Sanctions Top-5 for the week ending 30 April 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 UK unveiled a Global Anti-Corruption sanctions regime targeting bribery and misappropriation of property involving public officials. According to an explanatory memorandum from the Foreign, Commonwealth and Development Office, the regime is part of the UK government’s wider anti-corruption strategy and aims “to protect democratic values and promote effective governance.” The UK Foreign Secretary inaugurated the regime by announcing sanctions against 22 individuals in Russia, South Africa, South Sudan, and Latin America.
  2. In coordination with the UK announcement, the US Office of Foreign Assets Control (OFAC) named two former Guatemalan government officials as Specially Designated Nationals (SDNs) under the Global Magnitsky Sanctions program. The US State Department imposed visa bans on them in June 2020.
  3. OFAC announced a USD 34,329 settlement with a major US-based money service business for violations of several OFAC regulations. According to the settlement notice, some of the violations related to money transfers processed on behalf of SDNs held in US federal prisons. (Imagine being in prison and being on the SDN List!)
  4. OFAC announced a USD 2,132,174 settlement with a German software company for violations of the Iranian Transactions and Sanctions Regulations (ITSR). According to the settlement notice, the company sold software from the United States with knowledge it would be re-exported to Iran and made US-based cloud services available to persons in Iran in violation of the ITSR. The US Department of Justice (DOJ) concurrently announced a non-prosecution agreement with the company.
  5. OFAC issued an administrative notice about the conversion of the Non-SDN Communist Chinese military company (CCMC) List from a PDF format to the standard SDN List format. (Fun fact: OFAC’s version of the list still does not include the CCMCs identified by the Department of Defense on 14 January 2021. Check for yourself using OFAC’s online search tool.)

Comments

OFAC is cranking out the settlements lately. This week brings us two cases showing that sanctions compliance is one part technology and one part people. (Or maybe two parts technology.) In the first case, the money transmitter failed to identify SDN transactions in part due to “screening, technology, and fuzzy logic failures” as well as “limited instances of human error” where analysts confused prohibited commercial transactions with permissible personal remittances. In the second case, the software company failed to implement geolocation and IP-blocking controls to prevent users in sanctioned territories from downloading and accessing its products. Meanwhile, a compliance team responsible for the cloud-services business “was not resourced or empowered to manage these processes appropriately.

Both companies received mitigation credit for beefing up their compliance programs after discovering the apparent violations.

Check out this article from the South China Morning Post about the EU’s reaction to the PRC sanctions announced by the Ministry of Foreign Affairs in March 2021. According to the author: “China’s sanctions — unlike those imposed by Western countries that were based on the Global Magnitsky Act or similar frameworks — are not defined by Chinese laws.” If that sounds familiar, it’s because I made this point myself back in March when the sanctions were first announced. I wrote: “[T]he statements do not point to a law or regulation authorizing the sanctions, what the penalty for breaching them is, or where to go for guidance.” The PRC’s sanctions framework is a work in progress.

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

US attorney in Hong Kong specializing in economic sanctions, financial crimes. Sign up for emails: http://eepurl.com/cVhTXf LinkedIn at: http://goo.gl/KX1jER