Sanctions Top-5 for the week ending 1 January 2021

Here are five things that happened this week in the world of economic sanctions that I think you should know about.

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1. The US Office of Foreign Assets Control (OFAC) released a set of somewhat helpful FAQs about Executive Order 13959, which prohibits US persons from purchasing securities of so-called “Communist Chinese military companies” (CCMC) beginning 11 January 2021. OFAC also introduced the Non-SDN Communist Chinese Military Companies List with identifying information on the companies. (Another list!)
2. OFAC announced a USD 653,347 settlement with a Saudi Arabia-based bank for 13 violations of OFAC’s Syria and Sudan sanctions programs. According to the OFAC settlement notice, the bank processed transactions through the US financial system related to activities or persons in Syria and Sudan. (At the time, Sudan was still subject to comprehensive US sanctions.)
3. OFAC announced a USD 98,830 settlement with a California-based digital assets company for more than 180 violations of OFAC’s Crimea, Cuba, Iran, Sudan, and Syria sanctions programs. According to the OFAC settlement notice, the company failed to implement internet protocol (IP) blocking, allowing persons in sanctioned territories to access its services online.
4. OFAC named a judge and a prosecutor in Venezuela as Specially Designated Nationals (SDNs) under Executive Order 13692 for their roles in the prosecution and imprisonment of six US nationals on charges of corruption. The individuals, who were executives at US-based Citgo, are also known as the “Citgo 6.”
5. Congress voted to override Donald Trump’s veto on the National Defense Authorization Act (NDAA) for Fiscal Year 2021. The NDAA is an annual exercise and usually includes a sanction or two. This year’s sanctions provisions include expanded sanctions on supporters of the Nord Stream 2 and Turkstream pipeline projects, among others. (Full text available here.)

Comments

Did anyone else feel like they got socks for Christmas when those OFAC FAQs came out? The good news is that OFAC will update the CCMC list to include subsidiaries and isn’t expecting the market to identify them (what a mess that would have been). But many questions about Executive Order 13959 remain unanswered. Speaking of, OFAC just dropped another FAQ seconds ago on whether the Executive Order requires divestments of CCMC securities by 11 January 2021 (it doesn’t).

What can we learn from OFAC’s most recent settlements? First, it can take a long time to investigate and settle a case. The transactions in the bank settlement took place between 2011 and 2014. And there were only 13 of them — a low number for a banking case.

Second, customer attestations aren’t worth a plugged nickel if you have contradictory data on your hands. According to OFAC, the digital assets company asked customers about their locations for compliance purposes, while gathering IP data for security purposes. The IP data revealed that some customers didn’t the truth about their locations (shocker). The lesson: know your data and pick the best source. Look for inconsistencies.

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(The views expressed are my own and do not constitute legal advice. Photo from Vladislav Reshetnyak.)