Sanctions Top-5 for the week ending 8 May 2020

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

Sign up here if you would like to receive these summaries by email. Click here for an index of past Sanctions Top-5 briefings.

1. The US Office of Foreign Assets Control (OFAC) announced a USD 257,862 settlement with a Kansas-based company for violations of the Cuban Assets Control Regulations (CACR). According to the OFAC enforcement release, the company sold agricultural products to a Cuban customer via its non-US affiliates without authorization under a general or specific license. (More on the case below.)
2. Here comes Congress. Senate Majority Leader Mitch McConnell said the US Congress could soon pass a bill directing the Trump administration to adopt targeted sanctions against Chinese officials responsible for human rights abuses in the Xinjiang Uighur Autonomous Region (XUAR). The bill also calls for export controls on US-origin items that could be used in China to “suppress individual privacy, freedom of movement, and other basic human rights.” Versions of the Uyghur Human Rights Policy Act were previously approved by the House of Representatives and the Senate in 2019.
3. Meanwhile, Senator Tom Cotton introduced the Li Wenliang Global Public Health Accountability Act of 2020 to authorize sanctions in connection with “deliberate concealment or distortion of information about public health emergencies of international concern.”
4. OFAC made administrative updates to 11 entries on the List of Specially Designated Nationals and Blocked Persons (the SDN List) to change their “aliases” to “weak aliases.” This seems like a small thing, but for people who have to review all of those name screening hits, it can make a big difference. As explained in FAQ 124, “OFAC does not expect that persons will screen for weak AKAs.”
5. The Financial Action Task Force (FATF) and the Middle East and North African Financial Action Task Force (MENAFATF) published their mutual evaluation report on the United Arab Emirates (UAE). Among other findings, the report highlights deficiencies in handling targeted financial sanctions (TFS), despite the UAE’s elevated sanctions risk profile. For example, according to the report, many regulated entities “are not aware of the requirement to immediately freeze funds and assets in case of exact match with sanction lists.”

Comments

As usual, OFAC has gifted us with some useful compliance advice in its latest settlement. This time, the agency reminds us of the importance of seeking professional advice before embarking on risky business. According to the enforcement release, the company’s management “developed a transaction structure that they incorrectly determined would” comply with the CACR. Specifically, the company’s US division coordinated with its non-US affiliates to make sales to a Cuban customer because management believed the US division could not directly export its products to Cuba. Furthermore, the company “failed to seek appropriate advice,” even though it theoretically could have relied on an existing general license in the CACR.

OFAC could have brought a statutory maximum penalty of up to USD 2,149,230. Instead, the company paid just USD 257,862. (Not counting whatever it cost to investigate and remediate the issue.) Among the mitigating factors cited by OFAC: the company adopted a sanctions compliance program and brought in “outside counsel and export control consultants to conduct comprehensive training sessions” for company employees.

Bonus item: Check out my article on Regulation Asia discussing the US government’s power to access records held by banks outside the United States during investigations into North Korea-related cyber crimes, with three takeaways for banks in Asia.

Did I miss something? Send me a message or comment on LinkedIn.

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