Treasury Sanctions North Korean Officials and Companies from Transportation, Mining, Energy, and Financial Services Industries

On December 2, OFAC announced its decision to designate 16 entities and seven individuals in response to North Korea’s ongoing nuclear weapons development and violations of U.N. security council resolutions. The designations include a number of North Korean banks and other entities in the financial services sector of the North Korean economy. As a result of today’s action, any property or interests in property of the designated persons in the possession or control of U.S. persons or within the United States must be blocked. Additionally, U.S. persons are generally prohibited from engaging in transactions involving the designated persons and listed aircraft. The additions to the Specially Designated Nationals List were made pursuant to Executive Orders 13382, 13687, and 13722, which target proliferators of weapons of mass destruction, the Government of North Korea, and a number of North Korean trade and industry sectors, including transportation, coal and energy, and financial services.


OFAC Publishes Fact Sheet and FAQ Related to Termination of Burma Sanctions Program; Updates SDN List

On October 7, OFAC published a Fact Sheet and Frequently Asked Question (FAQ) number 481 regarding the implementation of the President’s Executive Order entitled “Termination of Emergency with Respect to the Actions and Policies of the Government of Burma.” OFAC’s fact sheet explains that all OFAC-administered restrictions and authorizations under the Burma sanctions program pertaining to banking with Burma, including 2012 and 2013 OFAC general licenses that authorized certain correspondent account activity with Burmese banks, are terminated pursuant to the Executive Order. FAQ 481 clarifies that “[p]ending OFAC enforcement matters will proceed irrespective of the termination of OFAC-administered sanctions on Burma, and OFAC will continue to review apparent violations of the [Burmese Sanctions Regulations], whether [such violations] came to the agency’s attention before or after the Burma sanctions program was terminated.” In connection with terminating the Burma-related sanctions program, OFAC made several deletions to its SDN List.


OFAC Updates Iran-Related FAQs

On October 7, OFAC updated its Frequently Asked Questions (FAQs) relating to the Listing of Certain U.S. Sanctions under the Joint Comprehensive Plan of Action (JCPOA). In addition to adding three FAQs related to due diligence (see M.10 through M.12), OFAC amended two FAQs (C.7 and C.15) regarding Financial and Banking Measures and one FAQ (K.19) related to Foreign Entities Owned or Controlled by U.S. Persons. FAQ M.10 clarifies that while “[i]t is not necessarily sanctionable for a non-U.S. person to engage in transactions with an entity that is not on the SDN List but that is minority owned, or that is controlled in whole or in part, by an Iranian or Iran-related person on the SDN List,” it is recommended that persons engaging in such transactions exercise caution to ensure that they do not involve Iranian or Iran-related persons on the SDN List. FAQs M.11 and M.12, respectively, address (i) due diligence expectations related to the screening of potential Iranian counterparties; and (ii) the circumstances under which OFAC expects a non-U.S. financial institution to repeat the due diligence their customers have already performed on an Iranian customer.


DOJ Teams Up With OFAC to Bring Enforcement against Chinese Front Company

On September 26, the DOJ announced charges against a Chinese trading company and its executives for conspiracy to violate the International Emergency Economic Powers Act (IEEPA), and to defraud the United States; as well as for conspiracy to launder monetary instruments through U.S. financial institutions. The criminal complaint alleges that the company served as a third-party payer, using an illicit network of front companies, financial facilitators, and trade representatives to purchase sugar and fertilizer for a banking entity based in North Korea that OFAC had designated as a Specially Designated National (SDN) in 2009. The civil forfeiture complaint seeks forfeiture of funds spread out across 25 different bank accounts located in China and connected to the affairs of the company. In addition, OFAC imposed sanctions on the company, which is located near the North Korean border and openly worked with the SDN banking entity after 2009.


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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