Multiple Federal Agencies Pursue International Payment Processor

The DOJ, OFAC and the U.S. Postal Inspection Service (USPIS), as part of an effort to stop an international network of mass mailing fraud schemes that target elderly and vulnerable victims, conducted a joint enforcement action against an international payments processor and money services business based in Canada. The agencies alleged that the payment processor engaged in money laundering and mail fraud by knowingly processing payments on behalf of the perpetrators of more than 100 different mail fraud campaigns, collectively involving tens of millions of dollars. OFAC designated the payments processor as a significant transnational criminal organization (TCO) pursuant to Executive Order 13581. OFAC also designated as TCOs a global network of 12 individuals and 24 entities across 18 countries based on their association with the payment processor. As a result of today’s action, all property and interests in property of the designated persons subject to U.S. jurisdiction are blocked, and U.S. persons are prohibited from engaging in transactions with them. Additionally, USPIS obtained a warrant through the Eastern District of New York to seize the funds in a U.S. bank account that was allegedly used to process payments received through fraudulent mailings. According to OFAC, the payment processor “has a nearly 20-year history of knowingly processing payments relating to these fraudulent solicitation schemes, which result in the loss of millions of dollars to U.S. consumers.”

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House Passes Bill to Bring Transparency to Iranian Finances

On September 21, the House of Representatives voted to pass the Iranian Leadership Asset Transparency Act. This bill, HR 5461, would require the Treasury Secretary to publish a list of assets held by senior Iranian political and military leaders, including where the assets were acquired, and how they are employed. The Treasury would also be required to identify new methods used to evade anti-money laundering laws and provide recommendations to improve techniques to combat illicit uses of the U.S. financial system by each official. The required report would be posted on the Treasury Department’s website in English, but also in the three major languages spoken within Iran.

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Federal Court Denies FinCEN’s Second Attempt to Ban Foreign Bank

On September 21, the U.S. District Court for the District of Columbia stayed enforcement of FinCEN’s second attempt to cut off a Tanzania-based bank’s access to the U.S. banking system. The dispute originated from FinCEN’s attempt to prohibit domestic financial institutions from opening or maintaining correspondent accounts on behalf of the foreign bank under the authority of Section 311 of the USA PATRIOT ACT, which authorizes FinCEN take special measures against banks of primary money laundering concern. FinCEN first promulgated a final rule imposing the prohibition in July 2015, which was enjoined by the court in August, 2015. FinCEN agreed to a voluntary remand to correct deficiencies in its rulemaking process, such as providing the bank access to declassified information and considering the use of less drastic measures to address its concerns. In March 2016, FinCEN promulgated a revised final rule in which it indicated that the bank’s AML compliance remained inadequate and that the bank continued to engage in “illicit financial activity.” Upon a second review, the court again found that FinCEN had failed to adequately disclose declassified information to the bank prior to releasing the revised final rule, and did not properly respond to other of the bank’s concerns. In addition, the court was not satisfied that FinCEN had made the required consultations with other executive-branch agencies as required by statute.

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OFAC Settles with Illinois-based Company for Alleged Violations of the Iranian Transactions and Sanctions Regulations

On September 13, OFAC announced a $4,320,000 settlement with an Illinois-based company to resolve allegations that it violated the Iranian Transactions and Sanctions Regulations (ITSR), 31 C.F.R. part 560. From approximately May 5, 2009 to March 2, 2012, OFAC alleges that on 48 occasions the company shipped seeds to consignees located in Europe or the Middle East with the knowledge or reason to know that the seeds were ultimately destined for Iran distributors. The settlement amount reflects OFAC’s consideration of the following aggravating factors: (i) the company acted willfully by engaging in conduct it knew to be prohibited; (ii) the company acted recklessly by ignoring its OFAC compliance responsibilities; (iii) the company’s employees, including mid-level management, had “contemporaneous knowledge” that the seeds were ultimately destined for Iran, and for almost eight months after the Director of Finance learned of OFAC’s investigation, it continued sales to its Iranian distributors; (iv) the company’s conduct resulted in providing $770,000 in economic benefit to Iran; (v) the company failed to cooperate with OFAC at the start of the investigation, providing information that was inaccurate, misleading, or incomplete; and (vi) the company is a subdivision of a commercially sophisticated, international corporation. Mitigating factors considered when determining the settlement amount include, but are not limited to, the company’s lack of sanctions history with OFAC for five years before the first of the alleged 48 violations and the remedial steps the company took to ensure future compliance with OFAC sanctions.

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Obama Administration Issues Executive Order Terminating Côte d’Ivoire Sanctions Programs

On September 14, the White House issued an Executive Order titled “Termination of Emergency with Respect to the Situation in or in Relation to Côte d’Ivoire.” The Executive Order terminates the Côte d’Ivoire-related sanctions program. Accordingly, OFAC updated its SDN List to indicate the removal of the sanctions against the country established under the United Nations Security Council’s Resolution 2284. The Executive Order is effective immediately.

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