• U.S. government continues to impose sanctions on parties supporting Iran
  • One Cypriot and three Panamanian companies sanctioned for connection to Venezuela
  • European bank fined for prohibited transactions involving Sudan

The U.S. Treasury Department, Office of Foreign Assets Control (OFAC), the main U.S. government body that administers U.S. economic sanctions and embargoes, continues to be busy.  In September 2019 alone, OFAC has announced new sanctions designations, new penalties, and new regulations on a nearly daily basis.

Many of these actions are largely administrative in nature.  For example, in the September 4 Federal Register, OFAC announced new U.S. sanctions on Nicaragua.  While the regulations (at 31 CFR Part 582) are in fact new, the prohibitions contained in the regulations are not: the regulations merely implement Executive Order 13,851, which was issued by President Trump in November 2018.

We nonetheless want to briefly summarize three actions taken by OFAC to date in September 2019.  As described below, we think these actions provide useful insight into how OFAC is operating currently.

Chinese Entities Designated Because of Support for Iranian Trade

On September 25, OFAC announced that it has designated six Chinese entities as Specially Designated Nationals (SDNs) under the authority of Executive Order 13,846.  U.S. persons are prohibited from conducting virtually any transaction with an SDN.  Notably, Executive Order 13,846 pertains not to China but rather to Iran and to entities that support Iranian trade, including trade and business in the Iranian petroleum sector.

This expansive use of sanctions is part of a pattern (and there is another example of similar OFAC action with respect to Venezuela – see below) particularly with Iran.  The U.S. government has essentially exhausted all options in terms of restricting U.S. companies and individuals from conducting business with Iran.  U.S. parties have been prohibited from conducting nearly all business with and in Iran for many years.

OFAC has therefore determined that its best chance of further isolating Iran is to introduce consequences against non-U.S. actors continuing to do business with Iran.  In effect, the U.S. government is trying to force non-U.S. companies and individuals to choose between doing business with the United States or Iran.

Cypriot, Panamanian Companies Designated Because of Relationship to Venezuela

Similar to the approach with Iran, on September 24, OFAC announced that it is designating one Cypriot party, and three Panamanian parties, under the authority of Executive Order 13,850.  That Executive Order, which President Trump issued in November 2018, is directed primarily at actors involved in, complicit in, or responsible for furthering “deceptive practices or corruption” by or involving the government of Venezuela.

The four parties designated on September 24 were designated because of their support for the government of Venezuela.  As described in our August 2019 blog, the U.S. government now maintains sanctions against virtually all Venezuelan government parties.  These four new designations show that the U.S. government – as with sanctions on Iran – is willing to extend sanctions to parties even outside Venezuela that are deemed to be affiliated with or supporting the Venezuelan government.

British Arab Commercial Bank Pays Penalty for Sudan Sanctions Violations

On September 17, OFAC announced that British Arab Commercial Bank (BACB) agreed to pay a $4 million penalty to settle charges that BACB had violated U.S. sanctions on Sudan.  A copy of the settlement agreement is available here; a copy of the OFAC web notice of the matter is available here.

In addition to the penalty, BACB agreed to specific compliance enhancements that are laid out in substantial detail in the settlement agreement.  It is increasingly common – as noted previously, for example in this January 2019 blog post – for OFAC to require parties to implement specified compliance enhancements as part of settlement agreements.  BACB is also required to provide annual compliance certificates to demonstrate that it has implemented and continues to abide by those compliance enhancements.

According to OFAC, the potential penalties against BACB could have amounted to over $380 million given the number of transactions and the amount of money transacted.  Interestingly, OFAC conferred with their UK counterparts in reaching the conclusion that such a penalty was not feasible for an institution the size of BACB.

We think the explicit coordination between OFAC and its UK counterparts at the UK Prudential Regulation Authority is notable.   Such collaboration is common in matters under the Foreign Corrupt Practices Act (FCPA), where the U.S. Department of Justice (DOJ) often works with – and highlights its work with – non-U.S. regulators.  See for example this December 2017 announcement of an FCPA settlement in which the DOJ both highlighted the assistance from regulators in Brazil and Singapore and detailed how the massive penalty paid was split between Brazil, Singapore and the United States.  Similar coordination is likely to increase between OFAC and non-U.S. sanctions enforcement personnel.

OFAC Stays Busy – Compliance Personnel Must Do the Same

The few examples described in this article show that OFAC remains active.  Compliance personnel must do the same and ensure their enterprise’s compliance infrastructure is supple enough to shift as needed to reflect OFAC actions.  Transactions permitted one week may be prohibited the next.  Financial partners can be designated – and thus no longer serve as a partner – in the middle of a transaction.

In this dynamic landscape, employees must be empowered to identify potential issues and report them to the compliance function.  Personnel need not be experts, but they do need to have the knowledge necessary to spot red flags and notify their manager or compliance resource.  Training and education for personnel involved in international transactions is essential.  Anything less than a meaningful commitment to sanctions compliance can lead to serious issues.

The Bass, Berry & Sims International Trade Practice Team regularly advises clients on their most challenging sanctions compliance matters.  Please contact us if we can help you or your business.