Wake Up To Sanctions

SanctionsAlert.com Sanctions Round Up
March 27, 2018

North Korea Generates $200 Million in Illicit Revenue and Continues to ‘Flout’ International Law – UN Report Claims

On March 5th, the United Nations (U.N.) Panel of Experts released its Report on North Korea sanctions pursuant to U.N. Security Council Resolution 2345 (2017) (the Report). The 298-page document details numerous examples of efforts by North Korea to evade U.N. sanctions and claims that the country has earned $200 million in 2017 concealing the origin of illicit exports.

According to the Report, a Panel of U.N. experts investigated “illicit ship-to-ship transfers of petroleum” by North Korea and determined that between January and September 2017, North Korea generated revenue of nearly $200 million by carrying out illicit coal exports and obscuring the origin of the product through “combined deceptive navigation patterns, signals manipulation, trans-shipment and fraudulent documentation.” The Panel also investigated as “a wide array of prohibited military cooperation projects” and determined that North Korea has ongoing ballistic missile cooperation with Syria and Myanmar. In addition, the U.N. informs us that North Korea “is accessing the global financial system through deceptive practices combined with critical deficiencies in the implementation of financial sanctions.” This includes designated banks and representatives across borders that facilitate illicit transactions as well as corporate service providers that allow the creation of front companies and deal in bulk cash.

The Report claims that, despite recent efforts by the international community to strengthen sanctions and introduce new measures, North Korea “is already flouting the most recent resolutions by exploiting global oil supply chains, complicit foreign nationals, offshore company registries and the international banking system.”

The Report also details a number of case studies and resulting recommendations that will be of particular interest to compliance professionals.

OFAC Sanctions 24 Russian Individuals and Entities for Cyber-related Activities

On March 15th, the US Office of Foreign Assets Control (OFAC) designated five entities and 19 individuals in Russia pursuant to the Countering America’s Adversaries Through Sanctions Act (CAATSA) and Executive Order (E.O.) 13694,“Blocking the Property of Certain Persons Engaging in Significant Malicious Cyber-Enabled Activities,” for their roles in malicious cyber-related activities in connection with the US elections in 2016.

Three entities and 13 individuals were designated for inclusion on OFAC’s Specially Designated Nationals (“SDN”) list pursuant to E.O. 13694, an order that targets malicious cyber actors, including those involved in interfering with election processes or institutions, namely: the Internet Research Agency (IRA), a Russian entity that tampered with or altered information in order to interfere with the 2016 U.S. election, as well as those who funded, controlled, or assisted the IRA. In addition, two entities and six individuals were designated under section 224 of CAATSA, which targets cyber actors operating on behalf of the Russian government – the Federal Security Service, or Federalnaya Sluzhba Bezopasnosti (FSB), a Russian intelligence organization, and the Main Intelligence Directorate, or Glavnoye Razvedyvatelnoye Upravleniye (GRU), a Russian military intelligence organization.

As a result, all property and interests in property of the designated persons subject to U.S. jurisdiction are blocked, and U.S. persons are generally prohibited from engaging in transactions with them.

Nevertheless, in an attempt to avoid unduly impacting U.S. persons engaging in certain business activities in Russia, OFAC simultaneously reissued Cyber General License No. 1A (CGL 1A), which authorizes certain transactions with the FSB that “are necessary and ordinarily incident to requesting, receiving, utilizing, paying for, or dealing in certain licenses, permits, certifications, or notifications issued or registered by the [FSB] for the importation, distribution, or use of information technology products in the Russian Federation.” Importantly, CGL 1A does not authorize the export of any goods, technology, or services directly or indirectly to the FSBexcept for the limited purposes of complying with certain rules, regulations, and investigations involving the FSB or requesting certain licenses or authorizations.

US Issues New Venezuela Sanctions In Response to ‘Petro’ Launch

On March 19th, President Trump issued Executive Order (E.O.) 13827, which immediately prohibits: “all transactions related to, provision of financing for, and other dealings in, by a United States person or within the United States, any digital currency, digital coin, or digital token, that was issued by, for, or on behalf of the Government of Venezuela on or after January 9, 2018.”Acting concurrently, OFAC has released new FAQs related to this Executive Order, which confirm that both the ‘petro’ and the ‘petro-gold’ fall within the Executive Order, and a set of new Digital Currency-related FAQs.

OFAC has also designated 4 current or former Venezuelan government officials pursuant to E.O. 13692, which designated and imposes asset freezes on: Willian Antonio Contreras (Vice Minister of Internal Commerce), Nelson Reinaldo Lepaje Salazar (Head of the Office of the National Treasury), Americo Alex Mata Garcia (Alternate Director on the Board of Directors of the National Bank of Housing and Habitat), and Carlos Alberto Rotondaro Cova (Former President of the Board of Directors of the Venezuelan Institute of Social Security).

These new sanctions come on the heels of the launch of Venezuela’s new oil-backed cryptocurrency – Petro.In addition to circumventing U.S. sanctions, Petro aims to offer a new alternative for Venezuela to raise money for its struggling economy. Venezuela is currently facing hyperinflation, the collapse of its currency, the bolivar, and shortages in food and other basic necessities due to price controls. Maduro claims that the new cryptocurrency has raised $735 million on the first day.

Despite these numbers, experts remain skeptical as to Maduro’s motivations for launching the currency as well as to whether or not Petro’s popularity will last long enough to make a considerable difference to Venezuela’s economy and infrastructure.

Qatar Places 28 People and Entities on New Terrorism List, Some Among Listed Groups by Other Countries.

On March 22nd, Qatar placed 28 people and entities on a terrorism list, including several Qatari nationals already blacklisted by rival Arab states who accuse the tiny but wealthy gulf state of supporting militants.This follows a 2017 boycott of Qatar by its fellow Gulf Cooperation Council (GCC) members – Saudi Arabia, the United Arab Emirates, Bahrain, and Egypt- which imposed travel, diplomatic and trade sanctions on Qatar,accusing it of financing terrorism.

Compliance officers working at companies with ties to Qatar should closely check their customers and business partners against Qatar’s new list. The Qatar administration has now listed 28 individuals – some already named by its rivals (the so-called ‘Anti-Terror Quartet’), such as the Islamist militant Nusra Front group fighting in Syria. While not listed on OFAC’s SDN, or UN sanctions list, the Nusra group had been listed by US Department of State in 2014 on the “Foreign Terrorist Organizations” list. Others, such as the Qatar-based International Union of Muslim Scholars, with connections to the Muslim Brotherhood, was absent on the Qatar list. The group was blacklisted by the Anti-Terror Quartet.On the other hand, the Union of Muslim Scholars is also not present on other sanctions lists, such as OFAC’s SDN, the UK sanctions, the United Nations, nor the US Department of State Foreign Terror Organizations (FTO) list.

Earlier, in October 2017, in an effort to cooperate with the U.S. and five other Gulf Arab states, Qatar placed 13 alleged al Qaeda and Islamic State militants suspects on its terrorism list.

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