On 27 August 2015, OFAC announced a $1,700,100 settlement with UBS AG (“UBS”) for 222 apparent violations of § 594.201 of the Global Terrorism Sanctions Regulations (31 C.F.R. part 594). The settlement notice is here.
Between January 2008 and January 2013, UBS was alleged to have processed 222 transactions related to securities held in the United States, on behalf of a UBS customer, located in Zurich, who had been designated by OFAC in October 2001, pursuant to Executive Order 13224, “Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism.”
Despite blocks and restrictions placed on the client’s accounts by UBS at the time of OFAC’s designation, UBS allegedly continued to engage in investment-related activity on behalf of the client, including processing USD securities-related transactions, receiving dividends, capital calls, management fees, and cash distributions in connection with a US private equity investment.
Although UBS identified all of the apparent violations, OFAC deemed that the disclosures did not constitute voluntarily self-disclosures on the basis that they were “substantially similar” to another apparent violation of which the OFAC was already aware.
OFAC cited as an aggravating factor the fact that UBS acted with “reckless disregard” by failing to implement adequate controls to prevent the apparent violations despite receiving numerous warning signs that its conduct could lead to breaches of US sanctions laws.
Last week HM Treasury published an update to its consolidated list of people and entities subject to asset freezes. On the updated list, the Treasury has retained the listing of Dawood Ibrahim, who is accused by the Indian government of involvement in organised crime as head of international crime syndicate “D-Company”, criminal conspiracy, and terrorism-related offences including the 1993 Bombay bombings. He has been listed since 2003 by the US government as a Specially Designated Global Terrorist and since 2006 as a Naroctics Trafficking Kingpin, and is the subject of an INTERPOL Red Notice for his arrest.
OFAC has designated as Specially Designated Nationals 3 Central African Republic (CAR) militia leaders on the grounds that they lead groups that threaten the peace, security, or stability of CAR, and the CAR diamond trading company BADICA and its Belgian branch KARDIAM for supporting people involved in that activity through illicit trade in natural resources. In May 2013, the Kimberley Process prohibited the export of diamonds from the CAR because of militia control of diamond mining areas, and BADICA and its affiliates are said to have made illicit payments to the Séléka militia group in an effort to smuggle diamonds out of the country. The newly listed individuals (blacklisted by the UN Security Council earlier this week) are:
- Habib Soussou
- Alfred Yekatom
- Oumar Younous
In OFAC’s press release, Acting Director John Smith states that the designations “target those responsible for waging a campaign of violence and atrocities against the innocent civilians in the Central African Republic”.
Earlier this year, the US Bureau of Industry and Security (BIS) published a proposed rule relating to the export of “cybersecurity items”, a category which includes software used to intrude on systems, network communications surveillance systems, and software, equipment, and technology used in the design and operation of these programs. Some products which fall under the new “cybersecurity items” heading are already controlled for their information security functionality under rules applying to “encryption items”, which are designed to maintain the secrecy of information, and are subject to registration and review requirements prior to export. These controls would continue to apply in addition to the new restrictions.
The proposed rule is designed to implement agreements by the Wassenaar Arrangement, a multilateral export control regime comprising 41 states (including the US and majority of Europe), made at a plenary session in December 2013. It:
- subjects intrusion and surveillance software, and related items, to export controls;
- requires a licence for the export, reexport, or domestic transfer of these items to all destinations except Canada;
- imposes a strict licencing policy, including a policy of presumptive denial for certain cybersecurity items;
- requires that specific technical information be submitted in support of licence applications, in addition to the usual information requirements; and
- makes cybersecurity items ineligible for most licence exceptions under the Export Administration Regulations and ends the application of License Exception ENC to encryption items, meaning that an export licence would be required for exports to foreign subsidiaries and foreign national employees of US companies.
BIS also requested that software and technology companies comment on the proposed rules. There have been strong objections, with Google publishing an article stating that the “proposed rules, as currently written, would have a significant negative impact on the open security research community. They would also hamper our ability to defend ourselves, our users, and make the web safer”. These sentiments have been echoed by the Electronic Frontier Foundation, a prominent digital rights charity based in the US (here).
The Ukrainian government has endorsed a second package of targeted sanctions against 1124 Russian people and 156 Russian entities, following its initial imposition of sanctions on Russia in September 2014 (Order 829-R) for what it described as “the aggression of the Russian Federation against Ukraine”. Its September 2014 sanctions imposed on listed people a ban on entering Ukraine, moving assets from Ukraine to Russia and importing Ukrainian currency into Ukraine from Russia, participating in privatisation projects, and exporting military or dual-purpose goods to Russia. The 2nd package of measures has been submitted to the National Security and Defence Council of Ukraine for review.
OFAC has issued an Advisory on the circumvention of US sanctions against Crimea pursuant to Executive Order 13685, which prohibit all transactions and trade with the region involving a US person or the United States. The intention of the Advisory is to highlight some of the practices that have been used to circumvent the US sanctions regime and to assist US persons in implementing controls to ensure compliance.
The evasive practices identified by OFAC typically involve the omission or obfuscation of references to Crimea in documentation underlying transactions involving US persons or the United States. In the context of financial transactions, OFAC has become aware of people and entities repeatedly omitting the originator or beneficiary address information from SWIFT messages involving persons ordinarily resident or located in Crimea. Where international trade is concerned, Crimean counterparties on financial and trade documents have been listed as being located in Russia rather than in Ukraine.
OFAC advises caution when processing payments lacking complete address information when such transactions involve persons that have previously omitted this information in respect of Crimean people and entities, and warns that when dealing with third-country companies they may be unaware of US sanctions on Crimea or intentionally exploit confusion over the situation to sell US products to Crimean persons. The Advisory goes on to recommend that compliance programs monitor for search terms corresponding to major geographic locations within Crimea, and not only references to “Crimea”, that additional information is requested from parties that have previously violated or attempted to violate US sanctions, and that US sanctions obligations are clearly communicated to international partners. OFAC adds that these are only examples, and that parties should always tailor specific compliance measures to their own risk profile.
The EU has added The Army Of Emigrants And Supporters to its Al Qaida sanctions list and amended the existing entries for 7 people and 4 entities, in order to implement 4 recent decisions made by the Al Qaida Sanctions Committee of the UN Security Council. The EU implementation of these sanctions imposes an EU-wide asset freeze and prohibition on supplying listed people with technical advice, assistance, or training related to military activities. Among those whose listings have been amended is Ayman al-Zawahiri, whose entry now reflects the death of Osama bin Laden and his rise to become leader of Al-Qaida.
The changes are made by Commission Implementing Regulation (EU) 2015/1390 amending Council Regulation (EC) 881/2002. The EU’s notice to The Army of Emigrants And Supporters is here and HM Treasury’s notices are here and here.
Switzerland has lifted its sanctions against Iran, which had been suspended since January 2014. The Swiss government cited the nuclear deal (JCPOA) agreed between Iran and the E3/EU+3 last month, stating in its press release that “The Federal Council wishes today’s steps to be seen as a sign of its support for the implementation of the nuclear agreement and its interest in deepening bilateral relations with Iran”.
Switzerland’s sanctions regime on Iran had banned trade in precious metals with Iranian state bodies and required that all trade in and relating to Iranian petrochemical products be reported. The Federal Council has also increased the threshold values for reporting and licensing obligations in relation to money transfers involving Iranian nationals ten-fold. In addition, a new exemption clause has been introduced by the Swiss government to The Ordnance of Measures regarding the Islamic Republic of Iran, authorising moves to implement UN Security Council Resolution 2231 (see previous blog).
The Federal Council stated that it will monitor the implementation of the JCPOA and adapt Swiss measures accordingly, adding that “should implementation of the agreement fail the Federal Council reserves the right to reintroduce the lifted measures”.