On August 6, OFAC announced a $271,815 settlement with a New York-based insurance company with an overall focus on marine insurance and related lines of business, professional liability insurance, and commercial umbrella and primary and excess casualty businesses. According to OFAC, from May 8, 2008 to April 1, 2011, the company and its London branch office, “issued global protection and indemnity (“P&I”) insurance policies that provided coverage to North Korean-flagged vessels and covered incidents that occurred in or involved Iran, Sudan, or Cuba—some of which led to the payment of claims.” The company’s willingness to engage with OFAC-sanctioned countries resulted in 48 alleged violations of Foreign Assets Control Regulations, Executive Order 13466 of June 26, 2008, North Korea Sanctions Regulations, Iranian Transactions and Sanctions Regulations, Sudanese Sanctions Regulations, and Cuban Asset Control Regulations. OFAC stated that (i) the company did not maintain a formal compliance program at the time it issued the P&I insurance policies; and (ii) the company’s London office personnel “misinterpreted the applicability of OFAC sanctions regulations.” The final settlement amount reflects the fact that managers and supervisors knew or had reason to know that the majority of the insurance policies and claims payments at issue involved OFAC-sanctioned countries; the company is a commercially sophisticated financial institution; and it did not have a formal OFAC compliance program in place at the time the apparent violations occurred. Mitigating factors included the company’s cooperation with OFAC’s investigation; lack of prior enforcement action; and its remedial action plan to implement a sufficient OFAC compliance program.
Leading International Financial Services Institution Pays $1.7 Million to Settle Sanctions Liability
On August 27, Treasury’s OFAC announced a settlement agreement requiring a Switzerland-based financial institution to pay slightly over $1.7 million to resolve potential liability over alleged violations of the Global Terrorism Sanctions Regulations, 31 C.F.R. part 594. According to OFAC, over a five-year period ending in 2013, the financial institution processed over 220 securities and other investment transactions involving an individual included on OFAC’s Specially Designated Nationals and Blocked Persons List. As part of the agreement, OFAC highlighted important mitigating factors leading to its reduced settlement amount with the financial institution noting that the bank has in place an adequate global sanctions compliance program, and that the “[institution] took remedial action in response to the apparent violations, including by conducting a thorough internal investigation regarding the apparent violations.”
On July 30, OFAC issued a “Crimea Sanctions Advisory,” highlighting certain actions that have been used to circumvent or evade U.S. sanctions involving the Crimea region as described in Executive Order 13685. The Advisory provides guidance to U.S. persons and persons engaging in business activities in or through the United States, directing them to implement appropriate internal controls relative to their OFAC sanctions risk profile. Specifically with respect to financial transactions, OFAC noted that “certain individuals or entities have engaged in a pattern or practice of repeatedly omitting originator or beneficiary address information” from SWIFT messages. OFAC advised that U.S. financial institutions should be “cautious” when processing payment instructions that fail to disclose complete address information when engaging in transactions involving an individual or entity that has previously omitted information of Crimean individuals or entities. OFAC offered three examples of risk mitigating measures: (i) ensure that transaction monitoring systems include appropriate search terms corresponding to major geographic locations in Crimea and not simply references to “Crimea”; (ii) request additional information from entities that previously violated or attempted to violate U.S. sanctions on Crimea; and (iii) clearly communicate U.S. sanctions obligations to international partners and discuss OFAC sanctions compliance expectations with correspondent banking and trade partners.
In addition to issuing the Crimea Sanctions Advisory, OFAC updated its Specially Designated Nationals List and Sectoral Sanctions Identifications List with additional designations.
On July 29, OFAC announced that it levied a $82,260 civil penalty against Blue Robin, Inc. for violating certain provisions of the Iranian Transactions and Sanctions Regulations. According to OFAC, from 2009 through 2010, Blue Robin conducted 33 transactions valued at over $200,000, where Blue Robin imported web development services from PersiaBMW, an Iranian company. The services rendered by PersiaBMW were used to develop web-based systems and applications to streamline online business processes and operations for Blue Robin’s customers. In its consideration of the penalty amount, OFAC determined that “Blue Robin acted recklessly because it knew it was importing services from an Iranian company over a period of more than five years, it sent payments through unlicensed money exchangers instead of through traditional commercial banking channels, and it appears that the company did not take any steps to research the legality of funds transfers to Iran or the importation of services from Iran until after it lost contact with its unlicensed money exchanger.” Nevertheless, due to Blue Robin’s self-disclosure and substantial cooperation with OFAC’s investigation, the penalty amount imposed against Blue Ribbon was below the base penalty amount for the violations.
On July 10, OFAC published regulations to implement the Venezuela Defense of Human Rights and Civil Society Act of 2014 and Executive Order 13692. The Act required the President to impose targeted sanctions on certain persons determined to be responsible for significant acts of violence or serious human rights abuses against antigovernment protesters in Venezuela, and to have ordered, or otherwise directed, the arrest or prosecution of certain persons in Venezuela. The Executive Order set forth standards for designating and suspending entry into the United States of corresponding persons in Venezuela. The regulations provide the framework for blocking property or interests in property of persons designated according to the Executive Order. According to OFAC, the regulations are currently in “abbreviated form” and the agency will issue a more comprehensive set of regulations that may provide further interpretive guidance, general licenses, and statements of licensing policy.
On July 14, OFAC released a statement regarding the agreement reached with Iran over its nuclear program. Following months of diplomacy, OFAC stated that the P5 + 1 reached a Joint Comprehensive Plan of Action (JCPOA) with Iran regarding Iran’s nuclear program to ensure that it is exclusively peaceful going forward. Once the International Atomic Energy Agency (IAEA) verifies that Iran has implemented key nuclear-related measures described in the JCPOA (“Implementation Day”), “U.S. sanctions relief will be provided through the suspension and eventual termination of nuclear-related secondary sanctions.” The P5 + 1 and Iran also concluded on July 14 that the sanctions relief provided for in the JPOA of November 24, 2013 would be extended through Implementation Day; until further notice, the JPOA sanctions relief will be the only Iran-related sanctions relief in effect. The White House issued a description of the agreement to demonstrate how the long-term comprehensive nuclear deal with Iran “will verifiably prevent Iran from acquiring a nuclear weapon and ensure that Iran’s nuclear program will be exclusively peaceful going forward.” Finally, as decided on July 14, licenses with the following credentials will remain in effect in accordance with their terms until Implementation Day: (i) Issued by OFAC’s Second Amended Statement of Licensing Policy on Activities Related to the Safety of Iran’s Civil Aviation Industry; and (ii) set to expire on or before July 14, 2015. OFAC stated that the U.S. government will publish detailed guidance related to the JCPOA prior to Implementation Day, and will issue revised guidance on the continued JPOA relief shortly.
Update: OFAC Releases Guidance on the Continuation of Certain Temporary Sanctions Relief Under the JPOA
On July 10, the P5 + 1, and Iran agreed to extend the JPOA for three days to further negotiations in reaching a comprehensive solution surrounding Iran’s nuclear program. As a result, OFAC issued updated guidance informing that all JPOA sanctions relief detailed in the Guidance, FAQs, and Statement of License Policy issued in November 2014 has been extended through July 13, 2015. This updated guidance replaces guidance previously issued by OFAC on July 7, 2015.
Update: OFAC Releases Guidance on the Continuation of Certain Temporary Sanctions Relief Under the JPOA
On July 7, the P5 + 1, EU, and Iran agreed to extend the JPOA for three days to further negotiations in reaching a comprehensive solution surrounding Iran’s nuclear program. As a result, OFAC issued updated guidance informing that all JPOA sanctions relief detailed in the Guidance, FAQs, and Statement of License Policy issued in November 2014 has been extended through July 10, 2015. This updated guidance replaces guidance previously issued by OFAC on June 30, 2015.
On June 30, the P5 + 1, European Union, and Iran agreed to extend the Joint Plan of Action for seven days, furthering negotiations to reach a solution to reduce Iran’s nuclear program. In conjunction with the announcement of the seven day extension, OFAC published Guidance on the Continuation of Certain Temporary Sanctions Relief Implementing the Joint Plan of Action, as Extended. The guidance continues the JPOA sanctions relief period, provided in November 2014 as implemented via Guidance, FAQs, and Statement of Licensing Policy, from June 30 through July 7, 2015.
On April 14, President Obama submitted to Congress a report and certifications signaling the Administration’s intent to rescind Cuba’s designation as a State Sponsor of Terrorism, according to a statement by the White House Press Secretary. The decision to rescind Cuba’s designation, which has been in effect since 1982, was based on a recommendation from the Secretary of State, resulting from the Department of State undertaking a comprehensive review of Cuba’s record. As statutorily required for a country’s designation to be rescinded, the President must submit a report to Congress at least 45 days before the proposed rescission would be effective and certifying that (i) Cuba has not provided any support for international terrorism during the preceding 6-month period; and (ii) the Cuban government has provided assurances that it will not support acts of international terrorism in the future. The White House’s announcement follows recent policy changes by the Administration aimed at normalizing U.S.-Cuba relations.
On April 2, the United States, along with the U.K., France, Germany, Russia, China, and the EU (the “P5+1”), agreed with Iran on a Joint Comprehensive Plan of Action (“JCPOA”). The JCPOA is a preliminary framework to reduce Iran’s nuclear program, and details key parameters to provide the foundation upon which a final JCPOA is intended to be agreed by June 30, 2015. The framework includes five key components: (i) Enrichment, (ii) Inspections and Transparency, (iii) Reactors and Reprocessing, (iv) Sanctions Relief, and (v) Phasing. In particular, the sanctions relief will not be immediate and, instead, linked to verifiable measures Iran takes with respect to its commitments under the JCPOA. In addition, sanctions relief is specific to a suspension of nuclear-related sanctions. Importantly, the structure of such sanctions will remain in place, allowing for a “snap-back” of sanctions in the event of significant non-performance. U.S. sanctions with respect to terrorism, human rights abuses and ballistic missiles will remain in place against Iran.
On March 23, Department of the Treasury’s OFAC announced a settlement agreement with a large money services business (MSB) for failing to implement an effective compliance program “to identify, interdict, and prevent transactions in apparent violation of the sanctions programs administered by OFAC.” According to the settlement, prior to the MSB’s 2013 “long term solution” to screen its transactions in real time against OFAC’s List of Specially Designated Nationals and Blocked Persons (the “SDN List”), deficiencies in the company’s transaction monitoring compliance procedures allowed for the processing of hundreds of transactions with OFAC-sanctioned individuals and countries. Specifically, OFAC alleged that from October 20, 2009 to April 1, 2013, the MSB processed over 100 transactions to or from an account registered to an individual on the SDN List because its “automated interdiction filter” did not initially identify the account holder as a potential match to the SDN List, and when it did, the MSB Operations Agents dismissed alerts on six separate occasions after failing to obtain or review documentation corroborating the identity of the SDN. Under the terms of the agreement, the MSB will (i) pay over $7 million to the Department of the Treasury and (ii) within six months, provide OFAC a summary of the company’s current policies and procedures as they relate to screening transactions and/or customers” to ensure compliance with OFAC regulations.
On March 25, the DOJ entered into a plea agreement with an oil company that agreed to pay over $230 million and plead guilty for facilitating illegal transactions and participating in trade activities with Iran and Sudan. According to the DOJ, from 2004 through 2010, the oil company’s subsidiaries provided oilfield services to customers in Iran and Sudan, and failed to adhere to U.S. sanctions against Iran and Sudan and enforce internal compliance procedures, resulting in a conspiracy to violate the International Emergency Economic Powers Act. Pending court approval, among other stipulations, the plea agreement also requires the oil company to (i) cease all operations in Iran and Sudan during the probation period; (ii) submit to a three-year period of corporate probation and agree to continue to cooperate with the government and not commit any additional felony violations of U.S. Federal law; and (iii) respond to requests to disclose information related to the company’s compliance with U.S. sanctions laws when requested by U.S. authorities.
On January 15, the Department of Treasury’s Office of Foreign Assets Control (OFAC) announced a final rule amending its Cuban Assets Control Regulations (CACR) to reflect policy changes previously announced by President Obama on December 17. The amendments (i) allow U.S. financial institutions to maintain correspondent accounts at Cuban financial institutions; (ii) allow U.S. financial institutions to enroll merchants and process credit and debit card transactions for travel-related and other transactions consistent with the CACR; (iii) increase the limit of remittances to $2,000 from $500 per quarter; and (iv) under an expanded license, allow U.S. registered brokers or dealers in securities and registered money transmitters to process authorized remittances without having to apply for a specific license. In addition, OFAC released a FAQ sheet to help explain the new amendments, which are effective January 16.
On December 18, President Obama signed into law H.R. 5859, the “Ukraine Freedom Support Act of 2014.” First introduced in the House on December 11, the bill gives the President the authority to impose sanctions against countries, entities, and individual persons that pose potential threats to financial stability through excessive risk-taking with the Russian market. The bill provides authority for sanctions against foreign persons, including executive officers of an entity, relating to (i) banking transactions; (ii) investing in or purchasing equity or debt instruments; (iii) U.S. property transactions; and (iv) Export-Import Bank of the United States assistance. Finally, the bill directs the President to “use U.S. influence to encourage the World Bank Group, the European Bank for Reconstruction and Development, and other international financial institutions to invest in and stimulate private investment in such projects.”