2012 Year-End OFAC Update

Transcription

1 A Gibson Dunn National Security Presentation: 2012 Year-End OFAC Update January 17, 2013 Judith Alison Lee Marcellus McRae James Doody Andrea Farr

2 MCLE Certificate Information Most participants should anticipate receiving their certificate of attendance in 2 to 3 weeks following the webcast. Virginia Bar members should anticipate receiving their certificate of attendance in 6 weeks following the webcast. Questions regarding MCLE information should be directed to Jeanine McKeown (National Training Administrator) at or jmckeown@gibsondunn.com. 2

3 2012 YEAR-END OFAC UPDATE TOPIC OUTLINE Legislation Executive Orders Regulations Other Developments Major Enforcement Actions Looking Forward 3

4 LEGISLATION Iran Threat Reduction and Syria Human Rights Act (Pub. L. No , 126 Stat. 1214) ( ITRSHRA ) (Signed August 10, 2012) 218 expands sanctions against Iran to prohibit activity by foreign subsidiaries of U.S. entities Requires divestment of foreign subsidiary that does business or termination of business with Iran 219 imposes further reporting requirements on issuers that file annual or quarterly reports 4

5 LEGISLATION Russia and Moldova Jackson-Vanik Repeal and Sergei Magnitsky Rule of Law Accountability Act (Pub. L. No ) (Signed December 14, 2012) Rolls back Cold War-era trade restrictions, granting Russia and Moldova permanent normal trade relations with the U.S. Imposes travel and financial sanctions on human-rights violators and those involved in the death of Sergei Magnitsky In response, Russia banned American adoption of Russian children 5

6 LEGISLATION National Defense Authorization Act for Fiscal Year 2013 (Pub. L. No , 126 Stat ) ( NDAA 2013 ) (Signed January 3, 2013) Further targets sectors critical to Iran s energy industry Blocks entities of proliferation concern: operators of ports in Iran; entities in energy, shipping, and shipbuilding sectors Targets bartering transactions Requires the president to report on bartering; vessels entering Iranian-controlled seaports, and airports into which Iraniancontrolled air carriers fly 6

7 LEGISLATION The Countering Iran in the Western Hemisphere Act of 2012 (Pub. L. No ) (Signed December 28, 2012) Secretary of State required assess threat posted by Iran s growing hostile presence and activity in the Western Hemisphere Include information concerning presence, activities and operations of Government of Iran, IRGC, IRGC s Qods Force and Hezbollah in Western Hemisphere Plan to address efforts by foreign persons, entities, and governments in the region to assist Iran in evading U.S. and international sanctions 7

8 OFAC YEAR-END REVIEW TOPIC OUTLINE Legislation Executive Orders Regulations Other Developments Major Enforcement Actions Looking Forward 8

9 EXECUTIVE ORDERS IRAN Executive Order 13,599 Blocking Property of the Government of Iran and Iranian Financial Institutions Blocks all property and interests in property of the Government of Iran, including the Central Bank of Iran Blocks all Iranian financial institutions Blocks all property and interests in property of persons owned, controlled by, directly or indirectly acting or purported to act on behalf of any person whose property and interests in property are blocked pursuant to this order General Licenses A and B exclude certain transactions from E.O. 13,599 sanctions 9

10 EXECUTIVE ORDERS IRAN Executive Order 13,622 Authorizing Additional Sanctions with Respect to Iran Parallel to E.O. 13,599 Authorizes sanctions on foreign financial institutions that have knowingly facilitated transactions involving Iran s petroleum or petrochemical sector or with the NIOC or NICO FFI may be prohibited from opening or maintaining correspondent or payable through accounts in the U.S. 10

11 EXECUTIVE ORDERS IRAN & SYRIA Executive Order 13,606 Blocking the Property and Suspending Entry into the United States of Certain Persons with Respect to Grave Human Rights Abuses by Governments of Iran and Syria via Information Technology ( GHRAVITY E.O. ) Blocks the property of parties involved in human rights abuses by the governments of Iran and Syria Prohibits any transaction by a U.S. person or within the U.S. that evades or avoids, has the purpose of evading or avoiding, causes a violation of, or attempts to violate the regulations established in the order Prohibitions do not apply to any contract entered into or any license or permit granted prior to the effective date of the order 11

12 EXECUTIVE ORDERS IRAN & SYRIA Executive Order 13,608 Prohibiting Certain Transactions with and Suspending Entry Into the United States of Foreign Sanctions Evaders with Respect to Iran and Syria Imposes penalties on any foreign person who: violates, attempts to violate, conspires to violate, or causes a violation of any license, order, regulation, or prohibition pursuant to a number of Executive Orders concerning Iran and Syria facilitates deceptive transactions for or on behalf of any person subject to United States sanctions concerning Iran or Syria is owned or controlled by, or is directly or indirectly acting for or on behalf of any person determined to meet the criteria above 12

13 EXECUTIVE ORDERS IRAN & SYRIA Executive Order 13,608-cont d Allows Treasury to identify a foreign company as a sanctions evader if it facilitates a deceptive transaction, even if it was unaware of the identity of the sanctioned individual or entity Provides for harsh penalties, including the prohibition of all direct or indirect transactions or dealings involving such persons U.S. persons are not required to block the property of foreign persons listed under the order 13

14 EXECUTIVE ORDERS IRAN & SYRIA Executive Order 13,628 Authorizing the Implementation of Certain Sanctions Set Forth in the Iran Threat Reduction and Human Rights Act of 2012 and Additional Sanctions with Respect to Iran Implements parts of ITRSHRA and CISADA Closes the foreign subsidiary loophole U.S. parent has civil strict liability for conduct of foreign subsidiary 14

15 EXECUTIVE ORDERS YEMEN Executive Order 13,611 Blocking Property of Persons Threatening the Peace, Security, or Stability of Yemen Blocks the property of persons who: have engaged in acts that directly or indirectly threaten the peace, security, or stability of Yemen are political or military leaders of an entity that has engaged in such acts have materially assisted, sponsored, or provided financial, material, or technological support for such acts are owned or controlled by, or are directly or indirectly acting for or on behalf of any person determined to meet the criteria above 15

16 EXECUTIVE ORDERS BURMA Executive Order 13,619 Blocking the Property of Persons Threatening the Peace, Security. or Stability of Burma Blocks the property of persons who: undermine or obstruct the political reform process; are responsible for or complicit with human rights abuses; or have supplied arms from North Korea to Burma 16

17 EXECUTIVE ORDERS SOMALIA Executive Order 13,620 Taking Additional Steps to Address the National Emergency With Respect to Somalia Blocks the property of persons who: threaten peace, security or stability; threaten Djibouti Agreement misappropriate Somali public resources responsible for or complicit in acts of violence targeting civilians import or export of charcoal 17

18 OFAC YEAR-END REVIEW TOPIC OUTLINE Legislation Executive Orders Regulations Other Developments Major Enforcement Actions Looking Forward 18

19 OFAC REGULATIONS IRAN Iranian Financial Sanctions Regulations ( IFSR ) 31 C.F.R. Part 561 Implements: Section 1245(d) of the National Defense Authorization Act for FY 2012 ( NDAA ) Section 104(c) of Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 ( CISADA ) Incorporates ITRSHRA amendment to CISADA to expand sanctionable activity Establishes Part 561 List 19

20 OFAC REGULATIONS IRAN-cont d Iranian Transactions and Sanctions Regulations ( ITSR ) 31 C.F.R. Part 560 Iranian Transactions Regulations reissued as Iranian Transactions and Sanctions Regulations Extends restrictions to foreign entities owned or controlled by U.S. persons Conforms to the IFSR definition and amends as follows: The term entity owned or controlled by the Government of Iran includes any corporation, partnership, association, or other entity in which Iran owns a 50 percent or greater interest or a controlling interest, and any entity which is otherwise controlled by that government. Block the Government of Iran and all Iranian financial institutions 20

21 OFAC REGULATIONS YEMEN Yemen Sanctions Regulations 31 C.F.R. Part 552 Implements Executive Order 13,611 and blocks those that have engaged in acts that directly or indirectly threaten the peace, security, or stability of Yemen; be a political or military leader of an entity that has engaged in such acts; have provided support to any person whose property and interests in property are blocked pursuant to these regulations; and be owned or controlled by, or to have acted or purported to act for or on behalf of, directly or indirectly, any person whose property and interests in property are blocked pursuant to these regulations 21

22 OFAC REGULATIONS CÔTE D'IVOIRE, DARFUR, & DEM. REP. OF CONGO Financial, Material, or Technological Support 31 C.F.R. Part 543 (Côte d'ivoire), 31 C.F.R. Part 546 (Darfur), and 31 C.F.R. Part 547 (Democratic Republic of Congo) Definition of Financial, Material, or Technological Support any property, tangible or intangible, including but not limited to currency, financial instruments, securities, or any other transmission of value; weapons or related materiel; chemical or biological agents; explosives; false documentation or identification; communications equipment; computers; electronic or other devices or equipment; technologies; lodging; safe houses; facilities; vehicles or other means of transportation; or goods. 22

23 OFAC REGULATIONS TRANSNATIONAL CRIMINAL ORGANIZATIONS Sanctions Regulations Final Rule: Reporting, Procedures and Penalties 31 C.F.R. Part 590 Continues OFAC s implementation of Executive Order 13,581 of July 24, 2011, Blocking Property of Transnational Criminal Organizations Prohibits all transactions which violate E.O. 13,581 Provides that any U.S. person holding funds subject to , which prohibits transactions in violation of E.O. 13,581, must hold or place such funds in a blocked, interest-bearing account located in the United States 23

24 OFAC YEAR-END REVIEW TOPIC OUTLINE Legislation Executive Orders Regulations Other Developments Major Enforcement Actions Looking Forward 24

25 OTHER DEVELOPMENTS BURMA General License 16 Authorizes the export and re-export of financial services to Burma Supersedes and replaces General Licenses 14C and 15 Excluded parties include: Ministry of Defense, Office of Procurement; state or non-state armed groups; blocked persons General License 17 Authorizes new investment in Burma Excluded parties include: Ministry of Defense, Office of Procurement; state or non-state armed groups; blocked persons 25

26 OTHER DEVELOPMENTS IRAN Interpretive Guidance and Statement of Licensing Policy on Internet Freedom in Iran (May 20, 2012) Amends of the Iranian Transactions Regulations, which authorizes the exportation of services incident to the exchange of personal communications over the Internet to persons in Iran Provides illustrative guidance to the types of services allowed under the ITR Clarifies OFAC s Statement of Licensing Policy ( SLP ) and concludes that specific licenses may be issued on a case-by-case basis for other types of software and services incident to the sharing of information over the Internet 26

27 OTHER DEVELOPMENTS SYRIA General License 4A authorizes the export or re-export of items to Syria from the United States to any person whose property is blocked if such items are authorized by the Department of Commerce General License 15 authorizes certain patent, trademark, copyright, and intellectual property transactions that would otherwise be prohibited by Executive Order 13,582 27

28 OTHER DEVELOPMENTS CUBA Comprehensive Guidelines for License Applications to Engage in Travel-Related Transactions Involving Cuba (May 10,2012) Updates 31 C.F.R (b)(2) (educational exchanges not involving academic study pursuant to a degree program) 28

29 OTHER DEVELOPMENTS TRADE SANCTIONS REFORM & EXPORT ENHANCEMENT ACT 3Q FY 2012 Update 3Q (April-June) FY 2012 OFAC: received 371 license applications issued 536 license determinations, 207 of which were for cases received during this quarter issued 328 licenses, 79 license amendments, 44 return-withoutaction letters, and 1 denial letter issued licenses for 305 products bound for Iran and 23 for Sudan issued the majority of licenses for medical devices and medicine 29

30 OFAC YEAR-END REVIEW TOPIC OUTLINE Legislation Executive Orders Regulations Other Developments Major Enforcement Actions Looking Forward 30

31 MAJOR ENFORCEMENT ACTIONS ING Bank, N.V. OFAC determined that ING Bank: violated the Cuba sanctions by processing 20,452 wire transfers worth a combined $1.65 billion violated the Burma sanctions by processing 41 wire transfers worth a combined $15.47 million violated the Sudan sanctions by processing 44 wire transfers worth a combined $1.98 million violated the Iranian Transaction Regulations by processing one wire transfer worth $153,000 and one transferable export letter of credit worth $1.2 million for a Romanian aircraft engine 31

32 MAJOR ENFORCEMENT ACTIONS ING Bank, N.V. cont d Mitigating factors: ING Bank voluntarily disclosed the alleged violations of the Cuba, Burma, Sudan, Libya sanctions, and one of the alleged violations of the Iran sanctions ING Bank voluntarily adopted a consolidated sanctioned countries policy and an export compliance program Aggravating factors: ING Bank did not voluntarily disclose the other apparent Iranian Transactions Regulations violation: the processing of the transferable export letter of credit for the purchase of a Romanian aircraft engine ING Bank did not consistently cooperate with OFAC with regard to explicit requests for information; requested information was ultimately provided only after multiple submissions with heavy redactions Settlement: The allegations were settled for $619,000,000 ING Bank must conduct a review of its compliance program and submit its results to OFAC within 18 months of signing the settlement agreement 32

33 MAJOR ENFORCEMENT ACTIONS Genesis Asset Managers, LLP OFAC alleged that GAM US violated the ITR when, under an agency agreement, its UK-based subsidiary, purchased approximately $3 million worth of shares in an equity fund that invests exclusively in Iranian securities OFAC determined that the alleged violation was not egregious Mitigating factors: OFAC had not penalized GAM US for similar violations GAM US substantially cooperated with OFAC s investigation by responding promptly to requests for information and voluntarily self-disclosing the alleged violation GAM US may not have fully understood its OFAC obligations under U.S. law Aggravating factors: GAM US failed to exercise a minimal degree of caution or care GAM US did not have an OFAC compliance program in place Settlement: GAM US agreed to pay $112,500 33

34 MAJOR ENFORCEMENT ACTIONS Sandhill Scientific, Inc. OFAC alleged that Sandhill violated the ITR and OFAC s Reporting, Procedures and Penalties Regulations when it: exported medical equipment to Dubai with knowledge or reason to know that the goods were intended for a company in Iran with which Sandhill had an exclusive distribution agreement failed to provide documents responsive to two administrative subpoenas issued by OFAC Egregious violation because: the export appears to have resulted from willful and reckless conduct Sandhill deliberately concealed the fact that the goods were destined for Iran Sandhill did not fully cooperate with the investigation Sandhill did not have any compliance program in place and did not take remedial actions Settlement: Sandhill agreed to pay $126,000 34

35 MAJOR ENFORCEMENT ACTIONS Essie Cosmetics, Ltd. OFAC alleged that Essie and a former corporate officer ( Individual ) violated the ITR when they knowingly sold and exported nail care products worth approximately $33,299 to an Iranian distributor OFAC determined that the violations were egregious because: No voluntarily self-disclosure Intentional effort to evade sanctions These alleged violations carried a base penalty of $750,000 Mitigating factors: Essie and Individual had no history of prior OFAC violations Cooperated with the ICE investigation Signed Non-Prosecution Agreements with the United States Attorney s Office for the Southern District of New York; agreed to forfeit $200,000 to DHS Settlement: Essie and Individual agreed to pay $450,000 35

36 MAJOR ENFORCEMENT ACTIONS Online Micro, LLC OFAC alleged that Online and one of its owners ( Owner ) violated the ITR by exporting computer-related goods from the United States through Dubai to Iran between 2009 and 2010 No voluntarily disclosure; OFAC considered the violations to be egregious Criminal charges for Online and Owner and a subsequent criminal plea agreement with the Office of the United States Attorney for the District of Columbia, as well as a settlement agreement with the U.S. Department of Commerce s Bureau of Industry and Security ( BIS ) Online and Owner each pleaded guilty to one count of criminal conspiracy, forfeited $1,899,964, and accepted suspended BIS Export Denial Orders, which would prohibit them from exporting any goods for a ten-year period if they do not remain in compliance with the terms of their agreement OFAC deemed its settlement with Online and Owner in the amount of $1,054,388 satisfied by Online and Owner s acceptance of the penalties specified above 36

37 MAJOR ENFORCEMENT ACTIONS National Bank of Abu Dhabi OFAC alleged that NBAD violated SSR when it removed Sudan-related references in 45 transactions worth approximately $4.39 million that were routed through financial institutions located in the United States between Nov and Dec OFAC determined that the apparent violations constituted a non-egregious case The base penalty for the alleged violations was $4,276,000 Mitigating factors: NBAD cooperated substantially throughout OFAC s review NBAD took prompt and appropriate remedial action OFAC had not penalized NBAD for a violation in the previous five years Settlement: NBAD agreed to pay $855,000 37

38 MAJOR ENFORCEMENT ACTIONS Brasseler USA Allegation concerning three transactions valued at $5,241 Base penalty: $21,000 Settlement: $18,900 Aggravating factors concealed Iranian customers identities management involvement no compliance program Mitigating factors cooperation likelihood that OFAC would have licensed the transactions no previously subject of OFAC enforcement action 38

39 MAJOR ENFORCEMENT ACTIONS Sogda Limited, Inc. Allegedly violated the ITR by engaging in seven export transactions transshipped through Bandar Abbas Base penalty $570,000; settlement $128,250 Mitigating factors: instituted OFAC compliance program no prior enforcement history cooperation with OFAC 39

40 MAJOR ENFORCEMENT ACTIONS Standard Chartered Bank Alleged violations of: Burmese Sanctions Regulations, Iranian Transactions Regulations, Sudanese Sanctions Regulations, Libyan Sanctions Regulations and the Foreign Narcotics Kingpin Sanctions Regulations 919 wire transfers totaling more than $133 million Base penalty: $209,747,769; Statutory maximum penalty: $427,852,032 Most of the violations were determined to be egregious recklessness certain employees and senior managers awareness of the relevant conduct significant harm to the U.S. sanctions programs SCB s sophistication as a financial institution SCB s failure to maintain adequate compliance policies and procedures Substantial civil penalty to deter future violations 40

41 MAJOR ENFORCEMENT ACTIONS Standard Chartered Bank-cont d Mitigating factors some of the alleged violations could have been eligible for an OFAC license no OFAC actions within the preceding five years all of the alleged violations were voluntarily self-disclosed cooperation appropriate remedial action Settlement--$132 million global settlement involving OFAC, the U.S. Department of Justice, the New York County District Attorney s Office, and the Federal Reserve Board of Governors. 41

42 MAJOR ENFORCEMENT ACTIONS HSBC Holdings plc 2,335 wire or funds transfers totaling approximately $430 million in violation of: Cuban Assets Control Regulations, the Burmese Sanctions Regulations, the Sudanese Sanctions Regulations, the former Libyan Sanctions Regulations, and the Iranian Transactions Regulations Egregious: failure to exercise a minimal degree of caution senior management and other employees awareness of conduct significant harm to the U.S. sanctions program sophistication of HSBC Group as a financial institution failure to maintain adequate compliance policies and procedures Base penalty: $1,159,872,734 42

43 MAJOR ENFORCEMENT ACTIONS HSBC Holdings plc-cont d Mitigating factors: some of the alleged violations could have been eligible for an OFAC license had not been the subject of OFAC actions within the preceding five years cooperation remedial action comprehensive nature of the settlement HSBC Group s willingness to settle the matter 43

44 MAJOR ENFORCEMENT ACTIONS HSBC Holdings plc-cont d Settlement $375 million maintain policies and procedures provide OFAC with copies of its submissions to the Federal Reserve Bank of Chicago regarding its OFAC compliance review if it determines that HSBC Group has willfully and materially breached its settlement obligations, to declare the settlement null and void 44

45 MAJOR ENFORCEMENT ACTIONS Bank of Tokyo-Mitsubishi UFJ, Ltd. Alleged violation of Burmese Sanctions Regulations, the Iranian Transactions Regulations, the Sudanese Sanctions Regulations, the Cuban Assets Control Regulations, and Executive Order Identified at least 97 funds transfers through United States banks between April 3, 2006 and March 16, 2007 with an approximately total value of $5,898,943 Aggravating factors concealment of U.S. sanctions targets involvement in transactions reckless disregard displayed for the sanctions programs general manager knew or had reason to know about the concealment procedures that were implemented the conferral of a substantial economic benefit to sanctions targets sophisticated financial institution 45

46 MAJOR ENFORCEMENT ACTIONS Bank of Tokyo-Mitsubishi UFJ, Ltd.-cont d Mitigating factors: BTMU s implementation of significant remedial measures to improve compliance lack of a prior history of OFAC violations substantial cooperation with the investigation providing OFAC with additional details about the apparent violations- Settlement $8,571,634 46

47 OFAC YEAR-END REVIEW TOPIC OUTLINE Legislation Executive Orders Regulations Other Developments Major Enforcement Actions Looking Forward 47

48 Today s Presenters Judith Alison Lee jalee@gibsondunn.com Marcellus McRae mmcrae@gibsondunn.com James Doody jdoody@gibsondunn.com Andrea Farr afarr@gibsondunn.com 48

49 MCLE Certificate Information Most participants should anticipate receiving their certificate of attendance in 2 to 3 weeks following the webcast. Virginia Bar members should anticipate receiving their certificate of attendance in 6 weeks following the webcast. Questions regarding MCLE information should be directed to Jeanine McKeown (National Training Administrator) at or jmckeown@gibsondunn.com. 49

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