August 31, 2017
NYDFS: Pakistani Bank’s OFAC Program Included Improper Inclusion of SDN’s on the Bank’s ‘Good Guy’ List
On August 24, 2017, the New York Department of Financial Services (NYDFS) – NY State’s financial regulator – announced it is seeking up to $630 million in penalties from Habib Bank for “serious deficiencies” in its AML and OFAC compliance programs. The deficiencies, identified in the “Statement of Charges”, span more than a decade. Among other things, the regulator’s investigation determined that transactions went un-reviewed because of the improper inclusion of certain individuals and transactions on the Bank’s so-called ‘good-guy’ list. Such improper inclusions comprised prohibited persons and entities identified on OFAC’s SDN List corresponding to:
- a transaction that involved the leader of a Pakistani terrorist group;
- a transaction that involved a known international arms dealer;
- an individual on the Specially Designated Global Terrorist list;
- the former Deputy Prime Minister of Iraq under Saddam Hussein; and
- a transaction involving an Iranian oil tanker.
In a letter posted on its website, the bank says that it plans to fight the allegations and close its NYC branch.
Singapore Oilfield Services Company Pays OFAC $415,350 to Settles Potential Civil Liability for Apparent Violations of the Iranian Sanctions
On August 24, 2017, COSL Singapore Ltd, an oilfield services company located in Singapore and a subsidiary of China Oilfield Service Limited, agreed to pay OFAC $415,350 to settle its potential civil liability for 55 apparent violations of the Iranian sanctions. The company, through two subsidiaries, exported or attempted to export 55 orders of oil rig supplies from the U.S. to Singapore and the U.A.E., and then re-exported or attempted to re-export these supplies to four oil rigs located in Iranian waters.
According to OFAC, although some of the purchase order quotations the COSL Singapore procurement specialists received from U.S. vendors included specific language warning that any such goods could not be shipped or re- exported to countries subject to U.S. economic sanctions, specifically including Iran, the company purchased the goods and shipped them to the oil rigs over a period of several years.
The transactional value of the 55 orders was $524,664. COSL did not self-report the violations.
One of the lessons of this case is that foreign companies in high risk sectors, such as off shore services, are well advised to have an OFAC compliance program in place when conducting business in the United States and/or with U.S. companies
New Sanctions on Venezuelan Oil Giant PdVSA– the parent of US-based Citgo– Impose Heavy Compliance Burdens
On August 24, 2017, the U.S. government announced Venezuelan sanctions, impacting oil company Petroleos de Venezuela (PdVSA), and other Venezuelan government entities. The U.S. carved out exemptions for Citgo, a subsidiary of PdVSA with a large U.S. presence, by issuinga general license authorizing all transactions “where the only government of Venezuela entities are Citgo Holding Inc. and any of its subsidiaries.” However, as these latest sanctions are not “list-based,” they place heavy burdens on due diligence programs for companies and financial institutions conducting business with the Venezuelan government and related entities.
In other related news, the potential oil deal between SSI-listed Rosneft from Russia and PdVSA, may cause further sanctions complications for Citgo because of OFAC’s 50% rule. To explore further, click here.
The Trump Administration paves the way for sanctions relief on Sudan after two decades
This Sunday, U.S. President Donald Trump’s new USAID Administrator, Mark Green, commenced his African tour in Sudan, where he will assess whether Khartoum has made enough of an effort in its conflict areas to deserve eased sanctions. The war torn country first received sanctions over Khartoum’s perceived support of global terrorism and, later, its violent suppression of rebels in Darfur.
Easing the sanctions- as ordered by former President Obama in January 2017, and only if the government of Sudan has “sustained the positive actions that gave rise to the order” – could suspend a trade embargo, unfreeze assets and remove financial restrictions that have hobbled the Sudanese economy for over 20 years. The North African country wants to regain access to the global banking system, potentially unlocking badly needed trade and foreign investment. An easing would be a major turnaround for the government of President Omar Hassan al-Bashir, who once played host to Osama bin Laden and is wanted by the International Criminal Court on charges of orchestrating genocide in Darfur, for which Washington maintains Sudan on its list of state sponsors of terrorism, alongside Iran and Syria.
The U.S. government will now decide whether to ease or extend the economic sanctions, a decision that must be made by Oct. 12, according to E.O. 13804 of July 11, 2017. Sudanese Foreign Minister, Ibrahim Ghandour, who was part of the discussions, seemed optimistic saying: “On our side we look forward for a normalization of our relations with an important country … the U.S.”
Note that, while the assessment takes place, OFAC’s sanctions on Sudan remain in place, as does the general license broadly authorizing most prohibited transactions with respect to Sudan. Also, keep in mind that the general license does not eliminate the need to comply with other provisions of 31 C.F.R. chapter V or requirements of agencies other than OFAC, such as Bureau of Industry and Security of the Department of Commerce.
EU consolidates North Korea sanctions
Throughout the years, the EU has implemented several restrictive measures imposed through resolutions of the UN Security Council and has reinforced them through its own measures. These measures target the DPRK’s weapons of mass destruction and ballistic missile-related programs.
On August 30, 2017, the Council of the European Union consolidated its restrictive measures on North Korea into a new Council Regulation (EU) 2017/1509, in view of the extent of the amendments that had been made to the old regulation issued in 2007.
The new Regulation contains the following chapters:
- Definitions
- Export and Import Restrictions
- Restrictions on Certain Commercial Activities
- Restrictions on Transfers of Funds and Financial Services
- Freezing of Funds and Economic Resources
- Restrictions on Transport
- General and Final Provisions
Further, on the same day, Council Decision (CFSP 2017/1512 of August 30, 2017 amended Decision (CFSP) 2016/849 concerning restrictive measures against North Korea.
For a general timeline on EU restrictive measures against North Korea, click here.