains in South Korea, Malaysia, Indonesia, and China were offset by declines in India, Mongolia, and the Philippines.

The CPI and TRACE Bribery Risk Matrix provide a largely consistent and useful point of reference for companies performing “risk-based” transactional and customer due diligence in APAC. However, there are some differences between the two which require a deeper dive into the analysis underlying the rankings.

For more information on how the 2019 rankings can help with risk-based due diligence, read the full Client Advisory.

 

On 5 February 2020, the UK Court of Appeal dismissed a challenge to the UK’s first Unexplained Wealth Order (UWO). Mrs. Zamira Hajiyeva, wife of the former chair of the International Bank of Azerbaijan who was sentenced to 15 years in jail in 2016 for defrauding the bank out of £2.2 billion, launched a challenge against the UK National Crime Agency’s (NCA) first ever UWO, attempting to overturn the UWO against a property in Knightsbridge, London, purchased for £11.5 million. Her arguments that the NCA mischaracterized her husband’s status as a politically exposed person (PEP) and that her husband’s conviction was the result of a “grossly unfair trial” were rejected by the Court of Appeal. This decision will likely energise and provide a boost to the NCA and other law enforcement agencies in seeking UWOs to seize ill-gotten gains in the future.

Continue Reading UK Court of Appeal Rejects Unexplained Wealth Order Challenge

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Of the record-breaking USD 2.9 billion in fines imposed by US authorities in 2019 for violations of the Foreign Corrupt Practices Act (FCPA), almost 95% involved Asia Pacific, primarily China and India, but also Indonesia, Vietnam, Thailand, and South Korea.

This year, the US Department of Justice and the Securities & Exchange Commission had cases against well-known multinational corporations operating in the region, and continued their emphasis on individual accountability, announcing prosecutive actions against 35 individuals in 2019, including several former Alstom executives for bribery in Indonesia; former Goldman Sachs executives in connection with Malaysian sovereign wealth fund (1MDB); and the former president, CEO, and Chief Legal officer of Cognizant accused of paying bribes in India.

Read more about these important FCPA cases and others from the Asia Pacific region in our Client Advisory.

On January 31, 2020, the US Treasury Department’s Office of Foreign Assets Control (OFAC) lifted sanctions on China-based COSCO Shipping Tanker (Dalian) Co., Ltd. (COSCO Dalian), five affiliates, and one individual who were named as Specially Designated Nationals (SDNs) in September 2019 for knowingly engaging in a significant transaction for the transport of oil from Iran. Despite last week’s reprieve, another COSCO subsidiary, COSCO Shipping Tanker (Dalian) Seaman and Ship Management Co., Ltd., as well as several affiliates and their executives, remain on the SDN List.

The September 2019 designations disrupted parts of the global shipping market, leading to a significant increase in some rates. OFAC’s announcement came several days before the scheduled expiration on February 4, 2020 of a general license authorizing US persons to engage in transactions for the maintenance or winding down of certain transactions with COSCO Dalian.

Continue Reading OFAC Removes Secondary Sanctions on COSCO Division Targeted for Iran Oil Imports