Sanctions Top-5 for the week ending 24 April 2020

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 New York Department of Financial Services (NYDFS) announced a Consent Order and USD 35 million fine against Industrial Bank of Korea (IBK) for breaches of New York State anti-money laundering (AML) regulations. The New York Attorney General and the US Attorney’s Office for the Southern District of New York simultaneously announced a Non-Prosecution Agreement and Deferred Prosecution Agreement, respectively, and a USD 51 million forfeiture, following a multi-year investigation. Among other compliance failures, IBK’s New York branch failed to detect transactions connected to a billion-dollar Iran-related fraud scheme.
2. The US Office of Foreign Assets Control (OFAC) issued a statement encouraging companies to contact the agency if they cannot meet regulatory reporting deadlines or other requirements as a result of the COVID-19 pandemic. The statement also suggests that OFAC will keep an open mind under its Economic Sanctions Enforcement Guidelines with respect to companies that are “temporarily reallocating sanctions compliance resources” as a result of COVID-19.
3. OFAC issued an amended Venezuela General License 8-F effectively requiring five companies, including Chevron, to wind down their activities in Venezuela. Whereas the old General License 8 allowed for the maintenance of certain operations in Venezuela, the new license only authorizes certain transactions and activities that are “ordinarily incident and necessary to the limited maintenance of essential operations, contracts, or other agreements . . . for safety or the preservation of assets in Venezuela” until 1 December 2020.
4. The United Nations Security Council committee concerning Central African Republic (CAR) added Martin Koumtamadji, leader of the militant Front Démocratique du Peuple Centrafricain (FDPC), to the UN Sanctions List. According to the listing, Koumtamadji, who founded the FDPC in 2005, poses “a threat to the peace, stability and security of the CAR,” despite taking part in an African Union-sponsored peace agreement signed in February 2019.
5. Citing data from Castellum.AI, The Wall Street Journal reported that Pakistan’s National Counter Terrorism Authority (NCTA) has deleted more than 3,800 names from a watch list used by local financial institutions to identify suspected terrorists. According to the article, the NCTA did not provide notice or an explanation at the time of the removals. (Click here for a copy of the full Castellum.AI report.)

Comments

It was common knowledge in the industry that the NYDFS was looking into New York branches of Korean banks, so the IBK Consent Order was not entirely unexpected. What about OFAC? Although OFAC has worked closely with state and federal banking regulators on major settlements, there’s no reason it couldn’t bring an enforcement action on its own (it has before). No word if that is the case here. As for the NYDFS, the IBK Consent Order is a reminder of the regulatory risks for non-US banks with branches in the United States. New York AML regulations in particular set high standards, as demonstrated by numerous major enforcement actions against foreign banks in recent years. Meanwhile, branches outside the United States should have controls to prevent misuse of US correspondent accounts.

Hats off to everyone who made the Global Investigations Review (GIR) list of “40 Under 40” investigations specialists! It’s an honor to be listed alongside 39 other excellent practitioners from around the world. Thanks, GIR!

Don’t miss the upcoming sanctions webinar hosted by Fintelekt and the Asian Bankers Association on 6 May 2020 at 1:30 p.m. Hong Kong time (sponsored by Accuity). I’m looking forward to joining my co-panelists Hala Bou Alwan, Surendra Thapa, and Vincent Gaudel, with moderator Shirish Pathak, to talk about recent sanctions trends and much more. (Sign up here for the webinar.)

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