U.S. Targets Russian Actors Involved in Efforts to Influence U.S. Elections

PRESS STATEMENT

MICHAEL R. POMPEO, SECRETARY OF STATE

SEPTEMBER 30, 2019

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Link:

State Department press release

General License 3 is up to revision G, while 9 is up to F.

The relevant paragraph in 3G says:

(c) Except as provided in paragraph (:f) of this general license, all transactions and activities prohibited by Section l(a)(iii) of E.O. 13808 or by E.O. 13850, each as amended, or by E.O. 13884 that are ordinarily incident and necessary to the wind down of financial contracts or other agreements that were entered into prior to 4:00 p.m. eastern standard time on February 1, 2019, involving, or linked to, GL 3G Bonds are authorized. This authorization is valid through 12:01 a.m. eastern daylight time, March 31, 2020.

And in 9F:

(d) Except as provided in paragraph (g) of this general license, all transactions and activities prohibited by Section l(a)(iii) of E.O. 13808 or by E.O 13850, each as amended, or by E.O. 13884, that are ordinarily incident and necessary to the wind down of financial contracts or other agreements that were entered into prior to 4:00 p.m. eastern standard time on January 28, 2019, involving, or linked to, PdVSA securities are authorized. This authorization is valid through 12:01 a.m. eastern daylight time, March 31, 2020.

In the previous versions of these licenses, these clauses were due to expire on September 30th.

Links:

OFAC Notice

General License 3G

General License 9F

For a period of over 3 years, GE appears to have violated the Cuban Assets Control Regulations (CACR) 289 times, resulting in a settlement of $2,718,581, as opposed to a base penalty of $3,377,119 and a maximum statutory penalty of $17,785,000.

This is what happened:

Specifically, between December 2010 and February 2014, the GE Companies appear to have violated § 515.201(b) of the CACR on 289 occasions by accepting payment from The Cobalt Refinery Company (“Cobalt”) for goods and services provided to a Canadian customer of GE.

Since June 1995, Cobalt had been identified as a specially designated national (SDN) of Cuba and appeared on OFAC’s List of Specially Designated Nationals and Blocked Persons (the “SDN List”). Publicly available information also demonstrated that GE’s former Canadian customer is a corporation with strong historic and then-current economic ties to the Cuban mining industry through its business partnerships and joint ventures with the Cuban government. Cobalt is one of three entities owned by a public joint venture between GE’s Canadian customer and the Cuban government. From at least 1996 until the GE Companies terminated their relationship with their Canadian customer, the GE Companies maintained — and renewed on at least 18 occasions — this customer relationship despite the obvious sanctions risk posed by the relationship.

On February 24, 2014, GE Working Capital Solutions discovered that from at least 2010 to 2014, the GE Companies received numerous payments directly from Cobalt for invoices issued to GE’s Canadian customer. While the GE Companies negotiated and entered into contracts with GE’s Canadian customer, and sent all of their invoices to GE’s Canadian customer, Cobalt paid the GE Companies for its goods and services in more than 65 percent of the total transactions. The GE Companies approved Cobalt as a third-party payer and, over a four-year period, failed to appropriately recognize the significant and widely published relationship between Cobalt and their Canadian customer and did not undertake sufficient diligence into their customer’s activities. The GE Companies deposited all checks received from Cobalt into GE’s bank account at a Canadian financial institution. The checks contained Cobalt’s full legal entity name as it appears on OFAC’s SDN List as well as an acronym for Cobalt (“Corefco”), but the GE Companies’ sanctions screening software, which screened only the abbreviation of the SDN’s name, never alerted on Cobalt’s name.

In total, the GE Companies received 289 checks directly from Cobalt from on or about December 9, 2010 to on or about February 28, 2014 totaling approximately $8,018,615. Additionally, goods and services the GE Companies provided to its Canadian customer were, in turn, used to supply utility services and other benefits to Cobalt, which is co-located with GE’s Canadian customer.

And how OFAC ended up at the final figure:

OFAC determined the following to be aggravating factors:

1. The GE Companies failed to take proper or reasonable care with respect to their U.S. economic sanctions obligations — particularly given GE’s commercial sophistication. GE failed to identify that (i) for at least four years it was receiving payments that were on their face from a SDN of Cuba that has been on the SDN List since 1995, and (ii) it was providing goods and services to a customer that provides a direct and indirect benefit to a facility owned and operated by that designated Cuban company;
2. The GE Companies’ actions caused substantial harm to the objectives of the Cuba sanctions program by conducting a large volume of high-value transactions directly with a Cuban company on the SDN List over a period of many years; and
3. The substance of GE’s disclosures and other communications with OFAC leave substantial uncertainty about the totality of the benefits conferred to a Cuban company on the SDN List by the GE Companies through their Canadian customer, which had substantial and public ties to Cuba and the Cuban mining industry. While OFAC considered certain jurisdictional limitations on GE’s ability to provide a full picture of the scope of work performed at the request of its Canadian customer, at all relevant times, GE had reason to know of its customer’s specific and longstanding relationship with Cobalt. GE should have treated its Canadian customer as higher risk due to the customer’s publicly known joint venture with Cuba and substantial reliance on Cuban-origin ore. Finally, despite the provision to GE of OFAC’s Office of Enforcement Data Delivery Standards, GE did not provide its primary submissions to OFAC in a clear and organized manner and the submissions contained numerous inaccuracies, placing a substantial resource burden on OFAC during the course of its investigation.

OFAC determined the following to be mitigating factors:

1. None of the GE Companies has received a penalty notice or Finding of Violation from OFAC in the five years preceding the date of the earliest transaction giving rise to the alleged violations;
2. GE identified the alleged violations by testing and auditing its compliance program. Additionally, GE implemented remedial measures and new processes to enhance its sanctions compliance procedures, including developing a training video for all company employees using the alleged violations as a case study; and
3. GE cooperated with OFAC by executing and extending multiple statute of limitations tolling agreements.

And the lesson to be learned from all of this:

This enforcement action highlights the sanctions risks to U.S. companies and their foreign subsidiaries associated with (i) accepting payments from third parties and (ii) conducting transactions in foreign currency or at a foreign financial institution. Additionally, this action demonstrates the importance of conducting appropriate due diligence on customers and other counter-parties when initiating and renewing customer relationships. Ongoing compliance measures should be taken throughout the life of commercial relationships.

As noted in OFAC’s Framework for Compliance Commitments, U.S. companies can mitigate sanctions risk by conducting risk assessments and exercising caution when doing business with entities that are affiliated with, or known to transact with, OFAC-sanctioned persons or jurisdictions, or that otherwise pose high risks due to their joint ventures, affiliates, subsidiaries, customers, suppliers, geographic location, or the products and services they offer.

Link:

OFAC Enforcement Information

So, according to this story (one of many), Adobe is going to cut off all Venezuelan customers. It looks like it’s struggling with the latest OFAC Executive Order, which blocks all assets of the “Government of Venezuela” – and that includes all associated persons (i.e. all government employees). And that seems to be the problem – because it can’t reliably tell government employees from other Venezuelans, Adobe is cutting off all business to the country.

Mr. Watchlist wonders – was this part of the Trump Administration’s machinations, or just a happy side effect?

Yesterday, OFAC added the following persons to the SDN List under its Global Magnitsky human rights sanctions program:

and changed the following 2 listings under the Iran (both), counter terrorism and/or non-proliferation programs (1 each):

And Treasury:

and State:

Global Magnitsky Sanctions Against Corruption Network in South Africa

PRESS STATEMENT

MICHAEL R. POMPEO, SECRETARY OF STATE

OCTOBER 10, 2019

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both issued press releases.

As you can see, although the Magnitsky sanctions program is ostensibly about human rights abuses, the “global” (i,e. Besides Russia) version includes corruption. Why not just a corruption program? Mr. Watchlist wonders…

Links:

OFAC Notice

Treasury Press Release

State Department Press Release

On Friday, OFAC added the following 2 persons:

and 6 entities:

to its SDN List under its Global Magnitsky human rights abuses and corruption sanctions program.

And Treasury:

and State:

Treasury Sanctions Individuals for Corruption in South Sudan

PRESS STATEMENT

MICHAEL R. POMPEO, SECRETARY OF STATE

OCTOBER 11, 2019

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issued press releases.

Links:

OFAC Notice

Press Releases: State, Treasury

On Monday, OFAC designated the following Turkish individuals:

and government entities:

under a new “Syria-related” program (Mr. Watchlist checked – there is still a Syria program). I guess they didn’t want to call it the Turkey program?

Anyhow, this all comes under a new Executive Order, which blocks the property of the following:

(i) any person determined by the Secretary of the Treasury, in consultation with the Secretary of State: (A) to be responsible for or complicit in, or to

have directly or indirectly engaged in, or attempted to engage in, any of the following in or in relation to Syria:

(1) actions or policies that further threaten the peace, security, stability, or territorial integrity of Syria; or

(2) the commission of serious human rights abuse;

(B) to be a current or former official of the Government of Turkey;

(C) to be any subdivision, agency, or instrumentality of the Government of Turkey;

(D) to operate in such sectors of the Turkish economy as may be determined by the Secretary of the Treasury, in consultation with the Secretary of State;

(E) to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, any person whose property and interests in property are blocked pursuant to this order; or

(F) to be owned or controlled by, or to have acted or purported to act for or on·behalf of, directly or indirectly, any person whose property and interests in property are blocked pursuant to this order.

Additionally, the Secretary of State (this time, he consults with Treasury, not the other way around), can impose a range of sanctions on the following foreign persons:

(i) is responsible for or complicit in, has directly or indirectly engaged in, or attempted to engage in, or financed, any of the following:

(A) the obstruction, disruption, or prevention of a ceasefire in northern Syria;

(B) the intimidation or prevention of displaced persons from voluntarily returning to their places of residence in Syria;

(C) the forcible repatriation of persons or refugees to Syria; or

(D) the obstruction, disruption, or prevention of efforts to promote a political solution to the conflict in Syria, including:

(1) the convening and conduct of a credible and inclusive Syrian-led constitutional

process under the auspices of the United Nations (UN);

(2) the preparation for and conduct of UN-supervised elections, pursuant to the new constitution, that are free and fair and to the highest international standards of transparency and accountability; or

(3) the development of a new Syrian government that is representative and

reflects the will of the Syrian people;

(ii) is an adult family member of a person designated under subsection (a) (i) of this section; or

(iii) is responsible for or complicit in, or has directly or indirectly engaged in, or attempted to engage in, the expropriation of property, including real property, for personal gain or political purposes in Syria.

The sanctions being:

(b) When the Secretary of State, in accordance with the terms of subsection (a) of this section, has determined that a person meets any of the criteria described in that subsection and has selected one or more of the sanctions set forth below to impose on that person, the heads of relevant departments and agencies, in consultation with the Secretary of State, as appropriate, shall ensure that the following actions are taken where necessary to implement the sanctions selected by the Secretary of State:

(i) agencies shall not procure, or enter into a contract for the procurement of, any goods or services from the sanctioned person; or

(ii) the Secretary of State shall direct the denial of a visa to, and the Secretary of Homeland Security shall exclude from the United States, any alien that the Secretary of State determines is a corporate officer or principal of, or a shareholder with a controlling interest in, a sanctioned person.

(c) When the Secretary of State, in accordance with the terms of subsection (a) of this section, has determined that a person meets any of the criteria described in that subsection and has selected one or more of the sanctions ~et forth below to impose on that person, the Secretary of the Treasury, in consultation with the Secretary of State, shall take the following actions where necessary to implement the sanctions selected by the Secretary of State:

(i) prohibit any United States financial institution that is a U.S. person from making loans or providing credits to the sanctioned person totaling more than $10,000,000 in any 12-month period, unless such person is engaged in activities to relieve human suffering and the loans or credits are provided for such activities;

(ii) prohibit any transactions in foreign exchange that are subject to the jurisdiction of the United States and in which the sanctioned person has any interest;

(iii) prohibit any transfers of credit or payments between banking institutions or by, through, or to any banking institution, to the extent that such transfers or payments are subject to the jurisdiction of the United States and involve any interest of the sanctioned person;

(iv) block all property and interests in property that are in the United States, that hereafter come within the United States, or that are or hereafter come within the possession or control of any United States person of the sanctioned person, and provide that such property and interests in property may not be transferred, paid, exported, withdrawn, or otherwise dealt in;

(v) prohibit any United States person from investing in or purchasing significant amounts of equity or debt instiuments of the sanctioned person;

(vi) restrict or prohibit imports of goods, technology, or services, directly or indirectly, into the United States from the sanctioned person; or

(vii) impose on the principal executive officer or officers, or persons performing similar functions and with similar authorities, of the sanctioned person the sanctions described in subsections (c) (i) – (c) (vi) of this section, as selected by the Secretary of State.

Three General Licenses were issued. Number 1 authorizes the official business of the U.S. Government, Number 2 allows wind-down operations with the two designated government agencies (but only until November 13th), and Number 3 authorizes official activities of the following groups: that deal with the two governmental agencies:

• World Bank

• IMF (International Monetary Fund)

• FAO (UN Food and Agriculture Organization)

• OCHA (UN Office for the Coordination of Humanitarian Affairs)

• OHCHR (UN Office of the United Nations High Commissioner for Human Rights)

• UN Habitat

• UNDP (UN Development Program)

• UNFPA (UN Population Fund)

• UNHCR (Office of the UN High Commissioner for Refugees)

• UNICEF (UN Children’s Fund)

• WFP (World Food Program)

• The World Health Organization (WHO), including the Pan-American Health

Organization (PAHO)

Meanwhile, Treasury:

and State:

Sanctioning the Government of Turkey in Response to the Ongoing Military Offensive in Northeast Syria

PRESS STATEMENT

MICHAEL R. POMPEO, SECRETARY OF STATE

OCTOBER 14, 2019

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issued press releases.

Mr. Watchlist will get the various resource pages updated today or tomorrow (today is a day off from the daily grind)….

Links:

OFAC Notice

Executive Order

General Licenses: 1, 2, 3

Press Releases: State, Treasury

This is the one authorizing activities with Nynas AB – the new version (D) sets a new expiration date of April 14, 2020.

Link:

OFAC Notice

Venezuela General License 13D

This is the PdVSA one, which authorizes maintaining “operations, contracts or other agreements” with PdVSA or things it owns for Chevron, Halliburton, Schlumberger, Baker Hughes and Weatherford International – now until January 20, 2020 (i.e. another 3 months).

Links:

OFAC Notice

Venezuela General License 8D

It’s now on version G, and was extended for 18 months this time (usually was being extended for a year at a time)…. why not just leave it open-ended, and revoke it if necessary?

Links:

OFAC Notice

Belarus General License 2G

Yesterday, OFAC’s brand-new Syria-related sanctions program was essentially terminated – by removing the handful of designations:

AKAR, Hulisi, Turkey; DOB 1952; POB Kayseri, Turkey; Gender Male (individual) [SYRIA-EO13894].

DONMEZ, Fatih, Turkey; DOB 1965; POB Bilecik, Turkey; Gender Male (individual) [SYRIA-EO13894].

SOYLU, Suleyman, Turkey; DOB 21 Nov 1969; POB Istanbul, Turkey; Gender Male (individual) [SYRIA-EO13894]. 

REPUBLIC OF TURKEY MINISTRY OF NATIONAL DEFENCE, Ankara, Turkey [SYRIA-EO13894].

REPUBLIC OF TURKEY MINISTRY OF ENERGY AND NATURAL RESOURCES, Ankara, Turkey [SYRIA-EO13894]. 

And Treasury issued a press release:

While technically, program still exists since the Executive Order has not been revoked yet – and OFAC needs to issue regulations for the program – effectively, the program is gone.

Links:

OFAC Notice

Treasury Press Release

On Thursday, OFAC issued Iran General License K, which gives you about 2 months (till December 20th) to take care of any maintenance or wind down transactions involving COSCO Shipping Tanker (Dalian) Co Ltd (and its 50 Percent Rule holdings).

It only took them a month to issue that license since COSCO was designated – on September 25th.

Links:

OFAC Notice

OFAC General License K

On Thursday, OFAC updated General License 5 (now 5A) for the Venezuela program, making the authorization for these transactions regarding the PdVSA 8.5% 2020 bond only effective starting in mid-January. They also amended FAQ 595 to explain:

595. What does Venezuela-related General License 5A authorize?

Links:

OFAC Notice

General License 5A

FAQ 595

On Friday, Treasury imposed Special Measure 5 (i.e. no correspondent banking accounts allowed) on Iran, but announced how Iran could still get humanitarian assistance:

And OFAC issued a guidance on “Financial Channels to Facilitate Humanitarian Trade with Iran and Related Due Diligence and Reporting Expectations”:

Financial Channels to Facilitate Humanitarian Trade with Iran and Related Due Diligence and Reporting Expectations

The U.S. Government has levied unprecedented economic pressure to disrupt the Iranian regime’s ability to covertly and illicitly access the international financial system to finance terrorism abroad, increase its domestic oppression, support the brutal Assad regime, procure ballistic missile technology, and broadly destabilize the Middle East. These U.S. government efforts are directed at the Iranian regime. They are not directed at the people of Iran, who themselves are victims of the regime’s oppression, corruption, and economic mismanagement.

The United States maintains broad exceptions and authorizations for the sale of agricultural commodities, food, medicine, and medical devices to Iran by U.S. and non-U.S. persons, provided such transactions do not involve persons designated in connection with Iran’s proliferation of weapons of mass destruction (WMD), or Iran’s support for international terrorism. These exceptions and authorizations are clearly outlined by Treasury’s Office of Foreign Assets Control (OFAC) in Frequently Asked Questions (FAQs) regarding Iran sanctions, Guidance on Humanitarian Assistance and Related Exports to the Iranian People (2013), and Guidance on the Sale of Food, Agricultural Commodities, Medicine, and Medical Devices by Non-U.S. Persons to Iran (2013).

Unfortunately, the U.S. government has seen the Iranian regime abuse the goodwill of the international community, including by using so-called humanitarian trade to evade sanctions and fund its malign activity. The U.S. government also knows that the regime and its proxies are looking for new ways to generate funds and launder money. In fact, we have grown increasingly concerned as we have uncovered Iranian and Iranian-proxy schemes to access illicitly the international financial system under the cover of seemingly humanitarian organizations or through shell companies or exchange houses.

Today, October 25, 2019, the U.S. Departments of the Treasury and State announced a new humanitarian mechanism to ensure unprecedented transparency into humanitarian trade with Iran. Given the Iranian regime’s history of squandering its wealth on corruption and terrorism instead of supporting the Iranian people, we have developed a framework to guard against such theft and assist foreign governments and foreign financial institutions in establishing a payment mechanism to facilitate legitimate humanitarian exports to Iran. Through this mechanism, no revenue or payment of any kind will be transferred to Iran.

Importantly, this path restricts the Central Bank of Iran’s (CBI) role in facilitating humanitarian trade, which is critical because the CBI and its senior officials have facilitated significant funds transfers to terrorist organizations. Iran’s deceptive financial practices and its deficient anti-money laundering and countering the financing of terrorism (AML/CFT) regimes can make it extremely difficult to determine who is on the other end of an Iranian transaction. Our designation of CBI under Executive Order 13224 puts governments and financial institutions on notice that engaging in transactions with the CBI may make them complicit in the CBI’s support of terrorism.

This mechanism, designed solely for the purpose of commercial exports of agricultural commodities, food, medicine, and medical devices to Iran, will provide unprecedented transparency into humanitarian trade to Iran and help ensure that humanitarian goods go to the Iranian people, and are not diverted by the Iranian regime to fund its nefarious purposes. To achieve this transparency, participating governments and financial institutions must commit to conducting enhanced due diligence to mitigate the higher risks associated with transactions involving Iran. Such stringency is merited given Iran’s status as the largest state sponsor of terrorism, as well as its continued failure to implement key AML/CFT safeguards established by the Financial Action Task Force (FATF), the global standard-setting body for combating money laundering and the financing of terrorism and proliferation. The enhanced due diligence requirements are informed by appropriate FATF standards.

As set forth below in greater detail, this framework will enable foreign governments and foreign financial institutions to seek written confirmation from Treasury that the proposed financial channel will not be exposed to U.S. sanctions in exchange for foreign governments and financial institutions committing to provide to Treasury robust information on the use of this mechanism on a monthly basis.

If foreign governments or financial institutions detect any potential abuse of this mechanism by Iranian customers, or the involvement of designated individuals or entities, they will be required to immediately restrict any suspicious transactions and provide relevant information to Treasury.

This mechanism also can be used by U.S. persons and U.S.-owned or -controlled foreign entities, as well as other non-U.S. persons. Of course, U.S. persons and U.S.-owned or – controlled entities must still comply with existing requirements under the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA) for humanitarian exports to Iran, as implemented through OFAC’s regulations.

Enhanced Due Diligence and Reporting Expectations

Provided that foreign financial institutions commit to implement stringent enhanced due diligence steps, the framework will enable them to seek written confirmation from Treasury that the proposed financial channel will not be exposed to U.S. sanctions

Host nation foreign financial institutions and their governments, as appropriate, will be expected to collect, maintain, and report to Treasury, with appropriate disclosure and use restrictions, a great deal of information on a monthly basis. Treasury will evaluate the information it receives in making any determination about whether the transactions continue to meet the stated due diligence and reporting expectations. Treasury will seek to protect information identified by the submitter, consistent with applicable laws and regulations.

The following is an illustrative list of documentation and information that Treasury and State may require depending on the nature of transactions:

1. The information used to identify the Iranian customers and to verify their identities and beneficial ownership;

a. For legal persons or arrangements, this would include the information used to identify and verify the existence of the entity or arrangement (company name, legal form and status, proof of incorporation, basic regulating powers, the registered address, list of directors, and principal place of business), and information sufficient to understand the nature of the Iranian customers’ business, ownership, and control structure;

b. For legal persons, information sufficient to identify and verify the identities of the natural person(s) who are beneficial owners. For legal arrangements, information sufficient to identify and verify the identities of the natural person(s) who are the settlor, trustee(s), protector (if any), the beneficiaries or class of beneficiaries, and any other natural person exercising ultimate effective control over the legal arrangements;

2. The information used by both the host nation’s foreign financial institutions and any Iranian financial institution involved to understand the purpose and intended nature of the business relationship between the seller of the humanitarian goods and the Iranian customer;

3. Monthly statement balances with the value, currency, and balance date of any account of an Iranian financial institution held at the participating host nation’s foreign financial institutions that is being used for humanitarian transactions, in .csv format;

4. A list of Iranian designated individuals or entities1 with which the Iranian customers indicate they currently have business relationships;

5. Detailed information regarding the commercial elements and logistics of the transaction that would be transmitted between the seller of humanitarian goods and the customer in the normal course of financial messaging, which could include:

a. customer information, including the identities of all consignees and intermediaries involved in the transactions;

b. information about the Iranian customer and the seller of the humanitarian goods and the Iranian financial institution’s payment order explanation or narrative linked to the contracts for the sale of humanitarian goods;

1 Persons designated on the List of Specially Designated Nationals and Blocked Persons under a program other than solely the Iranian Transactions and Sanctions Regulations (31 C.F.R. Part 560), and carrying a tag other than solely the “[IRAN]” tag.

c. order transaction amount and currency;

d. date of transaction order;

e. names of all involved financial institutions;

f. bills of lading, airway bills and invoices, as well as other relevant documents that verify the export to and entry into Iran of the goods;

g. the beneficiary’s identity; and

h. the beneficiary’s bank.

6. A written commitment from any Iranian distributors involved in the transactions that they will not allow the goods to be sold or resold to Iranian designated individuals or entities and that the Iranian distributor will impose this obligation on downstream customers;

7. Additional information obtained regularly throughout the course of the host nation foreign financial institutions’ ongoing due diligence of the business relationship that is necessary to verify the consistency of the transaction with the purposes of the humanitarian channel, including host nation’s foreign financial institutions’ knowledge of the Iranian customers and their business and risk profiles;

8. If, through the course of the host nation’s foreign financial institutions’ enhanced due diligence, Iranian customers are found to have attempted, or are suspected of, misuse of the humanitarian channel, the participating host nation’s foreign financial institution will immediately restrict any suspicious transactions and provide relevant information to Treasury when permitted; and

9. If a host nation foreign financial institution finds that an Iranian customer had previous ties (within five years) to U.S.-, U.N.-, or EU-designated entities or individuals, the host nation foreign financial institution will provide to Treasury detailed information regarding any changes to those ties, such as a change in beneficial ownership or control of the Iranian customer.

In certain circumstances, Treasury and State may require other information.

Interested foreign governments and foreign financial institutions should reach out to Treasury for more information or with any questions.

Links:

Treasury Press Release

Section 311 Final Rule

OFAC Guidance

Issuance of Amended Ukraine-related General Licenses

Note: Mr. Watchlist did some research. Ukraine-related General License 13 (the original) was authored on April 6, 2018, and the newest version expires in March of next year. General License 15 is slightly newer, but it was still issued on May 22, 2018. Your have to wonder why these keep on getting renewed – either the targeted firms clean up their act, or the sanctions go into place. Ditto that Belarus General License that has been in place for years…

Links:

OFAC Notice

General License 13M

General License 15G

On Monday, OFAC added the following persons:

and entity:

ARMED FORCES GENERAL STAFF (a.k.a. GENERAL STAFF OF IRANIAN ARMED FORCES; a.k.a. “AFGS”), Iran; Additional Sanctions Information – Subject to Secondary Sanctions [IRAN-EO13876].

to its Iran sanctions program under the authorizations from Executive Order 13876.

Additionally, the following 2 entities were removed from the Venezuela sanctions program:

Link:

OFAC Notice

Today, OFAC added the following persons:

BLANCO HURTADO, Nestor Neptali, Miranda, Venezuela; DOB 26 Sep 1982; nationality Venezuela; Gender Male; Cedula No. 15222057 (Venezuela) (individual) [VENEZUELA-EO13884]. 

CALDERON CHIRINOS, Carlos Alberto, Maracaibo, Zulia, Venezuela; DOB 03 Jul 1970; Gender Male; Cedula No. 10352300 (Venezuela) (individual) [VENEZUELA-EO13884]. 

CARRENO ESCOBAR, Pedro Miguel, Delta Amacuro, Venezuela; DOB 24 Apr 1961; Gender Male; Cedula No. 8142392 (Venezuela) (individual) [VENEZUELA-EO13884]. 

CEBALLOS ICHASO, Remigio, Caracas, Capital District, Venezuela; DOB 01 May 1963; Gender Male; Cedula No. 6557495 (Venezuela) (individual) [VENEZUELA-EO13884]. 

ORNELAS FERREIRA, Jose Adelino (a.k.a. ORNELLA FERREIRA, Jose Adelino; a.k.a. ORNELLAS FERREIRA, Jose Adelino), Caracas, Capital Disrict, Venezuela; DOB 14 Dec 1964; Gender Male; Cedula No. 7087964 (Venezuela) (individual) [VENEZUELA-EO13884].

to the SDN List under its Venezuela sanctions program.

Additionally, the Venezuela General License 34 was updated – authorized individuals now include “Current employees and contractors of the Government of Venezuela who provide health or education services in Venezuela, including at hospitals, schools and universities” and the list of unauthorized items now includes “Any transactions or dealings with, or the unblocking of any property or interests in property of, any person included on OFAC’s Specially Designated Nationals and Blocked Persons List (SDN List)” – curious that wasn’t there before.

There is now also a General License 35 – “Authorizing Certain Administrative Transactions with the Government of Venezuela.”

Additionally, Syria-related (i.e. Turkey-related) General Licenses 2 and 3 – the ones related to dealings with the two previously-sanctioned Turkish government ministries – have been revoked.

Links:

OFAC Notice

Venezuela General License 34A, 35

Sorry about this – about those OFAC changes to the Venezuela program I just posted? Well, OFAC also issued a new Frequently Asked Question (FAQ):

803. What types of activity does General License 35 authorize? 

U.S. persons are authorized to engage in certain administrative transactions with the Government of Venezuela that are prohibited by E.O. 13884 of August 5, 2019, where such transactions are necessary and ordinarily incident to such persons’ day-to-day operations.  General License 35 authorizes U.S. persons to pay taxes, fees, and import duties to the Government of Venezuela, and to purchase or receive permits, licenses, registrations, certifications, and public utility services from the Government of Venezuela, so long as these transactions are necessary and ordinarily incident to such persons’ day-to-day operations.  

U.S. persons should remain cautious when engaging in authorized activity with blocked persons to ensure all criteria for use of the general license are met.  The illegitimate former Maduro regime has a long history of corruption, and we encourage U.S. persons who rely on the authorization in General License 35 to exercise appropriate due diligence to ensure compliance with the terms of the authorization.  The U.S. government will continue to target corruption by the illegitimate former Maduro regime.  As with any general or specific license, OFAC is prepared to revoke this authorization if appropriate to support U.S. foreign policy and national security priorities. [11-05-2019]

and an amended one, too:

Links:

New FAQs

Amended FAQs

2nd, 3rd and 4th Quarter FY2018 Reports for Licensing Activities Undertaken Pursuant to the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA)

Links:

OFAC Notice

TSRA Reports for FY2018 – Q2, Q3, Q4

So, Apollo (now called Carlyle Aviation Partners Ltd) had 12 apparent violations of the Sudanese Sanctions Regulations for leasing aircraft engines to a company, which subleased them to another, which installed them on aircraft belonging to the SDN Sudan Airways. The lease agreements contained provisions prohibiting the lessee from transferring the engines to any country subject to US or UN sanctions.

According to OFAC, this is the problem:

Notwithstanding the inclusion of this clause, Apollo did not ensure the aircraft engines were utilized in a manner that complied with OFAC’s regulations. For example, at the time, Apollo did not obtain U.S. law export compliance certificates from lessees and sublessees. Additionally, Apollo did not periodically monitor or otherwise verify its lessee’s and sublessee’s adherence to the lease provision requiring compliance with U.S. sanctions laws during the life of the lease. As a result, Apollo learned where its engines had actually flown only after the engines were returned to Apollo at the end of the lease.

Because Apollo was considered a large sophisticated firm:

During the time in which the apparent violations occurred, Apollo was a multi-strategy aviation investment manager with extensive technical knowledge, in-depth industry expertise, and long- standing presence in the mid-life commercial aviation sector. Apollo’s aircraft investing included acquiring, refurbishing, marketing, and leasing commercial jet aircraft, engines and related assets, and disassembly and resale of aircraft and components. By the end of 2015, Apollo reported to have nearly $2.5 billion of aviation assets under management. At that time, Apollo had offices in the United States, Ireland, and Singapore.

The maximum penalty was $3,000,000, but these were considered non-egregious and had been voluntarily self-disclosed. Therefore, the base penalty was $360,000.

OFAC arrived at the final amount based on the following aggravating factors:

1. The unauthorized use of Apollo’s aircraft engines in Sudan by an entity on the SDN List resulted in harm to U.S. sanctions program objectives;

2. Apollo is a large and sophisticated entity; and

3. Although Company 1 appears to have violated the terms of its engine lease prohibiting any use in sanctioned countries, Apollo failed to monitor or otherwise verify the actual whereabouts of these aircraft engines during the life of its leases.

and mitigating factors:

1. No Apollo personnel had actual knowledge of the conduct leading to the apparent violations;

2. Apollo has not received a penalty notice or Finding of Violation from OFAC in the five years preceding the earliest date of the transactions giving rise to the apparent violations;

3. Apollo implemented a number of remedial measures in response to the apparent violations, including investment in additional compliance personnel and systems; and

4. Apollo provided information to OFAC in a clear, concise, and well-organized manner.

And the company fixed up its compliance program:

• Apollo improved its Know-Your-Customer screening procedures in keeping with global best practices;

• Apollo enhanced employee training on U.S. export law, including by making employees aware of the screening process used by the company; and

• Apollo began obtaining U.S. law export compliance certificates from lessees and sublessees.

And here is the lesson to be learned:

This enforcement action highlights the importance of companies operating in high-risk industries to implement effective, thorough and on-going, risk-based compliance measures, especially when engaging in transactions concerning the aviation industry. For example, on July 23, 2019, OFAC issued an advisory to the civil aviation industry to warn of deceptive practices employed by Iran with respect to aviation matters. While that advisory is focused on Iran, participants in the civil aviation industry should be aware that other jurisdictions subject to OFAC sanctions may engage in similar deceptive practices. This action also highlights the importance of companies operating internationally to implement Know You Customer screening procedures and implement compliance measures that extend beyond the point-of-sale and function throughout the entire business or lease period.

And there’s even a paragraph pointing folks to the OFAC Framework document (the title they quote for their own document is wrong).

But, still, the level of oversight OFAC seems to expect here seems to be overkill – especially since the sublessee installed the engines, not Apollo’s customer. Yes, it’s similar to the bar being set in the PACCAR and e.l.f. cases, but does seem a step further than either of those cases.

Link:

OFAC Enforcement Information