OFAC Issues Hizballah Financial Sanctions Regulations

On April 15, OFAC issued new regulations to implement the Hizballah International Financing Prevention Act of 2015. The regulations authorize the Secretary of the Treasury to prohibit U.S. financial institutions from opening or maintaining correspondent or payable through accounts, or to impose strict conditions on the opening or maintenance of such accounts, for foreign financial institutions determined to knowingly:  (i) facilitate significant transactions for or on behalf of Hizballah or any person whose property or interests in property are blocked due to a connection with  Hizballah; (ii) engage in money laundering to carry out such transactions; or (iii) facilitate or provide significant financial services in relation to transactions described in (i) and (ii). OFAC will publish the names of foreign financial institutions sanctioned under the Hizballah Financial Sanctions Regulations in the Federal Register, and include them in the Hizballah Financial Sanctions Regulations List, a new list maintained on OFAC’s website. The regulations took effect immediately upon issuance.

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OFAC Issues Burundi Sanctions Regulations

On April 14, OFAC issued the Burundi Sanctions Regulations, 31 CFR part 554 to implement the November 22, 2015 Executive Order 13712, “Blocking the Property of Certain persons Contributing to the Situation in Burundi.” OFAC issued the regulations in abbreviated form to provide immediate guidance to the public. The regulations provide limited definitional and interpretive guidance, and contain a number of licenses permitting U.S. persons to engage in activities otherwise prohibited by Executive Order 13712, including, among others, providing legal services and emergency medical services to designated persons. Persons designated pursuant to Executive Order 13712, i.e., those whose property and interests in property are blocked, are published in the Federal Register and incorporated into OFAC’s List of Specially Designated Nationals and Blocked Persons with the identifier ‘[BURUNDI].’” OFAC intends to issue a more comprehensive set of regulations in the future, which may include additional interpretive and definitional guidance, as well as additional general licenses and statements of licensing policy.

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The Panama Papers: Implications for Financial Crimes Compliance Professionals

A group of international news outlets published a series of articles this week regarding the so-called “Panama Papers;” 11.5 million documents leaked from a Panamanian law firm specializing in creating offshore companies. Offshore companies form a well-recognized component of tax planning, but have come under increased scrutiny recently. According to the reporting, the Panama Papers reveal that a large number of foreign politicians, celebrities and other high net worth individuals used opaque structures, such as limited liability companies (LLCs), personal investment companies (PICs) and trusts, to hold (and as implied in the reporting, hide) wealth offshore. Other reporting depicts the use of the offshore PICs, trusts and/or LLCs to conduct business with sanctions targets in Iran, North Korea, and Syria. A number of international foreign financial institutions providing trust administration and wealth management services held thousands of accounts for offshore companies identified in the Panama Papers, according to the reporting. Read more…

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President Expands North Korean Sanctions

On March 16, the President issued an Executive Order broadening sanctions in response to North Korea’s continuing pursuit of its nuclear and ballistic missile programs. The order blocks the Government of North Korea and the Workers’ Party of Korea; prohibits the exportation of goods, technology and services (including financial services) to North Korea from the United States; prohibits new investment in North Korea by U.S. persons; and establishes nine new criteria for designation as a blocked person. One provision authorizes the Secretary of the Treasury to identify sectors of the North Korean economy to target for asset blocking sanctions. Under this authority, Treasury Secretary Jacob J. Lew determined that persons in the transportation, mining, energy, or financial services sectors of North Korea can be targeted. Read more…

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OFAC Issues Finding of Violation for Alleged Violations of the Reporting, Procedures, and Penalties Regulations

On March 16, OFAC issued a Finding of Violation to a New York-based international digital payments solutions and technology company for allegedly violating the Reporting, Procedures and Penalties Regulations (RPPR), 31 C.F.R. part 501. According to OFAC, the company failed to report that it held accounts – albeit dormant – in which two Iranian banks on OFAC’s SDN List had an interest. OFAC asserted that, while no company personnel appeared to have knowledge of the conduct that led to the violations, the company had reason to know that it maintained funds associated with the sanctioned Iranian banks because it is “a large and commercially sophisticated company that deals primarily with banks and other financial institutions.” OFAC also noted that the company’s failure to report the accounts resulted in OFAC’s reports to Congress being incomplete, that the failure to record interest on the accounts reduced the value of the blocked accounts, and that the company apparently did not have internal controls sufficient to prevent or identify the violations. On the other hand, OFAC acknowledged that there was no actual knowledge of the violations or a history of similar violations, that the funds did not reach the sanctioned parties, and that the company eventually disclosed the issue and then fully cooperated with the investigation.

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